Bishkek City October 15, 1997, # 74
THE LAW OF THE KYRGYZ REPUBLIC
On Bankruptcy (insolvency)
(Amended by Laws of the Kyrgyz Republic:
# 160, passed December 30, 1998;
# 64, passed July 7, 1999;
# 79, passed September 29, 2000)
Article 1. Issues Regulated By This Law
Article 2. Terminology Applied In This Law
Article 3. Bankruptcy (insolvency)
Article 4. Process Of Bankruptcy
Article 5. Basic provisions of the procedure of special administration
Article 6. Basic Provisions Of The Sanation Procedure
Article 7. Basic Provisions Of The Rehabilitation Procedure
Article 7-1. Basic Provisions Of The Procedure Of Amicable Settlement
Article 9-1. Size Of Debt: Required For The Limitation Of The Process Of Bankruptcy Of A Debtor
Article 9-2. Mandatory Initiation Of The Process Of Bankruptcy By A Debtor
Article 11. Contents Of Creditors' Claims
Article 12. Creditors' Meeting
Article 13. Making Decisions At The Creditors' Meeting
Article 14. Creditors' Committee
Article 15. Expression Of No Confidence In Respect To The Administrator
Article 16. Liquidation Of A Solvent Legal Entity
Article 17. State Body In Charge Of Cases Of Bankruptcy
Article 18. Wrongful Acts During The Process Of Bankruptcy
Article 19. Fictitious And Predetermined Bankruptcy
Article 20 Invalidity Of Decision
Article 22. Consequences Of Recognition (Pronouncement) Of A Debtor As Bankrupt
Article 24. Recognition Of A Debtor Insolvent
Article 25. Safekeeping Documents After Completion Of The Process Of Bankruptcy
Article 26. Resuming The Process Of Bankruptcy
CHAPTER 1-1 CONSIDERATION OF CASES OF BANKRUPTCY IN THE COURT
Article 27. Consideration Of Cases By The Court
Article 27-2. The Right To Appeal To The Court
Article 27-3. Parties To A Bankruptcy Case
Article 27-4. Parties To An Arbitration Case
Article 27-5. Grounds For Starting The Case
Article 27-6. Petition By A Debtor
Article 27-7. Documents To Be Attached To A Petition By A Debtor
Article 27-8. Petition By Creditor
Article 27-9. Joint Claims Of Creditors
Article 27-10. Documents To Be Attached To A Petition By A Creditor
Article 27-11. Acceptance Of A Petition For Recognition Of The Debtor Bankrupt
Article 27-12. Rejection Of A Petition For Recognition Of A Debtor Bankrupt
Article 27-13. Returning The Petition For Recognition Of The Debtor As Bankrupt
Article 27-14. Measures To Secure The Claims Of Creditors
Article 27-15. Opinion Of The Debtor Concerning The Petition To Recognize The Debtor Bankrupt
Article 27-16. Time Frame For Consideration Of The Bankruptcy Case
Article 27-17. Issues Considered By The Court Prior To Making A Decision
Article 27-18. Grounds For Recognition Of The Debtor Bankrupt
Article 27-19. Opinion Of The Court
Article 27-20. Decision Of The Court
Article 27-21. Court's Decision Of Finding Debtor Bankrupt And Setting A Bankruptcy Process
Article 27-22. Publication Of The Decision On Recognition Of The Debtor Bankrupt
Article 27-23. Decision Of The Court On Denial Of Recognition Of The Debtor Bankrupt
Article 27-24. Court's Decision Of Ending Bankruptcy Process Of Debtor
Article 27-25. Suspending Proceedings In Bankruptcy Process
Article 27-27. Postponing the case consideration.
Article 27-28. Grounds For Not Considering The Petition
Article 27-29. Grounds For Termination Of The Proceedings In The Case Of Bankruptcy
Article 27-31. Consideration Of Petitions And Complaints
Article 27-32. Proceedings In The Appellate Instance
Article 27-33. Consideration Of The Case By The Supervising Instance
CHAPTER 2 SPECIAL ADMINISTRATION
Article 27-34. Initiation Of The Procedure Of The Special Administration
2. SPECIAL ADMINISTRATION WITHOUT COURT INVOLVEMENT
Article 28. Initiation Of A Process Of Special Administration Without Court Involvement
Article 29. Conditions Of Proceeding Special Administration Without Court Involvement
Article 30. Decisions Of Creditors' Meeting
Article 30-1. Consequences Of Absence Of Creditors At The Creditors' Meeting Organized By Debtor
Article 31. Effect Of Appointment Of The Special Administrator
Article 51. General Provisions
Article 52. Time Frame Of The Liquidation
Article 53. Authority Of The Special Administrator In Liquidation Of Debtor
Article 54. Creditors' Accounts
Article 55. Debtor Restructuring
6. COMPLETION OF THE PROCEDURE OF THE SPECIAL ADMINISTRATION
Article 55-1. Completion Of Procedure Of Special Administration
CHAPTER 3 TEMPORARY ADMINISTRATOR
Article 61. Role Of Temporary Administrator
Article 62. Appointment Of Temporary Administrator
Article 63. Rights And Duties Of The Temporary Administrator
Article 64. Cessation Of Powers Of A Temporary Administrator
CHAPTER 4 SPECIAL ADMINISTRATOR
Article 65. General Provisions
Article 66. Rights Of A Special Administrator
Article 67. Invalidity Of Transactions Made By Debtor
Article 70. Obligations Of The Special Administrator
Article 71. Obligations Of The Special Administrator In Case Of Insufficiency Of Assets
Article 72. Liability Of The Special Administrator (Temporary Administrator)
Article 73-1. Remuneration For A Special Administrator
Article 73-2. Report Of A Special Administrator
CHAPTER 5 SPECIAL ADMINISTRATOR AND SECURED CREDITORS
Article 74. Rights And Obligations Of A Secured Creditor
Article 75. Holding Collateral Ineffective.
