Insolvency Law at Belarus
Belarus has undergone significant reforms in its insolvency framework to modernize procedures and improve the efficiency of bankruptcy and restructuring processes. The primary legislation governing insolvency is the Law No. 227-Z "On Insolvency Resolution", which came into effect on October 1, 2023, replacing the previous Law “On Economic Insolvency (Bankruptcy)”. (Changes in the regulation of insolvency (bankruptcy))
⚖️ Key Features of the New Insolvency Law
1. Separation of Insolvency and Bankruptcy Proceedings
The new law distinguishes between two types of proceedings:
Insolvency Cases: Initiated by the debtor when they are unable to fulfill at least one monetary obligation.
Bankruptcy Cases: Initiated by creditors or other entities (such as prosecutors or anti-corruption agencies) when the debtor's assets are insufficient to meet creditor claims. (New Belarusian Insolvency Law in effect from October 1: Bankruptcy under the new rules, New Belarusian Insolvency Law In Effect From October 1: Bankruptcy Under The New Rules - Insolvency/Bankruptcy - Insolvency/Bankruptcy/Re-Structuring - Belarus)
2. Updated Criteria for Initiating Bankruptcy
Creditors can initiate bankruptcy proceedings if the debtor's unpaid obligations meet certain thresholds:
Labor-related obligations: 1,500 basic amounts (approximately €17,000).
Mandatory payments (e.g., taxes, fees): 100 basic amounts (approximately €1,100).
Other monetary obligations: 500 basic amounts (approximately €5,400). (New Belarusian Insolvency Law in effect from October 1: Bankruptcy under the new rules, New Belarusian Insolvency Law In Effect From October 1: Bankruptcy Under The New Rules - Insolvency/Bankruptcy - Belarus)
3. Restructuring and Rehabilitation Procedures
The law introduces a structured approach to rehabilitating financially distressed entities:
Protective Period: A one-month period to verify the accuracy of the insolvency application.
Competitive Proceedings: Assessment of the debtor's insolvency status and identification of any fraudulent activities.
Sanitation (Rehabilitation): A rehabilitation period lasting up to three years, extendable by two years, aimed at restoring the debtor's solvency.
Liquidation Proceedings: The final stage involving asset liquidation and distribution to creditors. (New Belarusian Insolvency Law in effect from October 1: Bankruptcy under the new rules)
4. Enhanced Role of Creditors and Government Agencies
Creditors have increased influence in the bankruptcy process, including the ability to approve asset sales and rehabilitation plans. Government agencies are granted expanded authority to oversee and facilitate bankruptcy and rehabilitation procedures. (Bill on insolvency management designed to keep enterprises, businesses afloat in Belarus)
5. Simplified Asset Disposal in Bankruptcy
Decree No. 333, signed on August 23, 2024, allows for the sale of insolvent entities' assets without full documentation, expediting the process of returning assets to the economy. (Decree No. 333 of 23 August 2024 On peculiarities of handling the property of insolvent organizations | Official Internet Portal of the President of the Republic of Belarus)
🏛️ Court System and Administration
Insolvency and bankruptcy cases are adjudicated by the Economic Court of the Republic of Belarus. The court appoints a crisis manager to oversee the proceedings, including asset management, creditor negotiations, and the implementation of rehabilitation plans. The crisis manager's authority and compensation are governed by the new law.
🧾 Creditor Hierarchy in Liquidation
In the event of liquidation, creditor claims are prioritized as follows:
Employee Claims: Unpaid wages and severance.
Social Security Contributions: Pension and social insurance obligations.
Tax Liabilities: Outstanding taxes and fees.
Secured Creditors: Claims backed by collateral.
Unsecured Creditors: General trade debts and obligations.
Shareholders: Claims arising from shareholder loans or equity investments. (New Belarusian Insolvency Law In Effect From October 1: Bankruptcy Under The New Rules - Insolvency/Bankruptcy - Belarus, Bill on insolvency management designed to keep enterprises, businesses afloat in Belarus)
🛡️ Protection of Employment and Public Interest
The new law emphasizes the protection of employees' rights and the preservation of enterprises critical to the national economy. Certain strategic sectors, such as defense and energy, are excluded from bankruptcy proceedings to safeguard national interests. (Bill on insolvency management designed to keep enterprises, businesses afloat in Belarus)
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