Bankruptcy – complex, multi-month (9-12 months or longer) and diligent procedure for resolving of the debtor`s legal entity or private entrepreneur insolvency. It is performed as on the request of the debtor, so at the request of the creditor.
They apply by bankruptcy for the following purposes:
1. For debtor`s debts remission;
2. In order to save on the State Duty for the creditor when applying to the court for large amounts recovery (5 MCI instead of 1% or 3% of the recovery sum);
3. To apply a number of restrictive and prohibitive measures on the debtor, for which the bankruptcy case is heard in the court, for example (Article 50 of the Law "On Rehabilitation and Bankruptcy"):
1) for the owner of the debtor`s property or the director it is forbidden to use and sell the property outside the ordinary business operations without its consent with the temporary manager;
2) the execution of previous taken court decisions, arbitration awards, national revenue authority`s decisions, as well as the participants, or the debtor's Director in respect of his property is suspended, except for payments to citizens to whom the debtor is liable for life or health damage without references to redress for the non-pecuniary damage;
3) Any creditors claim against the debtor may be brought only within the rehabilitation or bankruptcy proceedings, with the exception of the requirements for the guarantees and pledges execution by third parties, as well as the enforced collection in mortgage cases where the mortgagor is third parties;
4) it is not allowed to collect money from the bank debtor`s account on the creditors' claims, on the national revenue authority and on the other authorized state body carrying out the calculation and (or) collection of other compulsory payments to the budget, including those to be satisfied in an uncontested (without notice) order, as well as the enforced collection on the debtor's property;
5) it is forbidden to execute shares transfer, shares transfer in debtor`s authorized capital.
It should be noted that, unlike most of the majority`s businessmen opinion and even lawyers, bankruptcy procedure begins long before the preparation and submission of the relevant application to the court. In fact, the bankruptcy procedure begins with the moment when the debtor's property owner is negatively assessed its capacity to fulfill the liabilities to creditors (banks, private organizations, individuals, and even the national revenue authority) and began to take measures or to repay such debts, either evade the responsibility through the application of various legal and non-legal instruments.
The law strictly regulates the procedure and application`s bankruptcy bases sue to the court (Articleы 41, 42 of the Law), even a formal departure depending on statement return threat. In this case the debtor is required to provide, among the other things, as his financial statements for the last 3 years, so the evidence that he is a bankrupt, i.e. that he cannot meet his liabilities to creditors.
Most of the of bankruptcy success proceedings is built definitely at this stage, as well as at the position of the temporary manager in court and government agencies – the national revenue authority and the prosecutor.
Following the decision of the bankruptcy a second-long stage begins - the formation of creditors' claims, the stage of the inventory, evaluation and sale of the debtor`s property, as well as recognition of the debtor's transactions committed in the last 3 years prior to the initiation of bankruptcy proceedings, illegal. This task is engaged in the bankruptcy manager, reporting to the creditors' committee.
As a result of all these actions the final debtor`s property is formed, which is then is sold to the creditors in compliance of the law established priority (article 100 of the Law). Thus, the redemption is made as follows (text is simplified for better understanding):
1. Most urgent - administrative and legal costs, i.e. costs related to the bankruptcy proceedings carrying out, include the amounts of current payments to the temporary and bankruptcy manager;
2. At first instance - claims for compensation for harm caused to life and health; for alimony recovery; on payment for work under the labor contracts, on mandatory pension contributions, on the remuneration payment under the author`s contracts.
3. In the second place - claims of the secured creditors;
4. In third place - tax debts and other obligatory payments to the budget.
5. In the fourth place - payments to the other creditors under civil law and other obligations;
6. In fifth place - the creditors' claims for damages and the penalties recovery (fines, penalties).
Important clarification – the requirements of each priority shall be satisfied after the full satisfaction of the previous priority`s requirements.
After the satisfaction of the creditors` claims from the existing property, the bankruptcy manager submits the final report and the liquidation debtor`s balance for the approval into the court which court proves and sends to the judicial authority to exclude the debtor from the register of legal entities.
Since the inclusion of record on liquidation of the legal entity or private entrepreneur in this register, the bankruptcy procedure is considered completed.
This is the general bankruptcy procedure of the legal entities and individual entrepreneurs. Each step should be carefully clarified and worked out as it does a sculptor with his sculpture.
It should be noted that the current law on bankruptcy from March 7, 2014 has replaced the old Act of 1997, and significantly tightened the responsibility of the founders and director of the company with regard to the actions implementation aimed at the deliberate incitement to bankruptcy, at conceal the property or his documents` falsification, as well as at the introduction of the founders and bankrupt director`s subsidiary liability in case of such matters reveal.
Fake companies’ situation in practice should also have been taken into account, namely the fact that CIT and VAT offset is not a subject to the expenses with the fake companies` operations (Articles 115 and 257 of the Tax Code of the Republic of the Republic of Kazakhstan). Whereas the term of the tax actional presence is 5 years, so the tax authorities for such transactions may conduct a tax audit for this period, and if during this period there will be revealed operation with the company recognized in future as a fake company, from the taxpayer's expenses there will be deducted the amount of CIT and VAT, attributable to the setoff in total sum of more than 32%, with the additional charge of fines and penalties. It means that from these amounts the taxpayer will have to pay the corresponding amount into the budget, leaving them out of account. At large amounts transactions with the fake companies, these amounts may reach billions of tenge. This can create big problems for the taxpayers, and for its solutions they need to attract the competent professionals/experts.
These circumstances require the bankrupt debtor to take accurate and well-considered decisions.
My experience (9+ years of general work experience, 6+ years of work experience as a lawyer in economic disputes) and varied practice in the field of economic and financial law in the interests of corporate clients together with my team partners (lawyers and financiers) allow us to solve even the most complex legal and economic issues arising during bankruptcy.
Should you have any questions, please call me, and I'll be pleased to answer!
Best regards, attorney Kaplan A.