Article 77. Transfer Of The Right To Collect Collateralized Property
CHAPTER 6 PRINCIPLES OF LIABILITY IN THE BANKRUPTCY PROCESS
Article 78. Full Liability Of A Legal Entity
Article 79. Full And Extended Liability Of Stake Holders Of The Debtor
Article 80. Limited Liability Of Stake Holders Of The Debtor
Article 81. Liability Of A Guarantor
Article 82. Full Liability Of An Individual Entrepreneur
Article 83. Liability Of Managers Of A Troubled Debtor
CHAPTER 7 CONDITIONS AND PRIORITY OF DEBT REPAYMENT
Article 85. General Rules On Observation Of Priorities In Repayment Of Debts
Article 86. Property Not Included Into The Pool Of Liquidation Assets
Article 87. Payment Priorities
Article 88. Mutual Settlements
Article 89. Interests And Penalty
Article 90. Collection Of Under-Received Profit
Article 91. Consideration And Enforcement Of Creditors' Claims
Article 93. Concept Of Sanation
Article 94. Application For Sanation
Article 95. Surety And Guarantee Of Third Parties
Article 97. Procedure For Conducting Sanation
Article 98. General Provisions
Article 99. Rehabilitation And Special Administration
Article 100. Initiation Of The Rehabilitation Process And Role Of The Creditors' Meeting
Article 101. Conditions For Conducting Rehabilitation
Article 102. Decisions Of The Creditors' Meeting
Article 102-1. Approval Of The Plan Of Rehabilitation By The Court
Article 102-2. Rejection Of The Plan Of Rehabilitation By The Court
Article 104. Rehabilitation Plan
Article 105. General Provisions
Article 106. Format Of The Amicable Agreement
Article 107. Contents Of The Amicable Agreement
Article 108. Procedure For Entering Into The Amicable Agreement
Article 110. Conditions For Approval Of The Amicable Agreement By The Court
Article 111. Consequences Of Approval Of The Amicable Agreement By The Court
Article 112. Rejection Of An Amicable Agreement
Article 113. Invalidity Of The Amicable Agreement
Article 114. Consequences Of Invalidation Of The Amicable Agreement
Article 115. Consequences Of Failure To Perform Or Of Improper Performance Of Amicable Agreement
CHAPTER 11 PECULIARITIES OF BANKRUPTCY OF BANKS
Article 116. Rehabilitation Of A Bank
Article 117. Conservation Of A Bank
Article 118. Powers Of The Conservator
Article 119. Special Administration Of A Bank
Article 120. Particular Features Of The Special Administration Of A Bank
Article 121. Sanation Of Banks
CHAPTER 12 BANKRUPTCY OF AN INDIVIDUAL ENTREPRENEUR
Article 122. Particular Features Of The Special Administration Of An Individual Entrepreneur
CHAPTER 13 BANKRUPTCY OF INDIVIDUALS ENGAGED IN THE AGRICULTURE
Article 123. Bankruptcy Of Individuals Engaged In The Agriculture
Article 124. Legal Framework For A Process Of Bankruptcy Of Individuals Engaged In The Agriculture
CHAPTER 14 BANKRUPTCY OF A MISSING DEBTOR
Article 125. Peculiarities Of Submission Of A Petition For Recognizing A Missing Debtor Bankrupt
Article 126. Consideration Of Case Of Bankruptcy Of A Missing Debtor
Article 127. S atisfying Claims Of Creditors Of A Missing Debtor
Article 128. Application Of Provisions On Bankruptcy Of Missing Debtor
CHAPTER 15 BANKRUPTCY OF INSURANCE COMPANIES
Article 129. General Provisions
Article 130. Consideration Of Cases Of Bankruptcy Of Insurance Companies In The Court
Article 131. Special Administration Of An Insurance Company Without Involvement Of The Court
Article 132. Satisfaction Of Claims Of Creditors
CHAPTER 16 BANKRUPTCY OF PROFESSIONAL AGENTS OF THE MARKET OF SECURITIES
Article 133. General Provisions
Article 136. Satisfaction Of Claims Of Creditors.
CHAPTER 17 BANKRUPTCY OF PUBLIC FOUNDATIONS
Article 137. Regulating Cases Of Bankruptcy Of Public Foundations
CHAPTER 18 BANKRUPTCY OF CONSUMERS' COOPERATIVES
Article 138. Regulating Cases Of Bankruptcy Of Consumers' Cooperatives
Article 1. Issues Regulated By This Law
1. This Law shall establish the grounds for recognition (pronouncement) of an insolvent debtor as bankrupt (insolvent) and regulate the order and conditions for implementation of procedures applied within the process of insolvency: special administration, sanation, rehabilitation, amicable settlement, conservation and other issues arising from the inability of the debtor to satisfy fully the creditors' claims.
