THE MORATORIUM ENDS, BANKRUPTCIES BEGIN

As you know, since April 01, a general moratorium on the initiation of bankruptcy cases has been in effect in Russia, which was introduced by the Government of the Russian Federation for six months – until October 01.

Bearing in mind the experience of the covid moratorium, many asked a reasonable question about whether there would be an extension of restrictions this year, but all doubts (it would seem, although not exactly) were dispelled by the Government itself, stating that there was no need to extend the current moratorium.

This statement was expected to be reflected by the business community, a number of representatives of which (mainly from the retail sector) sent requests for an extension of the moratorium or, at least, a revision of the approach to its operation, creating a mechanism for selective restrictions on specific industries /economic entities, but these statements have so far been left unanswered.

While the merchants, some with hope and some with apprehension, are waiting for October 01, the editors of Rusbankrot decided to find out the opinion of lawyers on this issue. The majority is still inclined to the fact that it is still not worth waiting for an extension.

So, Alexey Sorokin, lawyer and expert consultant of the Financial and Legal Alliance company, speaking about the moratorium as a whole, notes its benefit in the context that, in the current realities of the legal and economic state of bankruptcy regulation in Russia, the moratorium, in fact, is the only measure of support for subjects of civil turnover in conditions of severe financial situation.

Sorokin notes that "the existing rehabilitation procedures in the bankruptcy of legal entities practically do not function and the recognition of the creditor's application for bankruptcy of the debtor organization as justified actually means that such a company, as a result, will be completely excluded from economic turnover, and all its assets will be spent on repayment of creditors' claims. In this sense, the moratorium gives such organizations a chance to restore economic stability by making the right anti-crisis management, administrative, financial and other decisions."

Dinara Fatikhova, a lawyer at the ELKO Profi law firm, also holds the same position, who also notes that there may be several scenarios for the development of events after the moratorium ends. She considers the most favorable of them to be the entry of creditors into negotiations with debtors, since the end of all restrictions means that creditors will immediately begin to write off debtors' funds. This may have an adverse effect on those subjects whose financial situation is not too stable.

Roman Chernyshov, a senior lawyer at the law firm SKO, in turn, supports these statements with statistical indicators: the number of publications of creditors about their intention to file for bankruptcy has decreased by 8 times, and the number of monitoring procedures introduced has decreased by more than 20%.

At the same time, Chernyshov did not ignore the negative aspect, which is due to practical nuances rather than conceptual shortcomings of the moratorium mechanism: "One of the consequences of the moratorium, enshrined in Article 9.1 of the Bankruptcy Law, is the suspension of enforcement proceedings on property penalties for claims that arose before the moratorium was introduced. However, in practice, many bailiffs did not suspend enforcement proceedings, referring to the letter of the FSSP, according to which such suspension is possible only if an application is received from the debtor and if he does not have the opportunity to repay the debt. Thus, the provisions of the legislation on the consequences of the moratorium in terms of enforcement proceedings were often not observed in practice."

Dmitry Krasnoshchek, lawyer, head of the Strategy law firm, expressing his opinion on the moratorium in a broad sense of this issue, refers to the experience of 2020. He says that, contrary to the fears of some business representatives, neither creditors nor debtors received significant benefits from restrictions on the initiation of bankruptcy cases – creditors methodically examined their claims, preparing the ground for foreclosures and bankruptcies, and debtors were able to improve their financial situation.

However, the lawyer's opinion was not shared by Roman Margulis, Managing Partner of ASB Consulting Group, who believes that the moratorium, on the contrary, made some creditors debtors, since for the duration of the restrictions they were deprived of the opportunity to fully conduct business due to "suspended" receivables.

Basically, lawyers agree on the prospects of a moratorium on bankruptcy that its extension should not be expected. However, everyone has a different assessment of its effectiveness, and there seems to be some truth in each of the opinions, since this phenomenon is quite versatile. 

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