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On the issue of improving the legislation regulating the bankruptcy procedure of legal entities

Sabanina Natal'ya Olegovna

PhD in History

Docent, the department of Theory and History of State and Law, International Innovation University

301650, Russia, Tul'skaya oblast', g. Novomoskovsk, ul. Berezhnogo, 12

yurcafedra@yandex.ru
Other publications by this author
 

 
Ermakov Dmitrii Sergeevich

Doctor of Pedagogy

Professor of the Department of Legal Disciplines of the International Innovation University

301650, Russia, Tul'skaya oblast', g. Novomoskovsk, ul. Berezhnogo, 12, of. 207

yurcafedra@yandex.ru
Popov Sergei Anatol'evich

PhD in Technical Science

Associate Professor, Department of Legal Disciplines, International Innovation University

301650, Russia, Tul'skaya oblast', g. Novomoskovsk, ul. Berezhnogo, 12, of. 107

yurcafedra@yandex.ru

DOI:

10.25136/2409-7136.2022.6.37624

EDN:

HJVEST

Received:

01-03-2022


Published:

02-07-2022


Abstract: In the conditions of the observed economic turbulence caused, among other things, by coronavirus restrictions, there is an increase in cases of insolvency of economic entities. In addition, the legal landscape of bankruptcy of legal entities has undergone major changes. Confirmation of this provision is the fact that it is currently planned to introduce significant changes to federal legislation, the understanding of which actualizes the presented research topic. The object of the study is regulated by the norms of civil, arbitration procedural law, bankruptcy legislation, public relations that develop within the framework of the bankruptcy procedure of legal entities. The subject of the study is the theoretical and practical problems of the institute of insolvency (bankruptcy) of legal entities. The authors consider in detail such aspects of the topic as the problems faced by legal entities during the pandemic and their impact on the specifics of the bankruptcy procedure; doctrinal and legislative aspects of the etymological features of the categories "insolvency" and "bankruptcy", "signs of bankruptcy" and "criteria of bankruptcy"; issues related to the implementation of interim measures of the parties during the bankruptcy procedure, etc. Particular attention is paid to the analysis of the changes that the legislator plans to make to the law "On Insolvency (Bankruptcy)". The main conclusions of the study can be called the need for further elaboration by the lawmaker of the planned changes in bankruptcy legislation. The novelty of the results obtained is determined by the analysis of legislation and law enforcement practice in relation to the institution of bankruptcy in order to further develop recommendations on the application, interpretation and amendment of the relevant provisions of bankruptcy legislation.


Keywords:

legal entity, bankruptcy, insolvency, changes, rulemaking, right, legislator, debtor, lender, arbitration

This article is automatically translated. You can find original text of the article here.

The contradictions existing in law enforcement practice, as well as gaps in the current legislation on insolvency (bankruptcy) of legal entities, are caused both by the dynamic development of this legal institution and by the insufficient elaboration and effectiveness of the existing norms.

So, on May 17, 2021, the State Duma received Bill No. 1172553-7 "On Amendments to the Federal Law "On Insolvency (Bankruptcy)"and certain legislative acts of the Russian Federation". Currently, the bill is under consideration in the first reading. The objectives of these amendments are to shorten the terms of bankruptcy procedures, increase the volume of repayment of creditors' claims and protect the interests of insecure debtors. We believe that the analysis of these amendments can serve as an important component of further doctrinal and legislative developments in the field of the studied relations.