2. This Law shall apply in respect of the following:
a. legal entities under any kind of ownership, established as commercial organizations (except state owned enterprises established on the grounds of operational management), including foreign legal entities and legal entities with foreign involvement, registered in the Kyrgyz Republic in accordance with the procedure established by the legislation, as well as banks and other financial lending organizations;
b. legal entities under any ownership which are not for profit organizations in cases directly stipulated by this Law or other normative legal acts of the Kyrgyz Republic regulating issues of the establishment and organizational and legal format of mentioned not for profit organizations;
c. individual entrepreneurs.
3. This Law shall not apply in respect of:
a. public and other institutions;
b. cases of liquidation of solvent legal entities upon the grounds stipulated by the paragraph 2 of the article 96 of the Civil Code of the Kyrgyz Republic , provided requirements set in the Article 16 of this Law have been met.
4. Rules required for the explanation and enforcement of this Law shall be established by other normative legal acts passed by the Government of the Kyrgyz Republic as well as the National bank of the Kyrgyz Republic in respect to banks and other financial and lending organizations in accordance with this Law.
5. Provisions regulating the bankruptcy (insolvency) of a debtor, contained in other laws may be applied only after respective amendments have been made into this law.
6. In case an international agreement of the Kyrgyz Republic sets other rules than those established by this Law, the rules of an international agreement shall apply.
7. Judgments made by courts of foreign states in respect to cases of bankruptcy (insolvency) shall be recognized in the territory of the Kyrgyz Republic in accordance with international agreements of the Kyrgyz Republic .
8. In absence of an international agreement of the Kyrgyz Republic , judgments made by courts of foreign states in respect to cases of bankruptcy shall be recognized in the territory of the Kyrgyz Republic unless such decisions contradict to the legislation of the Kyrgyz Republic .
Article 2. Terminology Applied In This LawFor purposes of this Law, the following terminology shall be applied:
Administrator - a qualified specialist appointed by the court, the National Bank of the Kyrgyz Republic or a creditors' meeting, who may act as a Temporary Administrator, Special Administrator, Conservator, External Manager, and who is responsible for conducting the process of insolvency of a debtor.
Assets - the property comprised of fixed assets, other long term investments (including nonmaterial assets), current assets, financial assets and accounts receivable.
Affiliate of a legal entity or a physical entity - any legal entity or a person (except public bodies supervising activities of a legal entity or an individual person within the limits of their competence (jurisdiction) that has the right to directly or indirectly determine or influence decisions made by this person, including through a contract (or an oral agreement) or any other agreement, as well as any individual person or a legal entity in respect to which the affiliate has the same right. Executive officers and shareholders of a legal entity or any enterprise that owns 10% and more of voting shares of a legal entity (5 % and over in case of open end joint stock companies) shall also be recognized as affiliates of such a legal entity.
Bankruptcy of an individual entrepreneur - a method of the procedure of the special administration which is conducted only through the involvement of the court and provides for the exaction and alienation of assets of a debtor included into the liquidation assets' pool in order to satisfy the claims of creditors.
External Manager - an administrator appointed by the court or by a meeting of creditors, who is responsible for implementing the procedure of rehabilitation of the debtor in accordance with an accepted rehabilitation plan.
Initiation of the process (procedure) of bankruptcy - set of measures, stipulated by this Law (for instance, filing a suit to the court for recognition of a debtor as bankrupt) that may result in the commencement of the procedure (process) of bankruptcy.
Temporary Administrator - an administrator appointed by court or the National Bank of the Kyrgyz Republic upon the petition filed by a petitioner who is responsible for preserving the assets of a debtor pending the final decision to be made by the court or the meeting of creditors (in case of the process of bankruptcy without the court involvement).
Debtor - a legal entity or an individual entrepreneur considered or recognized as insolvent.
Extended Liability - the principle applied to stakeholders of the debtor (in case of a legal entity) in under which the stakeholders and share holders of a legal entity are liable for the obligations of the debtor equally for all stakeholders in the same proportion to the value of their contributions made into the legal entity to be determined by founding documents of the legal entity.
Costs of the bankruptcy process - necessary costs, associated with carrying out the process of bankruptcy including the cost of publication of notices on the bankruptcy procedure, court fees, expenses made by the administrator and remuneration for the administrator, as well as expenses of the debtor relating to the period of time within which the administrator has considered it necessary to continue the economic activity of the debtor, and other expenses.
Petition for recognition of a debtor as bankrupt (insolvent) - a request to initiate a process of bankruptcy in the court in respect to a debtor, consisting of a lawsuit by a creditor (group of creditors), the debtor, the National Bank of the Kyrgyz Republic, and other persons indicated in this Law filed to the court in accordance with the procedure set by this Law.
Individual entrepreneur - any person carrying out entrepreneurial activities without establishing a legal entity in compliance with the civil legislation of the Kyrgyz Republic, who may be deemed insolvent in compliance with this Law and who may be subject to the process of bankruptcy.
Conservator - a qualified specialist appointed by the National Bank of the Kyrgyz Republic, For the conservation of a bank as well as for the initiation of the procedure of the special administration or rehabilitation of the bank.
Conservation - a procedure applied to an insolvent bank by decision of the National Bank of the Kyrgyz Republic in order to recover the solvency of the bank.
