"New abuses may arise in Russia in case of business bankruptcy" — Duman Alekperov for Delovoy Petersburg
Amendments to legislation may lead to new abuses in business bankruptcy
Current legislation provides for rehabilitation procedures in bankruptcy — external administration, financial recovery and settlement agreements. But their effectiveness is close to zero. As, incidentally, is that of bankruptcy itself.
However, in the near future, companies in a crisis situation may be provided with new mechanisms for avoiding insolvency by agreeing with creditors on restructuring. In practice, such measures may additionally stimulate abuses.
The essence of the bankruptcy procedure lies primarily in the possibility of rehabilitating the debtor. The very possibility of carrying out restructuring against the will of the creditors’ meeting (Cram Down) should only be welcomed. But this can also lead to abuses both by majority creditors to the detriment of the interests of minority ones, and by the debtor. Including for the purpose of obtaining an illegal deferment,
— believes Duman Alakperov, lawyer at Prime Advice Law Offices.