According to statistics, according to the results of the first quarter of 2021, both in the Russian economy as a whole and in most industries, a decrease in the intensity of corporate bankruptcies was recorded (the number of bankrupt legal entities in the economy decreased by 8.6% compared to the first quarter of 2020), however, it cannot be excluded that the process under consideration will not intensify in the coming months [3]. The reduction in the number of bankruptcies is primarily due to the introduction of a moratorium, which has become part of a set of anti-crisis measures in connection with covid restrictions. In particular, Article 5 of Federal Law No. 98-FZ of 01.04.2020 "On Amendments to Certain Legislative Acts of the Russian Federation on the Prevention and Liquidation of Emergency Situations" [4] supplemented Federal Law No. 127-FZ of 26.10.2002 "On Insolvency (Bankruptcy)" with Article 9.1, which gave the Government of the Russian Federation the right to impose a moratorium on the initiation of bankruptcy proceedings against debtors on the principle of forming the necessary groups of OKVED, as well as individual categories of persons [5]. Since 08.01.2021, the moratorium has ceased to operate [3].

The Government of the Russian Federation, introducing such a moratorium, prioritized the preservation of not just individual companies, but entire industries, and the measures taken made it possible to do this. However, the situation associated with the pandemic has seriously shaken the position of the business, therefore, even despite the lifting of most of the restrictions, it will take a long time to restore the company's previous pre-crisis positions. Many will not have the means to pay off their existing debts. In practice, this means that the number of claims to arbitration courts for declaring the debtor bankrupt after the moratorium is lifted will increase sharply, since creditors will attempt to compensate at least part of their losses.

In particular, according to the results of the first quarter of 2021, an increase in the number of bankrupt legal entities was recorded in 21 subjects of the Russian Federation. Thus, the situation with the pandemic has also made significant adjustments to the problems of bankruptcy of legal entities, which, in our opinion, also needs to be subjected to a more detailed understanding. However, if we conduct a comparative analysis during the pandemic with the situation abroad, then it should be noted that the measures initiated by our state were quite successful.

In conditions of economic instability, bankruptcy is one of the factors of the growth of social tension, which can negatively affect the political situation. In this regard, the search for ways to minimize this process is a very urgent problem.

In particular, there is a need to review and analyze judicial practice on the problems of the bankruptcy procedure of legal entities. This is due to the fact that today the judicial authorities face difficulties in carrying out a full-fledged prevention of violations of legal norms by the parties to the bankruptcy procedure. In addition, there is an objective impossibility of promptly formulating the necessary abstract legal positions on most issues requiring early resolution [6].

In various historical periods, quite a large number of domestic researchers have turned to the study of bankruptcy. In particular, in the imperial era, various aspects of the problem were considered by A. H. Golmsten, K. I. Malyshev, E. A. Nefediev, N. A. Tur, P. P. Tsitovich, G. F. Shershenevich, etc. For the Soviet era, the problem of insolvency (bankruptcy) of legal entities due to the nationalization of the economy was not acute, however, a number of researchers (such as A. F. Kleinman, L. A. Lunts, S. M. Prushitsky, D. S. Rosenblum, etc.) raised these issues in their works. Among the modern jurists working on the study of legal problems of bankruptcy, it is necessary to single out S. H. Abdurakhmanov, S. S. Galkin, N. V. Efimov, Yu. V. Zhiltsov, V. A. Strakhov, E. D. Suvorov, V. A. Slepyshev, E. V. Frolov, etc.

Etymologically, in relation to the definition of bankruptcy, it should be noted that the concept has Italian roots (bancarotta) and literally means "broken bench, office". Researchers tend to explain the origin of this term by the condition of a bankrupt person whose offices were subjected to pogrom and destruction [7].

Insolvency (bankruptcy) is a complex economic and legal phenomenon. The categories of "insolvency" and "bankruptcy" are closely related to each other due to the fact that they have one basic basis, which can be expressed as an excess of the amount of the debtor's obligations over the value of his property.

The legislator does not differentiate these concepts, considering them as synonyms, although substantive differences may occur. In particular, insolvency characterizes, first of all, the financial side of the bankruptcy of a legal entity. The category of "bankruptcy" by its legal nature is administrative, since it is an organizational and legal process closely related to insolvency, in which many entities are involved, and its logical finale is the liquidation of a legal entity.