Creditors' committee - an authorized body established by the meeting of creditors to carry out its activities in compliance with the requirements of this Law.
Creditor - a person, including the domestic or foreign legal entities and individuals, as well as the Kyrgyz Republic represented by authorized bodies, that has the right to claim that the debtor should fulfill its obligations - transfer property, perform works, pay the money, etc.
Liquidation - a method of the procedure of special administration which involves the exaction and alienation of all assets of a debtor (in case of a legal entity) included into the pool of liquidation assets in order to satisfy claims of creditors in the order of priority.
Pool of liquidation assets - assets that belong to a debtor less the assets pointed out in this Law (collateralized assets, withdrawn from the turnover, assets of an individual entrepreneur that may not be subject to lien, etc.).
Amicable settlement - a procedure applied within the process of bankruptcy aiming at reaching an agreement between the debtor and creditors concerning the execution of obligations of the debtor, to be binding upon other creditors after approval by the court.
Commencement of a procedure of bankruptcy - the moment of making a decision by the court, meeting of creditors, National Bank of the Kyrgyz Republic on recognition of the debtor as bankrupt and on initiation of the procedure of the special administration through the appointment of a special administrator.
Mandatory payments - taxes, charges, and other obligatory contributions into the budget of the respective level, and into extra-budgetary funds, pursuant to the procedure and conditions determined by the legislation of the Kyrgyz Republic.
Limited liability - the principle applied to stakeholders of a debtor (in case of a legal entity) under which the stakeholders of the debtor are not liable for the obligations of the debtor and bear the risk of losses associated with the activities of the debtor to the extent of their contributions (shares).
Liabilities - obligations of a debtor (with the exception of sub ventions, subsidies, own funds and other sources) consisting of borrowed and attracted funds, including the accounts payable.
Full liability - the principle applied to shareholders and stakeholders of a debtor (in case of a legal entity) under which the stakeholders of a debtor are liable for the obligations of the debtor to the extent of all the property they own in solidarity, in accordance with the founding documents or the legislation of the Kyrgyz Republic.
Enterprise - set of property as implied by the concept provided in the Article 33 of the Civil Code of the Kyrgyz Republic .
Process of bankruptcy - a process applied to the debtor, through the procedures stipulated by this Law.
Rehabilitation - a procedure, applied within the bankruptcy process in order to recover the solvent status of the debtor. Procedure of rehabilitation in respect to a debtor which is a legal entity may or may not involve the court and must always involve the court in case of a debtor which is an individual entrepreneur.
Restructuring - a method of the procedure of special administration which involves creation of one or more new legal entities based on the assets of the debtor for further sale in the interests of creditors and subsequent liquidation of a legal entity which is the debtor.
Manager - a person appointed in compliance with the established procedure to manage a legal entity (director, member of the board, manager, executive, etc., or a deputy or an acting manager).
Sanation - a procedure, applied within the bankruptcy process, which involves economic recovery of the debtor, by employing financial, economic or organizational measures. Sanation implies satisfaction of claims of all creditors within the period established by this Law.
Special administration - a procedure of bankruptcy process, applied to a debtor. Procedure of the special administration in respect to a debtor which is a legal entity may or may not involve the court, and must always involve the court in respect to a debtor which is an individual entrepreneur. Methods of the special administration include the liquidation or restructuring a legal entity and bankruptcy of an individual entrepreneur. It involves the appointment of special administrator, the sale or alienation of the debtor's assets to third parties for the benefit of creditors and a termination of the legal entity and business activity of the individual entrepreneur.
Special administrator (liquidator) - an administrator appointed by the court or the National Bank of the Kyrgyz Republic, or by a meeting of creditors, who is responsible for implementing the special administration of the debtor.
Stakeholder of a legal entity - an individual or a legal entity (including the Kyrgyz Republic, represented by the State Property Fund of the Kyrgyz Republic in respect to state owned Enterprises and legal entities with the share of the state ownership; founders, share holders, members and partners, etc.) that have claims in respect to the debtor, or the lien over the debtor' property or other rights in respect to property of the debtor.
Legal entity - any organization which has characteristics as described in the Article 83 of the Civil Code which may be recognized (pronounced) as insolvent and may be subject to the process of bankruptcy.
Article 3. Bankruptcy (insolvency)Bankruptcy (insolvency) shall be understood as the insolvency of a debtor which has been recognized by the court or declared by a meeting of creditors, i.e. the lack of ability of the debtor to fully satisfy claims of the creditors in respect to monetary obligations, including the lack of ability to make mandatory payments in favor of the budget and extra-budgetary funds.
Article 4. Process Of Bankruptcy1. The process of bankruptcy shall be understood as the activity of the state, represented by authorized bodies, courts, administrators who have been specially appointed in compliance with the procedure established by law (temporary administrators, special administrators, conservators, external managers), as well as creditors and the National Bank of the Kyrgyz Republic, regulated by this Law and aiming at satisfying claims of the creditors, as well as the restoration of debtor's solvency, or the termination of activities of the debtor.
2. The process of bankruptcy shall serve as the way to satisfy the claims of creditors in respect to an insolvent debtor.
3. Procedure of the special administration, conducted through the liquidation or restructuring a debtor, in case of a legal entity, or through the bankruptcy of an individual entrepreneur, may be applied upon commencement of the process of bankruptcy or within the process of bankruptcy.
