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Katsiaryna Buraya

A BELARUSIAN COUNTERPARTY BECAME A BANKRUPT.
WHAT HAS TO BE DONE?

10.04.2020

A court case

A Belarusian manufacturing company filed for bankruptcy.

An Italian company requested a bankruptcy administrator to include in the register of creditors' claims its claim in the amount of about 200 000 Euros.

The bankruptcy administrator refused to recognize the claim, since it was filed in an inappropriate form (by e-mail), the original documents confirming the claim were not attached.

The Italian company was unable to present the original documents within the period set by law. The claim of the Italian company was not included in the register of creditors' claims. After selling the property of a Belarusian debtor, the Italian company did not receive money.

How to find out that a debtor is in bankruptcy?

A creditor can find out that bankruptcy proceedings have been opened against a Belarusian debtor through free Internet resources:

  1. Unified State Register of Legal Entities and Individual Entrepreneurs;
  2. Unified State Register of Bankruptcy Records.
The creditor can receive the most complete information through the Unified State Register of Bankruptcy Records.

This information includes the data on:
  • a court case (a claimant, case number, court hearing the case, etc.);
  • a bankruptcy administrator;
  • key dates and current case status.

In particular, on this website it is possible to find out the date up to which creditors must submit their claims.

It is also possible to find the details, including the address of the bankruptcy administrator, appointed by court.

These resources provide information exclusively in Russian.

Where to apply?

    The bankruptcy administrator compiles a so-called register of creditors' claims.

    The bankruptcy administrator makes settlements with creditors in accordance with the register of creditors' claims. The claims of the creditors of each next stage are satisfied after the full satisfaction of the claims of the creditors of the previous
    stage [1].

    Creditors not included in the register are not entitled to receive payments (debt repayment).

    This register is formed on the basis of written claims from the creditors.

    Creditor's claims shall be sent to the bankruptcy administrator at the debtor's post address or other post address indicated in the text of the notice on bankruptcy proceedings opening.

    Documents confirming the amount of the claim must be attached thereto [2].

    How to draw up documents?

    Documents confirming the submitted creditors' claims must be notarized or the original documents along with their copies must be provided by the creditor for subsequent verification by the bankruptcy administrator.

    The bankruptcy administrator reconciles the copies of the documents with the originals, as a result it makes an appropriate mark on the copies. The originals are returned to the creditors within 7 days from the date of receipt of the creditors' claims [3].

    In other words, providing the bankruptcy administrator with ordinary scans or copies of the documents is a violation. The bankruptcy administrator has the right to refuse recognition of the claim.

    The procedure established by law is inconvenient for creditors, there is a risk of loss of the originals when sending by post, etc.

    Belarusian creditors often file claims in person to ensure the return of the originals.

    In Belarus the state languages are Belarusian and Russian. Therefore, the bankruptcy administrator has the right to demand the translation of the documents into one of the state languages.

    From practice:

    If a creditor's claim is confirmed by a court judgement or arbitration award, then the bankruptcy administrator may be less strict about documents verification. Often a copy of the judgement or award is enough for the bankruptcy administrator.

    How much time does the creditor have?

    Producing of notarized copies, legalization, translation, etc. take time. Therefore, foreign creditors often miss the deadlines for submitting their claims.

    The creditor has the right to submit its claims to the debtor within 2 months from the date of publication of the notice on bankruptcy proceedings opening [4].

    The date of publication of the notice on bankruptcy proceedings opening can also be found through the Unified State Register of Bankruptcy Records.

    Missing a 2-month period does not deprive the creditor of the right to submit claims to the debtor. The bankruptcy administrator can include these claims in the register.

    However, such claims are satisfied at the very end, after satisfying the claims of other creditors applied timely [5].

    In the vast majority of cases, a creditor missed a 2-month period does not receive any payments.

    There is an arbitration or prorogation clause in a contract

    In the contract with a debtor an arbitration or prorogation clause may be agreed upon. In this case, a question arises whether a creditor shall apply to the arbitration or court specified in the clause.

    Bankruptcy cases of legal entities and individual entrepreneurs located in Belarus belong to the exclusive competence of economic courts, even if a foreign legal entity is involved in the case [6]. Данная исключительная компетенция белорусского суда не может быть изменена по соглашению сторон. This exclusive competence of a Belarusian court cannot be changed by the agreement of the parties. The transfer of a bankruptcy case to a tribunal is expressly prohibited by law [7].

    Therefore, a Belarusian court at the debtor's place conducts bankruptcy proceedings against a Belarusiandebtor [8].

    Accordingly, a creditor's claim, including claims for payment of a principal debt, penalties, loss, return of leased property, etc., is subject to consideration in the order set by the law on bankruptcy: by submitting a creditor's claims to a bankruptcy administrator, even if a relevant contract contained an arbitration or prorogation clause.

