The main trends of the bankruptcy law development in Russia and abroad were discussed at the 8 th St Petersburg International Legal Forum on Friday. The discussion was chaired by the Ministry of Economic Development of the Russian Federation and the International Association of Insolvency Regulators.
The session was moderated by Divanandum Chinien - Chair of the International Association of Insolvency Regulators, Registrar of Companies, Director of Insolvency Service, Corporate and Business Registration Department, Mauritius. Ekaterina Salugina-Sorokovaya - Director of Department for finance and banking activity and investment development, Ministry of Economic Development of the Russian Federation, Oleg Zaytsev - Consultant, Research Center of Private Law named after Sergey Alekseev under the President of the Russian Federation, Irina Bukina - Judge, Supreme Court of the Russian Federation, Mandisa Maya - President, Supreme Court of Appeal of South Africa, Andrei Smirnykh – Head of Problematic Assets Department, Sberbank, and Aigul Ualiyeva - Head of the Financial Resolution Department, Committee of State Revenues, Ministry of Finance of the Republic of Kazakhstan participated in the discussion.
According to statistics, carried out by Irina Bukina, only 8% of potential bankrupts among consumers opted for the bankruptcy proceeding in Russia. “The provisions of bankruptcy law, regulating bankruptcy of citizens, have been effective in the Russian Federation since the 1st of October 2015. According to the data of court statistics and the Unified Federal Register of Information about Bankruptcy, over 50 000 Russian citizens have become insolvent since the establishment of consumer insolvency institution. According to the assessment of the Unified Credit Office it accounts for approximately 8% of potential bankrupts. <…> It means that the number of citizens, who need the procedure, is significantly higher than the number of those, who actually went through it,” the judge of Supreme Court said.
According to her opinion, it is connected with the expensive price of the procedure among other factors. “It really turns out to be an expensive procedure. Money is needed to cover costs. Moreover, not all the citizens understand this law. It is written in a difficult way. Sometimes even judges have questions <…> And citizens attract experts, and as you know, the services of experts are not cheap,” Irina Burkina added.
In addition to that, she said that an important factor is that consumer insolvency transformed into liquidation, because the rehabilitation procedure is applied only for the very few.
Aigul Ualiyeva shared the experience of Kazakhstan in the development of such law. “As for today, this draft law is in the Government of the Republic of Kazakhstan. When we created this draft law, we came to the conclusion that we had to change the name of the law itself: not the Consumer Insolvency Law, but the Citizens Solvency Rehabilitation Law, so that it doesn't cause a firm assertion that a person is bankrupt. <…> The procedure should not be about the liquidation of a consumer, but a reason for his/her future economic activity,” – the Head of the Financial Resolution Department of the Committee of State Revenues at the Ministry of Finance of the Republic of Kazakhstan explained.
In her speech, Mandisa Maya shared the information about a similar law in South Africa. “In South Africa, such law is created according to a model law, suggested by the Committee of the United Nations. Despite the fact that the law was adopted in 2000, we still have to do a lot. We have to fill the gaps, which are identified in practical activity. This law offers instruments of cooperation between the agencies of South Africa and corresponding agencies in other countries,” the President of the Supreme Court of Appeal of South Africa said.
In his talk, Andrei Smirnykh also touched upon the small number of bankruptcy proceedings in Russia. "If we look at the private bankruptcy cases in Russia, there were only dozens of thousands of proceedings, although the procedure has been in place for over two years now (which is not such a short time as it may seem). <…> As a comparison, the U.S. has nearly reached one million bankruptcy cases. Our system obviously still has a huge potential," the Head of Problematic Assets Department at Sberbank said.
In his opinion, this is partly caused by the high cost of a bankruptcy proceeding.
Concluding the panel, the moderator thanked the participants for an insightful contribution to the bankruptcy law discussion and expressed her hope that this session was useful for all the attendees.