4. Upon initiation of the process of bankruptcy or within the process of bankruptcy the following procedures may be applied:
a. sanation;
b. rehabilitation;
c. amicable settlement;
d. conservation, in respect to banks.
Article 5. Basic provisions of the procedure of special administration1.. Liquidation shall:
- apply in respect to a legal entity;
- involve the exaction, alienation and subsequent distribution of assets of the debtor, included into the pool of liquidation assets, in favor of the creditors;
- upon completion of the liquidation process, the activity of the debtor shall be terminated and the record in the state register of legal entities shall be canceled.
2. Bankruptcy of an individual entrepreneur shall:
- apply in respect to a physical entity, registered as an individual entrepreneur;
- be conducted only through the involvement of the court;
- involve the exaction and alienation and subsequent distribution of assets within the pool of liquidation assets in favor of the creditors of the debtor;
- the court may disqualify an individual entrepreneur, i.e. disallow the entrepreneur to conduct any business activity within a period of time, set by this Law.
3. Restructuring shall:
- apply to legal entities;
- imply the replacement of stakeholders (stakeholder) of an entity and establishment of one new or several new legal entities;
- new legal entity, or several legal entities, and the remaining assets of the debtor shall be sold (alienated) to satisfy the claims of creditors;
- activity of the legal entity shall be terminated upon completion of the restructuring procedure.
Sanation shall:
1. apply to legal entities;
2. imply existence of guarantees to protect interests of creditors, and full satisfaction of their claims within the period established by this Law;
3. allow the debtor to continue its economic activity if sanation is successful and the debtor has restored the solvency status;
4. not imply the replacement of stakeholders, unless otherwise provided by the agreement of parties.
Article 7. Basic Provisions Of The Rehabilitation ProcedureRehabilitation:
1. shall apply both to a legal entity and an individual entrepreneur;
2. shall require the involvement of the court in cases of rehabilitation of an individual entrepreneur;
3. shall involve the submission of a rehabilitation plan by the debtor for acceptance by the creditors in accordance with the requirements of this Law;
4. rehabilitation plan shall allow the debtor to continue business activity to satisfy the creditor's claims in full or in part;
5. may turn into the process of the special administration of the debtor in compliance with the requirements of this Law;
6. shall not involve the change of stakeholders, unless otherwise provided by the agreement between the parties.
Article 7-1. Basic Provisions Of The Procedure Of Amicable SettlementAmicable settlement shall:
1. apply within the process of bankruptcy both in respect to a legal entity or an individual entrepreneur, through the involvement of the court;
2. imply reaching an agreement between the debtor and the creditors, under which the creditors agree that all or some claims shall be satisfied on the grounds of an agreement, without appointment of an administrator by the court;
3. not imply the replacement of stakeholders, unless otherwise stipulate by the agreement between parties involved.
Article 8. Administrator1. Procedures within the process of the bankruptcy shall be conducted by an administrator as a qualified expert. An administrator may act as:
• Temporary administrator;
• Special administrator;
• External manager;
• Conservator (in case of banks).
2. Administrator may be an individual including a foreigner who meets the requirements established by the legislation of the Kyrgyz Republic in respect to the physical and legal capabilities of such persons, as well as the requirements specified below in the paragraph 3 of this Article.
3. An administrator must possess a license to perform the activities of an administrator except when administrator is an employee of the public body for bankruptcy cases or the National Bank of the Kyrgyz Republic. The following may not be appointed as administrators:
• a creditor, a debtor, a party to a transaction, an stakeholder, or the manager of an insolvent debtor;
• a person who used to be a stakeholder, a stake holder or the manager of the debtor at least a year prior to the initiation of the process of bankruptcy;
• a close relative of the persons, listed above;
• any person employed in the bodies of the public administration or the governance (except the staff of the state body for bankruptcy cases and the National Bank of the Kyrgyz Republic), the local self government and judiciary of the Kyrgyz Republic:
• an official of the state body of cases of bankruptcy - in respect to the cases of bankruptcy at an enterprise owned by the state, partially or fully;
• any person whose activity associated with the management of affairs and/or property of other persons is subject to restrictions;
• any person who has been convicted by the court;
• any person who used to be an individual entrepreneur and has been recognized as bankrupt within the previous five years.
4. An administrator shall be appointed or dismissed by court (in a bankruptcy process with involvement of the court), or by the meeting of creditors (in a process without involvement of the court) or the National Bank of the Kyrgyz Republic (in respect to insolvency of banks) in compliance with the procedure and conditions established by this Law.
5. An administrator shall be protected and guided by the legislation of the Kyrgyz Republic, and shall enjoy the rights and bear the obligations established by the legislation of the Kyrgyz Republic or an agreement, while performing the duties of an administrator.
6. Whenever a special administrator is appointed without involvement of the court, the newly appointed administrator must conclude a civilian legal agreement with one of creditors authorized by the meeting of creditors to act on behalf of the meeting of creditors. Unless otherwise stipulated by the meeting of creditors, this authorized person shall establish the order of concluding an agreement and terms of the agreement upon consent of the creditors.
7. Creditor (creditors), or the debtor, the National Bank of the Kyrgyz Republic (in cases of insolvency of banks) or the state body for cases of bankruptcy shall have the right to nominate an administrator, provided the requirements in respect to administrators set by this Law have been met. If there are several nominees, the administrator shall be appointed through a competition. Conditions, terms and the procedures for such a competition shall be established by the bodies listed in the paragraph 4 of this Article.