A number of modern researchers, in particular, V. A. Slepyshev [8], N. V. Efimov [7], believe that the breeding of the categories under consideration would be justified due to the fact that insolvency is only a prerequisite for bankruptcy, and not its fact. In addition, it is more profitable for the debtor to be called insolvent than bankrupt in order to preserve his business reputation. In this regard, we consider it a justified initiative to consolidate the distinction between the terms "bankruptcy" and "insolvency" at the legislative level [9].

When they talk about bankruptcy, they use its "criteria" and "signs" at the same time. However, if the first term is characteristic of the legal doctrine, then the second is legitimized, in particular in Federal Law No. 127-FZ of 26.10.2002 "On Insolvency (Bankruptcy)" [1].

According to E. V. Frolova, the criterion can be defined as a kind of fundamental principle, the principle on the basis of which the legislator builds the signs used by him to classify the debtor as bankrupt. The signs of bankruptcy are a set of legal facts, based on which a person can be declared bankrupt in the course of arbitration proceedings [10].

In particular, according to E. D. Suvorov, signs of bankruptcy are external manifestations of the debtor's inability to satisfy creditors' claims, which can be verified for the purpose of opening bankruptcy proceedings against the debtor and (or) introducing bankruptcy procedures against him, declaring him bankrupt [11]. According to V. V. Vitryansky, the category of "signs of bankruptcy" should be understood as a set of factors (material and formal), having sufficient character and giving the court the opportunity to declare a person bankrupt [12].

Thus, the category of "bankruptcy criteria" is broader than its signs, since it serves as a kind of principle on the basis of which specific conditions (signs) are developed that serve as the basis for declaring a legal entity bankrupt by an arbitration court. The key criterion of bankruptcy at present, according to a number of researchers, is the insolvency of the debtor.

The Federal Law "On Insolvency (Bankruptcy)" implements the regulatory regulation of the bankruptcy procedure we are considering [1]. At the forefront of the legislator put the procedure for the implementation of the impact on the faulty debtor.

A legal entity is declared bankrupt solely by the decision of the arbitration court. Persons participating in the insolvency (bankruptcy) procedure of a legal entity are: debtor; arbitration manager; bankruptcy creditors – creditors for monetary obligations; authorized bodies – federal executive authority authorized by the Government of the Russian Federation, as well as executive authorities of the subjects of the Russian Federation and local self-government bodies; a person providing security for financial recovery (rehabilitation).

The bankruptcy procedures of a legal entity include the following: supervision, financial rehabilitation, external management, settlement agreement, bankruptcy proceedings. Taking into account the provisions of the Civil Code of the Russian Federation, it should be assumed that even after the liquidation of the debtor, there is a possibility of singular succession, in connection with which, the obligations incurred to the creditor cannot be considered terminated if there is an unfulfilled claim against the debtor. It is necessary to note the importance of interim measures in relation to the bankruptcy proceedings, since they provide an opportunity to protect the interests of creditors. These include: arrest, prohibition of certain actions, assignment of the obligation to commit certain actions, etc.

The analysis of law enforcement practice allows us to come to the conclusion about fairly frequent refusals by arbitration courts regarding the adoption of interim measures against the debtor's property. The arguments in this case are very formal arguments related to the indication that there is insufficient evidence provided by creditors. Although, nevertheless, it should be noted that the Supreme Court proves by its actions the consistency of its decisions [13], therefore, it can be concluded that if the evidence of the interested party is collected with the proper degree of diligence and literacy, then she can count on her application to be satisfied.

Currently, the problem of intentional bankruptcy is quite acute. We believe that the effectiveness of the fight against this type of crime is directly affected by the quality of the behavior of financial and economic expertise. The problem areas of the examination in question include: the lack of unification of methods for analyzing the financial condition of the company, their inconsistency and insufficient elaboration; the presence of certain specifics in companies due to the industry in which they operate; insufficient scope of expert rights (for example, it is significantly less than that of an arbitration manager) [14].

