RIA NOVOSTI. The corporate bankruptcy procedure in Russia requires substantial revision, first and foremost, regarding rehabilitation, Deputy Economic Development Minister Nikolay Podguzov claimed at a meeting held by the State Duma's Committee for Natural Resources, Ownership and Land Relations.
"The state of corporate bankruptcy procedures in our country requires considerable renovation. Above all, we, of course, think that the rehabilitation procedure needs being updated and rethought to a certain extent," he said.
Despite the fact that the effective laws call for rehabilitation procedures, "the practice of recent years and law enforcement practice show that procedures of this kind are most likely not applied," the deputy minister said. According to him, out of 15,000 bankruptcy procedures "only a few, i.e. just some percentage points, fall to rehabilitation procedures". At the same time, the same indicator in European countries is around 10-15%, and up to 30% in the United States, i.e. rehabilitation procedures in European and American laws do work, Podguzov noted.
He reiterated that if a company's rehabilitation is successful, jobs are preserved, a business unit remains a taxpayer and related social risks go down. "So, the rehabilitation procedure, if it works, allows businesses to have a second chance to carry on business because not always any deterioration of the corporate debtor's financial standing is caused maybe not by its incompetent management," the deputy minister thinks.
Furthermore, the ministry analyzed data on debt repayment in the course of bankruptcy proceedings and came to a conclusion that the debt repayment rate is very low for both banks and the Federal Tax Service. "It turns out that right now bankruptcy laws are not advantageous either for debtors or creditors, while creditors have quite a lot of rights to demand debtors to pay back debt," Pogduzov pointed out.
"If lawmakers define main aspects that are presently not clearly set forth in bankruptcy laws to make these procedures more efficient, this will do good for both businesses and creditors," the deputy minister said confidently.