8. An administrator may be dismissed in the following cases:
• on the grounds of a decision by the meeting of creditors made in accordance with the requirements of the article 15 of this Law, as a result of the no confidence vote by the meting of creditors (committee);
• license of the administrator has been withdrawn in accordance with pre-set procedures;
• administrator has violated the requirements of the law of the Kyrgyz Republic while conducing the bankruptcy procedures;
• criminal conviction in respect to the administrator has become effective;
• administrator has filed a petition on dismissal from the position of the administrator;
• emergence or establishment of circumstances that disallow to appoint or continue performing the duties of an administrator;
• due termination (completion) of the procedure for which the administrator has been appointed.
9. Unless otherwise specified in this Law, an administrator, dismissed from the position, must within the period of time, established by the court (meeting of creditors) do the following:
- to refuse to prevent a newly appointed administrator from performing the duties, and provide access to the buildings, assets, banking accounts and documents of the debtor;
- to prepare and present a progress report in the order, set by other normative legal acts on bankruptcy;
- to hand in all the documents related to the process of bankruptcy of a debtor, the list of which is set by other normative legal acts on bankruptcy, to a newly appointed administrator;
- if necessary, to be prepared to provide full information (in writing or orally) concerning the process of bankruptcy of the debtor to a newly appointed administrator;
- to take the inventory of the property and other assets of the debtor along with the newly appointed administrator, representatives of the debtor and other people - the members of the inventory commission;
- to hand in the stamps and seals of the debtor to the newly appointed administrator;
- to perform other duties established by the legislation of the Kyrgyz Republic.
10. After decision on the dismissal of the administrator has been made, the administrator shall have the right to do the following, unless otherwise stipulated by this Law:
- to lodge a complaint to the court of arbitration, against the decision on dismissal;
- to receive the remuneration for the actually performed duties and the time spent, in accordance with the procedure set by a decision of the court or an agreement, in compliance with this Law;
- other rights, established by the legislation of the Kyrgyz Republic.
1. A debtor shall be insolvent and may be recognized or pronounced as bankrupt (insolvent) if at least one of the following conditions have been met:
- if debtor fails to satisfy the lawful claims of a creditor (creditors) to repay the debt or cover other liabilities (for goods, services, etc.) due;
- if debtor refuses to fully satisfy such claims;
- if debtor is not able to fully satisfy such claims;
- if debtor fails to satisfy claims of the creditor, in accordance with the order, set by the article 27-26 of this Law, pending a final decision by the court on the essence of the bankruptcy case.
2. If at least one of the conditions, listed in the paragraph 1 of this article, has been met but the debtor claims the ability to repay the debt, the court shall recognize the debtor as insolvent unless the debtor satisfies the claims of creditors in accordance with the procedures set in the article 27-26 of this Law, after the court has received the petition for recognition of the debtor insolvent and by the time the court has made the final decision in the case.
3. The fact of insolvency of a debtor shall be established by a decision of the court of arbitration (when process of bankruptcy involves the court) or by a decision of a meeting of creditors (if court is not involved). Establishment of the fact of insolvency of the debtor serves as the grounds for recognition (pronouncement) of the debtor as bankrupt (insolvent) and for application of procedures stipulated by this Law in respect to such debtor.
Article 9-1. Size Of Debt: Required For The Limitation Of The Process Of Bankruptcy Of A Debtor1. The following minimal size of the debt is required in order to start the process of bankruptcy in respect of an insolvent debtor:
- at 500 minimal monthly salaries, as the sum of claims of one or several creditors;
- at least 5 minimal monthly salaries, as the claim of a creditor who is a physical entity, including an individual entrepreneur;
- at least one minimal monthly salary, as the claim in respect to a debtor bank, regardless of whether a creditor is a physical or legal entity.
2. Rules of this article shall not apply to imitation of the process of bankruptcy by the debtor.
Article 9-2. Mandatory Initiation Of The Process Of Bankruptcy By A Debtor1. A debtor that predicts the bankruptcy shall be obliged to imitate the process of bankruptcy through the involvement of the court or without at least one month after emergence of at least one of the following circumstances:
- if satisfaction of claims of one creditor or several creditors results in a failure to satisfy fully monetary obligations and liabilities in front of other creditors, including the budget or extra budgetary funds;
- if the debtor fails or is going to fail to fully fulfill the obligations and cover the liabilities in front of the budget and extra budgetary funds;
- if a body that is authorized by the founding documents of the debtor to make a decision on the liquidation of the debtor or the body that is authorized by a stake holder of the debtor - state owned enterprise, has made a decision on liquidation of the debtor as bankrupt;
- if it is established after liquidation of a solvent legal entity that claims of creditors may not be satisfied in full (article 16 of this Law);
- in other cases, stipulated by this Law.
2. Failure to comply with the requirements set in the article 1 of this Article shall result in the subsidiary responsibility of the stake holders, the manager, and members of the liquidation commission of the debtor in front of the creditors.
3. The manager of the debtor, members of the liquidation commission that have committed the violation of the requirements set in this Article may be deprived of the right to hold a managerial position and (or) act as an entrepreneur and manage legal entities (to be disqualified) for a period of time and in accordance with the procedure set by the legislation of the Kyrgyz Republic.
