On 29 May 2024, the new version of the Bankruptcy Law entered into force. The legislator has raised the threshold for initiating bankruptcy proceedings, simplified the consideration of certain incidental disputes, and standardised appeal deadlines. Below is an overview of the key changes.

Higher Threshold for Initiating Bankruptcy Proceedings

The minimum amount of claims required to initiate bankruptcy proceedings for legal entities has been increased from RUB 300,000 to RUB 2 million, and for natural monopolies, agricultural enterprises, and strategic enterprises — to RUB 3 million.

In addition to accounting for inflation, the higher threshold reflects the substantial costs of the bankruptcy process, which often far exceed RUB 300,000. This measure also makes it more difficult to use bankruptcy petitions as a tool in corporate disputes or as a means of pressuring debtors to repay.

Simplified Procedure for Certain Incidental Disputes

Some categories of incidental disputes will now be considered in a simplified procedure — without a court hearing or summoning the parties, and with rulings issued without a reasoned part. This procedure will apply to disputes concerning:

• inclusion of claims in the creditors’ register;
• removal of an insolvency practitioner;
• extension or completion of liquidation proceedings;
• allocation of court costs;
• engagement of third parties by the insolvency practitioner at the debtor’s expense;
• recovery of the debtor’s documents and assets; and others.

If a motion is filed for a full text of the ruling or an appeal is lodged, the court must prepare the reasoned part within five days. The court may, on its own initiative or at the request of a participant, switch to the standard procedure.

As many of these disputes are resolved without objections, mandatory hearings have often been unnecessary. The simplified process should reduce the courts’ workload and expedite proceedings.

Changes to Appeal Procedures

The amendments establish a uniform one-month period for filing appeals against first-instance rulings and for filing cassation appeals against appellate decisions.

Rulings on incidental disputes considered under the simplified procedure may be appealed in one of two ways:

1. The appellant may file an appeal against the operative part of the ruling and, within 15 days of receiving the full text, submit the reasoned part of the appeal; or
2. The appellant may first request preparation of the full text of the ruling and then appeal that version.

Appellate rulings ordering an expert examination under the Bankruptcy Law, or requiring payment of case-related expenses, are no longer subject to cassation appeal.

Objections to Claims

The revised law broadens the list of persons entitled to object to claims — any participant in the bankruptcy case or related arbitration proceedings may do so, as well as any person able to substantiate the potential to file claims in the future.

Objections to claims must be filed within 30 days of the deadline for lodging claims. The time limit may be restored in liquidation proceedings if missed for valid reasons. All objectors may also plead the statute of limitations.

Upon receiving objections, the court will consider the creditor’s claim with the parties present. However, consideration under the simplified procedure despite objections will not automatically invalidate a ruling.

A significant new rule allows for subordination or exclusion of claims already entered in the register, if grounds for doing so become known after the claim was recognised, but within three months of discovering those grounds. All creditor claims must now be submitted electronically. Expanded Powers of Insolvency Practitioners

Insolvency practitioners may now request information on the debtor and its controlling and related parties — including banking and commercial secrets — without a court order. They may also request information on the debtor’s spouse and relatives, with simplified court authorisation.

The procedure for approving the practitioner’s success fee is simplified:

• fees from RUB 100,000 to RUB 1 million will be approved without a hearing;
• fees above RUB 1 million will be considered at a hearing;
• fees under RUB 100,000 will be calculated by the practitioner independently.

Changes to Personal Bankruptcy

The reform also affects personal bankruptcy. A new procedure is introduced for approving the rules, conditions, and deadlines for selling a debtor’s assets. The debtor’s spouse is now formally recognised as a participant in the bankruptcy case.

Supreme Court Review of 2023 Bankruptcy Case Law

Shortly after the reform, the Presidium of the Supreme Court of the Russian Federation approved a review of bankruptcy case law for 2023. It sets out key positions, including:

• rules on indexation of amounts;
• admissibility of set-off for penalty interest;
• the order of priority for profit tax upon sale of bankrupt’s assets;
• several provisions specific to developer insolvency.

Notably, the review confirms that claims by former participants for payment of the value of their shares take precedence over claims by bad-faith participants.

In another case, the Supreme Court allowed the burden of proof to be shifted to the defendant in a claim for secondary liability, where the claimant, due to procedural inequality, could not objectively obtain evidence.

In yet another matter, it was clarified that the presumption of causing bankruptcy applies only if amounts additionally assessed through tax audits exceed 50% of total claims.

The practical application of these reforms will require adjustment over time, making it essential to monitor court practice closely.

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This material has been prepared solely for informational and/or educational purposes and does not constitute legal advice or a legal opinion. EPAM Law, its management, lawyers, and staff cannot guarantee the applicability of such information to your specific circumstances and accept no liability for any decisions you make, or for any direct or indirect losses and/or damages arising from the use of the information contained in these materials, in whole or in part.