It should be noted that currently there is a prediction of possible bankruptcy, which is implemented through the use of specially developed techniques. Initially, they were created abroad (for example, the two-factor model of E. Altman and E. Hotchkiss (USA) [15], the model of W. Beaver (Great Britain) [16], the model of R. Fox (Great Britain), the model of G. Springate (Canada) [17], etc.), but their use on domestic soil is not always productive. The reason for this is both the peculiarities of the development of Russian business, which differ from American and Western European ones, and serious differences in accounting, as well as in the preparation of reporting forms.

Methods for assessing the financial condition of small and medium-sized businesses are also not developed at the moment. They suffer from imperfection and lack of adaptation and methods of assessing the financial condition of enterprises that are owned by the state. Budget law and budget accounting are the areas of special knowledge that experts need to possess when assessing the financial condition of budget organizations, state–owned and autonomous enterprises.

One of the reasons indirectly influencing the attempts of unscrupulous entrepreneurs to realize deliberate bankruptcy is the presence of gaps in modern Russian legislation regulating this aspect of legal relations. In this regard, the bankruptcy procedure is currently being reformed at the legislative level [18]. According to the forecasts of a number of researchers, we should expect, on the one hand, the emergence of new ways to carry out deliberate bankruptcy, and on the other – difficulties in the production of financial and economic expertise.

The analysis of the changes that the legislator plans to make to the federal law "On Insolvency (Bankruptcy)" allowed us to identify key changes in relation to the bankruptcy procedure of legal entities, which should include: 1) changing the name of the law, now it will be called: "On restructuring and Bankruptcy" (this novel is designed to emphasize the main purpose of bankruptcy, aimed at enabling the debtor to restore its solvency); 2) restructuring procedures are prescribed in detail; 3) the model of bidding for the sale of property will change (this change is aimed at speeding up the procedure for the sale of property the debtor); 4) there are clearly prescribed eight queues for satisfying creditors' claims; 5) the activities of arbitration managers will be subject to a point assessment.

According to experts, a number of changes have not been fully thought out and worked out by the legislator and can have not only a positive, but also a negative impact on the conduct of the bankruptcy procedure [19]. In particular, the introduction of points for arbitration managers received a negative assessment, since there are currently no sufficiently transparent principles and a mechanism for awarding points. In addition, there will be a multi-fold increase in the responsibility of the arbitration manager, over whom this system will "dominate"; there will be an overload of managers with high scores and insufficient loading of the rest. All this can lead to negative consequences associated with delaying the bankruptcy procedure.

Another point that will affect, first of all, the debtor's wallet is the tendency to increase the cost of the services of arbitration managers, depending on the group to which the debtor is assigned. That is, with the adoption of the new law, it will become more expensive to write off debts.

In addition to the above-mentioned legislative novelties, I would like to focus on those problem areas that are still present in the bankruptcy law, but have not yet been regulated by the lawmaker.

1. The specifics of publishing information about the debtor's bankruptcy currently suffer from their information saturation, confusion and high cost. We believe that the introduction of amendments to Part 1 and Part 4 of Article 28 of the Federal Law "On Insolvency (Bankruptcy)" will serve to simplify the above-mentioned procedure. So, in part 1, it is necessary to fix the obligation to publish information on bankruptcy in the Unified Federal Register and on the portal of Public Services, however, at the same time, the cost of publication must be significantly reduced. In connection with the last remark (regarding the reduction of the cost of publication), it seems necessary to make additions to part 4 of Article 28 of the Law "On Insolvency (Bankruptcy)" so that this norm is correlated with the consumer price index. It is proposed that the increase in the cost of publishing publications should be within 1/100 of the minimum wage [20].