    Procedure for consideration and recognition of a creditor's claim

    The bankruptcy administrator considers a submitted claim not later than 7 days after its receipt. The bankruptcy administrator must notify the creditor in writing about the results of consideration within a period not exceeding 7 days from the date of receipt of the claim [9].

    The bankruptcy administrator has the right to accept or reject the claim.
    Option 1.
    The bankruptcy administrator does not have any objections. The claim is recognized in the amount declared and is subject to satisfaction in accordance with the priority [10].
    Option 2.
    The bankruptcy administrator refuses to include the claim in the debtor's register of creditor's claims in whole or in part. In such a situation, the creditor will have to defend the claim. The creditor has the right to apply to the bankruptcy administrator and the court considering the bankruptcy case of the debtor with the objections (a statement of claim).

    The statement of claim shall be sent within a period not exceeding 7 days from the date of receipt by the creditor of the notice from the bankruptcy administrator about the results of consideration of the claim [11].

    If the creditor misses a 7-day period, it can be reinstated by a meeting of creditors or court on the basis of a request from the creditor, but only if there is a valid excuse [12].

    Defense of a claim

    After receipt of the statement of claim the court at the proposal of the bankruptcy administrator considers the need to defense the claim at the meeting of creditors [13].

    If the court finds it necessary, it will issue a respective ruling and the bankruptcy administrator will appoint the time and place of the meeting [14].

    Claims recognized at the meeting of creditors are included in the register of creditors' claims [15].

    The court also has the right to accept the statement of claim for its own consideration.

    If the meeting of creditors does not recognize the claim, the creditor will have to file the statement of claim to the court again. The term for filing the statement of claim shall not exceed 7 days from the day of the meeting of creditors.

    A missed 7-day period may be reinstated by the court on the basis of the creditor's request if there is a valid excuse [16]. If the deadline is not reinstated, then the statement of claim will be returned to the creditor, the claim will be considered unrecognized and not subject to satisfaction.

    If the creditor's claim is recognized by the court, it will be included in the register of creditors' claims [17].

    All statements and claims, court rulings and other documents are drawn up in one of the state languages of the Republic of Belarus.

    From practice:

    A Russian company requested the inclusion in the register of creditors' claims of a debt in the amount of about 100 000 Euros. The bankruptcy administrator did not recognize the claim, indicated that there were no certificates confirming the provision of services for this amount.

    A Russian company applied to the court with a statement of claim, asked to reinstate the missed deadline for filing the statement of claim and include the claim in the register of creditors' claims.

    The court reinstated the missed deadline, engaged experts to assess the scope and cost of the services. Based on the expert opinion, the court recognized the claim of the Russian company in full.
    So, the deadlines for submitting the relevant claims and statements are very short. There can be different situations with a complete or partial refusal to recognize the claim. Sometimes the bankruptcy administrator does not respond to the claim or includes the claim incorrectly, in the lower line of creditors.

    Creditor's effective control, well-timed execution and submission of documents are important for bankruptcy proceedings but make certain difficulties for foreign creditors.
    [1] Article 147 of the Law of the Republic of Belarus dated 13 July 2012 No. 415-З "On economic insolvency (bankruptcy)" (hereinafter – the Law on bankruptcy)
    [2] Part 1 of Article 89 of the Law on bankruptcy
    [3] Part 3 of Article 89 of the Law on bankruptcy
    [4] Part 1 of Article 89 of the Law on bankruptcy
    [5] Part 5 of Article 147 of the Law on bankruptcy
    [6] Paragraph 6 of part 1 of Article 236 of the Economic Procedural Code of the Republic of Belarus
    [7] Part 2 of Article 23 of the Law on bankruptcy
    [8] Part 6 of Article 51 of the Economic Procedural Code of the Republic of Belarus
    [9] Part 2 of Article 89 of the Law on bankruptcy
    [10] Part 6 of Article 89 of the Law on bankruptcy
    [11] Part 1 of Article 92 of the Law on bankruptcy
    [12] Article 93 of the Law on bankruptcy
    [13] Part 1 of Article 94 of the Law on bankruptcy
    [14] Part 2 of Article 94 of the Law on bankruptcy
    [15] Parts 3, 5 of Article 95 of the Law on bankruptcy
    [16] Part 1 of Article 96 of the Law on bankruptcy
    [17] Part 2 of Article 96 of the Law on bankruptcy
    * This review is made by Lex Torre Law Office for foreign companies and law firms.

    ** The purpose of the review is to point out the most common mistakes made by foreign creditors in bankruptcy of Belarusian counterparties and to specify the ways of defense.

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