Article 10. Creditors1 . Both domestic and foreign individuals and legal entities, as well as the Kyrgyz Republic , acting through the authorized agencies may be creditors.
2. Interests of all creditors shall be represented by a meeting of creditors and a committee of creditors, established in accordance with this Law to apply the procedures of bankruptcy.
3. Unless otherwise stipulated by this Law, the provisions on creditors shall apply to the tax agencies, bodies of the Social Fund and other authorized public bodies.
4. Stake holder of a debtor (in case of a legal entity) may also be a creditor of a legal entity (this shall not apply to the claim to return the contribution made into the authorized capital of the debtor).
Article 11. Contents Of Creditors' Claims1. In order to establish the minimal size of a debt, as stipulated by the article 9-1 of this Law, the size of the monetary obligations (the principal, including interest duly accrued) shall be taken into account regardless of the size of penalties due for the non execution or improper execution of the obligations, in compliance with the law or an agreement.
2. In order to establish the minimal size of the debt, stipulated by the article 9-1 of this Law, the size of the mandatory payments shall be taken into account regardless of the financial or economic sanctions imposed in compliance with the law.
Mandatory payments shall include: taxes, fees, and other mandatory contributions in to the budget at the respective level as well as extra budgetary funds, following the procedures and terms set by the legislation of the Kyrgyz Republic.
3. Size of the monetary obligations shall be established on the basis of an effective court decision or documents that confirm that the debtor has admitted such claims, or in other cases as stipulated by this Law.
4. If a debtor challenges claims of creditors, the size of liabilities and mandatory payments shall be established by the court, through the procedure stipulated by this Law.
Article 12. Creditors' Meeting1. Participants of the creditors' meeting with the right to vote shall be considered as creditors (or their representatives), and in the instances provided by this Law, other authorized bodies as well.
2. Depending on the applied bankruptcy procedure, the creditors meeting shall be organized and held by the stake holder of the debtor, the insolvent debtor himself, creditors, or by the administrator.
After the first meeting of creditors, the meeting itself, the committee of creditors and the administrator shall have the right to call on subsequent meetings of creditors.
3. Unless otherwise specified in the normative legal acts concerning the bankruptcy, these persons (bodies) must publish a notice of the meeting in the national newspaper (at least once) no less than 10 days prior to the date of the meeting and inform known creditors with the size of claims over 100 minimal monthly salaries by sending a letter or handing the notification in at least 10 days prior to the date of the meeting. One letter shall be sufficient for a proper organization of a meeting or creditors.
4. The creditors' meeting may make any decision in respect to obligations of the debtor, which shall not contradict to this Law, decisions of the court and not impede the administrator's activity.
5. To participate in the first meeting of the creditors with the right to vote, the creditor must within seven calendar days prior to the beginning of the meeting submit his/her demand (claim) to persons who initiated this meeting, or to a special administrator, unless otherwise stipulated by this Law.
The procedure of formation and submission of claims shall be established by the other normative and legal acts in respect to bankruptcy. legislation. Documents confirming the presence, amount and grounds of the creditor's demands must be attached to such claim.
6. To participate in the meeting of the creditors with the right to vote, a secured creditor must estimate the value of the subject of pledge, and announce it at the first meeting of creditors. The right of a secured creditor to vote shall be determined as the difference between the amount of the claim of the secured creditor, and estimated value of the subject of pledge.
A secured creditor shall have the right to waive the right to security. In this case the voting right of the secured creditor shall be established as the value of the claim but the creditor shall not have the right to reverse this decision afterwards.
An administrator shall have the right to purchase the collateral from the secured creditor at the estimated value.
7. In cases, stipulated by this Law, decisions of the creditors in the debtor's bankruptcy process with the involvement of the court must be approved by the court.
8. Decisions of the creditors' meeting in the process of bankruptcy must be formalized by the protocol of the meeting and signed by a chairperson of the meeting. 9. Creditors' meeting shall be held at the place of location (residence) of the debtor, unless otherwise established by the meeting (committee) of creditors, or administrator.
Article 13. Making Decisions At The Creditors' Meeting1. Unless otherwise stipulated by this Law:
- A properly called creditors' meeting (by the committee of creditors) shall be considered valid, if attended by creditors claiming 51 or more per cent of the total amount of debts of the debtor.
- Meeting of creditors properly called by the debtor or the administrator shall be considered as valid regardless of the number of creditors attending the meeting or the size of their claims.
2. If there are less than 50 creditors, the chairperson of the meeting must make sure the decisions of the meetings have been sent to the creditors through registered mail or handed in against a receipt within three days after making decisions. This period of time may be extended by the meeting of creditors if there are more than 50 creditors.
3. Unless otherwise stipulated by this Law, decisions of the first or any other subsequent meeting of creditors in respect to any issue shall be considered as valid if creditors in attendance that claim 51% and over of the debt have voted for such decision. Size of the debt claimed by those absent from the meeting shall be disregarded.
4. In case no creditor has arrived at the meeting, called up properly by the debtor or the administrator, all proposals by the debtor or the administrator shall be considered as approved by the creditors and issues in the agenda of the meeting shall be considered as passed by the meeting of creditors, in order to reduce the costs of the process of bankruptcy.
Article 14. Creditors' Committee1. Meeting of creditors shall have the right to elect a committee of creditors of 3-7 persons, at any time. Creditors' committee represents interests of creditors, and carries out the control over the acts of the administrator in compliance with the procedure established by this Law.