2. Another negative factor related to the legislative regulation of the procedure for publishing information about bankruptcy is the dispersion of the rules governing it throughout the "On Insolvency (Bankruptcy)". We consider it necessary to codify the above-mentioned norms through the adoption of a Decree of the Government of the Russian Federation, which will contain all the necessary legal framework concerning the mechanism for publishing information about bankruptcy. The above-mentioned measure will not only simplify this procedure, but also discipline managers [21].

3. In accordance with paragraph 1 of Article 59 of the Federal Law "On Insolvency (Bankruptcy)", the costs associated with the bankruptcy procedure are imposed on the debtor. If the debtor does not have the necessary funds for this, then these expenses must be repaid at the expense of his property. However, if the bankruptcy proceedings have been completed and the debtor's settlement account has already been closed, then we believe it will be correct if the costs incurred in connection with the creditor's claims after the completion of the procedure should be paid by the applicant of these claims, that is, the creditor himself [22].

Thus, the problems presented above have a high level of relevance due to the prevailing socio-economic circumstances, both in our country and at the level of the international community. Of course, consideration of the legal regulation of the bankruptcy procedure of legal entities is extremely important. In order to increase the effectiveness of its implementation at the present stage, it seems necessary for the legislator to perceive the conclusions and proposals outlined above. We believe that this will contribute to the further development of the legislative framework regulating the problems of the bankruptcy procedure of legal entities.

 

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Peer reviewers' evaluations remain confidential and are not disclosed to the public. Only external reviews, authorized for publication by the article's author(s), are made public. Typically, these final reviews are conducted after the manuscript's revision. Adhering to our double-blind review policy, the reviewer's identity is kept confidential.
The list of publisher reviewers can be found here.

