The government will impose a large-scale moratorium on bankruptcy from April 1. It will affect almost all legal entities and individuals, not just the industries affected by the crisis, as was the case in 2020. An exception is made only for “problematic” developers listed in the relevant register. The announcement of such a broad moratorium is due to the difficulties caused by the sanctions in the work of a large number of industries and the deteriorating economic situation. Experts warn that this measure of business support has a downside – it can lead to abuse by debtors who are able to pay debts, which will ultimately affect the position of bona fide creditors.
From today, the government imposes a virtually universal moratorium on bankruptcy, it will last six months – until October 1, 2022. The essence of the mechanism is that creditors during this period will not be able to file for bankruptcy of a person, while the opportunity to declare their own insolvency remains. According to the Ministry of Economy, bankruptcy applications sent by creditors not only from April 1 to October 1, but also submitted before the date of the moratorium will be rejected, if the issue of acceptance for proceedings by this time has not been resolved by arbitration.
Let us explain that in 2020, the law on insolvency was amended to allow the government to introduce such a moratorium in exceptional situations (in particular, with a significant change in the ruble). This is the second time the government has exercised this right. The first moratorium was introduced during the “corona crisis” in April 2020 for companies and individual entrepreneurs from the affected industries (such as the restaurant and hotel business) to prevent a chain reaction of defaults, after which it was partially extended.
Now the moratorium is much wider – it will be extended to legal entities (now almost all) and citizens.
An exception is made only for developers who have already entered the register of problematic objects – now it includes about 330 developers and about 700 houses. The Ministry of Economy, which was preparing a regulatory framework for the moratorium, explains this by the need to ensure the protection of the rights of affected shareholders. As Kommersant was told in the Territorial Development Fund, the fund can make decisions on the completion of the facility or the payment of compensation to shareholders only for facilities whose developers have been declared bankrupt and when bankruptcy proceedings have been instituted.
The de facto moratorium is already partially in force – from March 9, the Federal Tax Service suspended the filing of bankruptcy applications. In general, the motives of the authorities are the same as two years ago. As Prime Minister Mikhail Mishustin said yesterday, the moratorium “will actually give debtors the opportunity to cope with current difficulties within six months, adjust their affairs, find new sources of income and strengthen finances without closing businesses or laying off employees.”
As Kommersant was told in the press service of the Ministry of Economy, the already started executive proceedings with the start of the moratorium are suspended. However, now, according to Kommersant, the issue of abandoning such a “freeze” is being discussed. The White House said yesterday that “the issue of suspending enforcement proceedings is under consideration.”
The chairman of the Bankruptcy Club Oleg Zaitsev reminds that in the pandemic moratorium “helped businesses survive until the abolition of explicit restrictions”, and despite fears of a wave of new bankruptcy cases after its abolition, it did not happen. Now, he says, “the situation is so unpredictable that few can be sure of maintaining solvency,” and maintaining the possibility of forcing creditors to initiate bankruptcy can “lead to the destruction of many businesses.” Another argument, according to him, is “the unwillingness of Russia’s bankrupt right to save the business – so far it can only bury it in liquidation proceedings.”
Ekaterina Tokareva, a partner at the Pen & Paper Bar Association, notes that the reasons for the moratorium are obvious – too many sectors of the economy have suffered from changes in the economic and foreign policy situation. As RKT partner Ivan Gulin adds, “restrictions on imports and exports, as well as inflation affect all participants in the civil turnover.” On the other hand, says Ekaterina Tokareva, there are companies that not only did not suffer, but even received a number of benefits – the moratorium on them is not quite right, their creditors must be able to enforce debts that are deliberately unpaid. Lydia Solodovnikova, KPMG’s head of litigation and bankruptcy, warns of the risks of such abuses.