A MORATORIUM ON BANKRUPTCY: HOW WILL THE NEW LAW HIT THE PANDEMIC?

The coronavirus pandemic has led to the situation, where special support from the state is required in almost every sector of the economy. But the experts believe that for the travel companies and air carriers, support is needed to the greatest extent.

The government of the Russian Federation decided that a moratorium on bankruptcy could become a cure for an economic pandemic that threatens to bankrupt entire sectors of the national economy. The representatives of the government plan to adopt a special law, developed by the Ministry of Economic Development.

The head of the bankruptcy practice of the “Borodin & Partners” legal company”, lawyer Oleg Sklyadnev, told the representatives of “Rusbankrot” that, despite the urgency, with which the draft law should go through all three readings in the State Duma, he is unlikely to earn money in the nearest future. This requires the resolution of procedural issues (consideration by the Federation Council, signing by the president), and during the Duma discussions, the amendments to the law are still possible.

Ensuring the stability of the functioning of the domestic economy in exceptional circumstances is the main task of this initiative of the Russian government. It is assumed that after the project receives legal force, the executive branch will gain the freedom to suspend bankruptcy for up to six months. In this case, the courts will not accept the bankruptcy claims, and hearings on the proceedings, that have already begun, will be terminated.

According to Oleg Sklyadnev, the significance of this initiative is determined by the fact that not only emergency situations, but also a sharp change in the national currency rate, are attributed to the exceptional reasons for changing the operating procedures in case of bankruptcy. 

“Previously, judicial practice did not attribute the destabilization of the currency to force majeure,” Oleg Sklyadnev notes. “This means that in the future it will be possible to reconsider the approach to the procedure for fulfilling the terms of deals in a situation of significant fluctuations in the foreign exchange market” 

The similar opinion is shared by the head of the dispute resolution practice of “A.T. Legal” company Mikhail Chernyshev, who indicates that the decision to amend the relevant bankruptcy law is fully justified.

“With its rapid implementation, the law will help to prevent negative scenarios for the companies, most affected by the epidemic,” Mikhail Chernyshev said. “The law can also bring great benefit to combat unscrupulous competitors, who will use the current situation for personal gain, abusing their rights.”

Despite this, many experts are skeptical about the possibilities that the new law can provide in the fight against the economic consequences of the pandemic. In particular, the ex-president of one of the largest banks and independent expert, Mikhail Ermakov, noted that the law is unlikely to help the airlines in the current situation. According to our interlocutor, in this situation, the regulations of the Central Bank of the Russian Federation will be required. They will allow the banks to lend to the companies after "bankruptcy clearance" without a need to increase the accrual of compulsory reserves.

“Tax incentives and direct financing of the expenses of the companies, affected by the active phase of the pandemic, will help most likely”, says Mikhail Ermakov. “The government will need to stimulate new domestic demand, introducing the subsidies for airline tickets and tours throughout Russia and the countries of the Customs Union”

Despite the differences in the estimates of the new initiative, all experts agree that this draft law is necessary, because it can provide an opportunity to stay afloat not only for the companies, operating in the tourism or air travel industry, but also for the representatives of other industries, affected by the pandemic. However, as Oleg Sklyadnev noted, if during the term of the moratorium the companies cannot reformat their work by adapting it to the changing market conditions, the law will not achieve the goals for which it is to be adopted.