A REVIEW of an article on the topic "On the issue of improving legislation regulating the bankruptcy procedure of legal entities". The subject of the study. The article proposed for review is devoted to topical issues of improving the legislation of the Russian Federation on insolvency (bankruptcy) in terms of regulating bankruptcy procedures for legal entities. The author points out some problems in the proposed area. Of course, it is difficult to consider all issues related to bankruptcy legislation within the framework of the article. Therefore, it is impossible to require the author to disclose the subject of the study in detail. The author dwelled on only a few problems, which seems to be quite acceptable. The specific subject of the study was the norms of Russian legislation, the opinions of scientists, empirical data, and foreign literature. Research methodology. The purpose of the study is not stated directly in the article. At the same time, it can be clearly understood from the title and content of the work. The purpose can be designated as the consideration and resolution of certain problematic aspects of the issue of improving the legislation on insolvency (bankruptcy) of legal entities in Russia. Based on the set goals and objectives, the author has chosen the methodological basis of the study. In particular, the author uses a set of general scientific methods of cognition: analysis, synthesis, analogy, deduction, induction, and others. In particular, the methods of analysis and synthesis made it possible to summarize and share the conclusions of various scientific approaches to the proposed topic, as well as draw specific conclusions from the materials of judicial practice. The most important role was played by special legal methods. In particular, the author actively applied the formal legal method, which made it possible to analyze and interpret the norms of current legislation (first of all, the norms of the legislation of the Russian Federation on insolvency (bankruptcy)). For example, the following conclusion of the author: "A legal entity is declared bankrupt solely by a decision of the arbitration court. The persons participating in the insolvency (bankruptcy) procedure of a legal entity are: the debtor; the arbitration administrator; bankruptcy creditors – creditors of monetary obligations; authorized bodies – the federal executive authority authorized by the Government of the Russian Federation, as well as executive authorities of the subjects of the Russian Federation and local governments; the person providing security for financial rehabilitation (rehabilitation)". The possibilities of an empirical research method related to the study of judicial practice materials should be positively assessed. Thus, it is argued that "An analysis of law enforcement practice allows us to conclude that commercial courts often refuse to take interim measures against the debtor's property." In addition, the author provides a fairly large amount of other empirical data, including statistical data. Among them are the following: "already by the end of the first quarter of 2021, an increase in the number of bankrupt legal entities was recorded in 21 subjects of the Russian Federation. Thus, the situation with the pandemic has also made significant adjustments to the problem of bankruptcy of legal entities, which, in our opinion, also needs to be subjected to a more detailed understanding. However, if we conduct a comparative analysis during the pandemic with the situation abroad, then it should be noted that the measures initiated by our state were quite successful." Thus, the methodology chosen by the author is fully adequate to the purpose of the study, allows you to study all aspects of the topic in its entirety. Relevance. The relevance of the stated issues is beyond doubt. There are both theoretical and practical aspects of the significance of the proposed topic. From the point of view of the theory of the topic, the issues of improving the legislation on insolvency (bankruptcy) are complex and require resolution. There are many unresolved theoretical problems related to contesting transactions, protecting the rights and legitimate interests of creditors in bankruptcy proceedings, mechanisms for the real protection of the debtor's rights, etc. Legislation does not always provide clear answers to these problems. On the practical side, it should be recognized that problems often arise in the implementation of the rights and obligations of subjects in an insolvency (bankruptcy) case. The examples from judicial practice given by the author in the article clearly demonstrate this issue. Thus, scientific research in the proposed field should only be welcomed. Scientific novelty. The scientific novelty of the proposed article is beyond doubt. Firstly, it is expressed in the author's specific conclusions. Among them, for example, is the following conclusion: "the problems presented above have a high level of relevance due to the prevailing socio-economic circumstances, both in our country and at the level of the international community. Of course, consideration of the legal regulation of the bankruptcy procedure of legal entities is extremely important. In order to increase the effectiveness of its implementation at the present stage, it seems necessary for the legislator to perceive the above conclusions and proposals. We believe that this will contribute to the further development of the legislative framework governing the problems of the bankruptcy procedure of legal entities." These and other theoretical conclusions can be used in further scientific research. Secondly, the author suggests ideas for improving the current legislation. In particular, "We consider it necessary to codify the above-mentioned norms through the adoption of a Decree of the Government of the Russian Federation, which will contain all the necessary legal framework regarding the mechanism for publishing information about bankruptcy." The above conclusion may be relevant and useful for law-making activities. Thus, the materials of the article may be of particular interest to the scientific community in terms of contributing to the development of science. Style, structure, content. The subject of the article corresponds to the specialization of the journal "Legal Studies", as it is devoted to legal problems related to the implementation of legislation on insolvency (bankruptcy) of legal entities. The content of the article fully corresponds to the title, since the author considered the stated problems and achieved the research goal. The quality of the presentation of the study and its results should be recognized as fully positive. The subject, objectives, methodology and main results of the study follow directly from the text of the article. The design of the work generally meets the requirements for this kind of work. No significant violations of these requirements were found. Bibliography. The quality of the literature used should be highly appreciated. The author actively uses the literature presented by authors from Russia (Galkin S.S., Efimov N.V., Slepyshev V.A., Zhiltsova Yu. V., Strakhov V. A., Suvorov E. D. and others). Many of the cited scientists are recognized scholars in the field of insolvency (bankruptcy) law. I would like to note the author's use of a large number of materials of judicial practice, which made it possible to give the study a law enforcement orientation. Thus, the works of the above authors correspond to the research topic, have a sign of sufficiency, and contribute to the disclosure of various aspects of the topic. Appeal to opponents. The author conducted a serious analysis of the current state of the problem under study. All quotes from scientists are accompanied by author's comments. That is, the author shows different points of view on the problem and tries to argue for a more correct one in his opinion. Conclusions, the interest of the readership. The conclusions are fully logical, as they are obtained using a generally accepted methodology. The article may be of interest to the readership in terms of the systematic positions of the author in relation to the issues of improving the legislation on insolvency (bankruptcy) of legal entities. Based on the above, summing up all the positive and negative sides of the article, "I recommend publishing"
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