The Russian Arbitration Court for the first time introduced bankruptcy proceedings against a foreign company

The Arbitration Court of the Chelyabinsk Region issued the first decision in Russian practice in case No. A76-31539/2021 on the bankruptcy of a foreign company.

The main activity of a foreign company registered in the state of Saint Kitts and Nevis is the conduct of legal business.

The activity of the company was terminated in January 2019, it was excluded from the commercial register, and in the territory of the Russian Federation the debtor was deregistered in December 2021.
Having studied the materials, the arbitration court came to the conclusion that the debtor should be declared bankrupt with the opening of bankruptcy proceedings against him.

The court considered that the process of liquidation of the company that had begun, but not completed, is not a basis for terminating the proceedings on its bankruptcy case, respectively, the provisions of paragraph 1 of Art. 225 of the Bankruptcy Law. The grounds for applying the provisions on the moratorium on bankruptcy were also not established by the court, since the bankruptcy case was initiated before April 1, 2022 – i.e. before the introduction of the moratorium. In addition, the norms on the moratorium on bankruptcy, the court noted, do not apply to the bankruptcy of the property mass of foreign companies.

Partner of the financial and legal group of companies Tenzor Consulting Group, lawyer Anton Makeichuk, in a commentary for Advocate newspaper, noted that the situation under consideration is remarkable in that the issue of declaring insolvent (bankrupt) foreign organizations is most often regulated by the rules on cross-border insolvency (cross-border insolvency)․

Such rules are most often contained either in international acts (for example, the European Convention on Certain International Aspects of Bankruptcy – Istanbul, June 5, 1990; EU Regulation 2015/848 “On Insolvency Procedures”), or national regulation is devoted to them (Germany, France, Japan). Meanwhile, in Russia, cross-border insolvency is not regulated either by national legislation or by international treaties signed by the Russian Federation.

According to the expert, such a gap in the legislation did not prevent the arbitration court from opening bankruptcy proceedings against the debtor.

The lawyer also drew attention to the fact that

Previously the Supreme Court had already considered such cases and found no grounds for the bankruptcy of foreign persons in Russian courts.

The material of the Lawyer’s newspaper is fully available at the link.