Legal regulation of insolvency
(bankruptcy) of credit organizations
Legislation
about insolvency (bankruptcy) of credit organizations
•Federal Law No. 40-FZ of February 25, 1999 About insolvency
(bankruptcy) of credit organizations
• Federal law No. 127-FZ of October 26, 2002 About insolvency
(bankruptcy) (regarding not settled by the previous law);
•Federal law from December, 2nd, 1990 No. 395-1 About banks and
banking activity.
Credit organizations
•
Credit organization - a legal entity entitled to carry out banking operations
envisaged in the Federal Law About banks and banking activities to make
profit as the main goal of their activities on the basis of special permission
(a license) of the Central Bank of the Russian Federation (Bank of Russia).
A credit organization shall be formed as an company on the basis of any
form of ownership.
•
Banks is credit organization that enjoys an exclusive right to carry out in the aggregate
the following banking operations attraction of monetary resources of legal entities and
natural persons in the form of deposits, investing the mentioned resources in its own
name and for its own benefit on a returnable basis through payments within specified
deadlines, opening and keeping of bank accounts of natural persons and legal entities.);
•
Non-banking credit organization is a credit organization that enjoys the right
to carry out individual banking operations envisaged in the present Federal Law.
Permissible combinations of banking operations for non-banking credit
organizations shall be fixed by the Bank of Russia.);
•
Foreign credit organization isa credit organization that enjoys the right to
carry out individual banking operations envisaged in the present Federal Law.
Permissible combinations of banking operations for non-banking credit
organizations shall be fixed by the Bank of Russia.).
Evidence of Bankruptcy
Insolvency (bankruptcy) of a credit organization means its inability as
recognized by an Arbitration Court to satisfy in full creditors' claims with respect
to monetary obligations and/or to perform its obligation to make obligatory
payments.
Evidence of bankruptcy of credit organizations:
A credit institution shall be deemed unable to satisfy creditors' claims with
respect to monetary obligations and/or to meet an obligation to make
mandatory payments if it fails to meet the corresponding obligations
within fourteen days from their due date and/or if the value of the
organisation's property (assets) after its banking transaction license has
been revoked is insufficient for the credit organisation to discharge its
liabilities owing creditors and (or) its duty to make mandatory payments.
Prevention of insolvency
Measures on prevention of insolvency (bankruptcy) of credit
Institutions
financial rehabilitation of the credit organization (rendering of
financial assistance to the credit institution by its founders (participants) and
other persons; change of the structure of assets and the structure of liabilities
of the credit institution; bringing into line the amount of authorised capital of the
credit organisation and its own resources (capital); change of the credit
institution's organisational structure;)
appointment of the provisional administration to manage the
credit organisation
reorganisation of the credit organisation
These measures are applied only after revocation of the license for
realization of banking operations.
Undertaking bankruptcy petition
The right to the reference in arbitration court with the application to
recognize credit organization to be bankrupt has the competitive
creditor or the authorized state body after a revocation of the license
for realization of banking operations.
Liquidation proceedings of credit organization can be undertaken by
arbitration court after revocation license for realization of banking
operations.
Liquidation proceedings are used by arbitration court during a credit
organisation's bankruptcy case
Functions of the insolvency practitioner are exercised by State
Corporation «Deposit insurance Agency».
Compulsory liquidation
Two versions of compulsory liquidation:
 Under the decision of arbitration court in connection with infringement by the
credit organization of statements of law (if at it the license for realization of
banking operations is withdrawn, but thus there are no attributes of an
inconsistency (bankruptcy);
 According to the legislation about insolvency (bankruptcy) in case when cost
of property of the credit organization concerning which the decision on
liquidation is accepted, is insufficient for satisfaction of requirements of its
creditors.
Liquidation proceedings
Liquidation proceedings shall be introduced for a term of one year. The time
period of liquidation proceedings may be extended on the application of a
person participating in a bankruptcy case by six months at the most.
The main purpose of liquidation proceedings - equitable assessment
among creditors during the limited time period of property of the insolvent
debtor under condition of observance of principles of sequence and
proportionality of satisfaction creditors' claims.
Order of satisfying creditors’ claims
•
• All current
obligations of a
credit organization
shall be discharged
out of turn at the
expense of the
bankrupt estate
•
•
•
Current obligations
the duty of paying off the debts formed before the date
of withdrawing the credit organisation's licence for
conducting banking operations related to payments for
carried out works (rendered services) that are connected
with continued functioning of the credit organisation
within the limits of the estimate of outlays endorsed by
the Bank of Russia in compliance with the Federal Law
on Banks and Banking;
the duty of making obligatory payments that arose
within the period starting from the date of withdrawing
the credit organisation's licence for conducting banking
operations up to the starting date of bankruptcy
proceedings, as well as the duty of making mandatory
payments that arose in the course of bankruptcy
proceedings when paying labour wages to the credit
organisation's employees)
the duty of making obligatory payments that arose
within the period starting from the date of withdrawing
the credit organisation's licence
the duty of deducting monetary funds from the wages
of the credit organisation's employees paid in
connection with discharging the duties indicated in the
1st item within the period from the date of withdrawing
the credit organisation's licence for conducting banking
operations up to the date of completing liquidation
proceedings
Order of satisfying creditors’ claims
Очередность
General order of satisfying
creditors' claims
the first turn is for settlements
relating to the claims of the citizens
to whom the debtor is liable for harm
inflicted to life or health;
the second turn is for settlements
relating to disbursement of severance
benefits and employees;
the third turn is for settlements with
other creditors’ claims.
Features concerning credit organizations
The first turn:
1) the claims of the natural persons in respect of which the credit organisation is
liable for causing damage to their life and health by way of capitalising
appropriate time payments, and the moral damage shall be compensated as well;
2) the claims of the natural persons who are creditors of the credit organisation
under contracts of bank deposit and (or) bank account made with them (except for
the persons engaged in business activities without forming a legal entity, if such
accounts are opened in connection with the said activities, as well as for the
persons indicated in Item 5 of this Article);
3) the Agency's claims under contracts of bank deposit and bank account passed
over to it
4) the claims of the Bank of Russia that have passed over.
The claims of the natural persons under contracts of bank deposit and (or)
contracts of bank account for compensation damages in the form of loss of profit,
as well as for paying the amounts of financial sanctions shall be included into the
composition of the creditors claims to be satisfied in the third turn.
Creditors' claims to subordinated loans shall be satisfied after satisfying the
claims of all other creditors included into the register of creditors' claims.
secured creditors’ claims are discharged prior to the other creditors except for obligations to the first and second
priority creditors if their claims occurred before a relevant contract of pledge/mortgage had been concluded
Executive summary of the lawdraft
•
Establishment and regulation of methods of property alienation of the
liquidated credit organization to other managing subjects (to the credit
organizations possessing the license of Bank of Russia on banking
operations realization);
•
Introduction of not monetary forms of reckoning with creditors by the
liquidated credit organization (a compensation, novations, offset of
requirements).
The purposes of the lawdraft
 To increase efficiency of bankruptcy procedure of the credit
organizations
 To reduce terms of liquidation proceedings
 To minimize current expenses
 To increase quantity of satisfied creditors’ claims
Thank you for attention!