THE MINISTRY OF ECONOMIC DEVELOPMENT DOES NOT HEAR ANYONE: ANNUAL WAGES OF 50,000 RUBLES ARE PROPOSED FOR ARBITRATION MANAGERS

Since the middle of last year, the Ministry of Economic Development of the Russian Federation has been trying to reform the legal framework for bankruptcy procedures. The first attempt to “push” the bill to the Government without taking into account the views of the professional and business community failed - the bill was sent back for revision, taking into account serious shortcomings identified by the state legal department of the Presidential Administration.

On January 15, 2021, a letter from the Ministry of Economic Development of Russia with a new draft law was sent to the leading business communities (Business Russia, Russian Union of Industrialists and Entrepreneurs, Chamber of Commerce and Industry of the Russian Federation). However, the current draft law does not eliminate conceptual remarks of the state legal department of the Presidential Administration and business communities.

In spite of the instructions of the President to change the liquidating nature of bankruptcy proceedings to rehabilitating one, the Ministry of Economic Development is doing everything to destroy the business of debtors and destabilize the work of arbitration managers.

Experts of the Liquidation and Bankruptcy Bar Association noted that the competence of the meeting of creditors to make decisions on the procedure (except for the transition from bankruptcy proceedings to debt restructuring and vice versa) and on the candidacy (except for the candidacy of the crisis manager) was excluded from the draft law. Thus, the role of creditors in the bankruptcy case has been significantly reduced, which can negatively affect the anti-crisis measures to restore the debtor's business, implemented through the purchase of debt by a potential investor.

The draft also notes that if the arbitration manager does not submit his response to the court, a fine in the amount of 100 thousand rubles may be imposed on him (her). However, the Association recalled that in accordance with paragraph 1 of Art. 119 of the Arbitration Procedural Code of the Russian Federation, the amount of fine cannot exceed 5,000 rubles for citizens, 30,000 rubles for officials, and 100,000 for organizations.

Thus, the arbitration manager cannot receive a fine of more than 30,000 rubles.

Experts also criticized the procedure for choosing arbitration managers proposed by the Ministry of Economic Development. The version of the point system was called too complicated. The Association, in turn, proposed to simplify it by imposing the procedure for forming a rating of arbitration managers (taking into account qualifications, years of service, the number and quality of procedures, etc.)on the SROs. It is assumed that the SRO will also be engaged in uploading the rating to the register of arbitration managers. Next, the court will randomly select several candidates, send them requests for consent to the conduct of the procedure, and appoint an arbitration manager who has submitted consent to the conduct of the procedure within the prescribed time limit (and in the case there are several candidates who have given consent, a manager with a higher rating and lower level of workload).

Liquidation and Bankruptcy Bar Association noted other shortcomings of the bill. For example, it is not clear how to behave in the event of competition between the application for declaring the debtor bankrupt and the application for the introduction of debt restructuring.

Experts also noticed that the draft law estimated the term of restructuring at "no more than 4 years from the date of approval by the commercial court" and may be extended in the future.

However, according to the practice, the Association's lawyers believe that it would be more expedient to set the lower limit of the term of 1 year, and the upper one - 3 years.

Questions from the professional community were raised in connection with a provision, according to which the bankruptcy manager is responsible for the non-sale of property at the auction. Experts note that this does not correspond to the goals of maximum satisfaction of creditors' claims in a bankruptcy case, as in such a case, it will be in the interests of the arbitration manager to put the property up for auction at the minimum price.

The Association's lawyers have added specific proposals to the draft law:

-          To introduce liability insurance for bankruptcy commissioners instead of the compensation fund;

-          To prevent a fixed payment to managers after completion of the procedure instead of monthly payments. According to this logic, the manager receives 50,000 rubles a year, i.e. 4000 rubles per month, which does not correspond to moral, economic and legal norms;

-          To stop corruption in the SROs of arbitration managers;

-          To introduce procedures for fast and effective reorganization when that include an opportunity to continue the business;

-          To organize the work of arbitration managers by analogy with the system in the legal profession and notaries;

-          To change the liquidating orientation of the bankruptcy bill to the rehabilitating one.

Read the rest of the experts' comments on the draft law and the proposals of the professional community in the attached file.

 

A letter to the State-Legal Directorate