2. To implement its functions, the creditors' committee may:
- request information from the administrator on financial state of the debtor;
- request information from the administrator on the process of bankruptcy;
- provide recommendations to the administrator;
- express no confidence vote to the administrator in compliance with the procedure provided by this Law;
- call a meeting of creditors by written notice of all creditors.
Creditors' meeting may be held within no less than 2 weeks after the date of mailing the last notice. Special administrator must provide to the committee the information on all creditors known to him.
3. The creditors' committee shall be considered effective at its properly called meetings if attended by all members of the committee (or their representatives).
Creditors' committee shall make decisions by the ordinary majority vote of the committee members. Should the number of votes split equal, vote of the chairperson shall be decisive.
Article 15. Expression Of No Confidence In Respect To The Administrator1. In the course of the bankruptcy process, the creditors' meeting and creditors' committee may express no confidence to the administrator.
2. n case of the imitative coming from the committee of creditors the administrator shall be obliged to raise the issue of no n confidence at the meeting of creditors.
3. Meeting of creditors to consider the issue of no confidence shall be organized and conducted by a creditor (creditors), the committee of creditors or the administrator upon agreement with (upon demand of) creditors.
4. The initiating creditor, the committee of creditors or the administrator upon demand of the initiating creditor must inform all known creditors about the meeting, if their claims exceed 100 minimal salaries through registered mail or delivering notification in person against a receipt at least 10 days prior to the date of the meeting.
5. Properly organized meeting of creditors shall be considered effective if attended by 51% and over of the total size of the debt as of the date of the meeting (quorum of the meeting). Meeting of creditors shall be attended by creditors (or representatives) who have the right to vote.
6. Decision of the properly organized creditors' meeting concerning the expression of no confidence in the administrator and proposal of the new candidacy shall be deemed adopted, if voted by the majority of the total number of creditors attending the meeting, including the creditors attending the meeting and claiming 75 per cent or more, of the total amount of the debtor's debt (majority in value). The amount of debt payable to those who do not attend the meeting is not taken into consideration.
7. Decision of the meeting of creditors must be legalized through a protocol of the meeting and shall be signed by the chairperson of the meeting.
8. Regardless of whether the process of bankruptcy involves the court or not, it must notify the administrator, as well as creditors who have not attended the meeting of creditors on the decisions made at the meeting through registered mail or personal delivery of the notifications against a receipt within three days after the day of the meeting.
9. I f the process of bankruptcy involves the court the decision of a meeting of creditors on the dismissal of an administrator and appointment of a new administrator shall be subject to approval by the court of arbitration. The court of arbitration may approve the meeting of creditors provided all the interest of creditors as well as requirements of this Law have been satisfied. The court of arbitration shall draw its opinion as to the decision made and this opinion may be lodged a complaint against in the court.
Article 16. Liquidation Of A Solvent Legal Entity1. A solvent legal entity shall be liquidated on the grounds stipulated by the paragraph 2 of the article 96 of the Civil Code of the Kyrgyz Republic in accordance with the requirements of the article 96-99 of the Civil Code of the Kyrgyz Republic. Claims of creditors shall be covered at the expense of the liquidated legal entity.
2. In case the liquidation commission, stake holders, or the manager of a legal entity, or the body authorized by the founding documents of the legal entity to liquidate this legal entity establish within the process of liquidation that cash available at the legal entity shall not be sufficient to satisfy the claims of all creditors in full, the legal entity will have to be liquidated through the procedure established by this Law.
3. Decision on liquidation of a bankrupt legal entity through the involvement of the court or without involvement of the court shall be made by stakeholders of the debtor or the body authorized by founding documents of a legal entity to make a decision to liquidate this legal entity. After decision has been made and the liquidation commission has presented its final performance report the authorities of the liquidation commission shall be terminated.
4. Failure to make a decision indicated in the paragraph 3 of this Article shall entail subsidiary responsibility of the stake holders, the managers, or the members of the liquidation commission for the liabilities of the debtor in front of creditors.
5. The manager of a debtor, members of the liquidation commission that have committed a violation of the requirements set in this article may be deprived by the court to hold an executive position or manage legal entities (to be disqualified) for a period of time and through the procedure, established by the legislation of the Kyrgyz Republic.
Article 17. State Body In Charge Of Cases Of Bankruptcy1. The State agency in charge of bankruptcy cases shall implement the public policy regarding preventing bankruptcies and fostering the implementation of the bankruptcy process in compliance with this Law. The Government of the Kyrgyz Republic shall approve the Regulation on the State agency in charge of bankruptcy cases.
2. The State agency in charge of bankruptcy cases shall:
- approve the requirements to persons implementing professional activity as administrators in bankruptcy process;
- issue licenses for performing the activity of the individuals who act as professional administrators in the bankruptcy process, and withdraw such licenses;
- organize the training system for administrators;
- foster implementation of bankruptcy of a missing debtor;
- register and analyze insolvent large, economically or socially substantial legal entities; submit proposals on financial improvement of such legal entities to the Government of the Kyrgyz Republic;
- prepare by the request of the court, office of the state prosecution, or of the authorized agency an opinion on presence of features of insolvency, and a fictitious or predetermined bankruptcy;
- represent the interests of the state in the process of bankruptcy of a debtor, in which the state is a stake holder, or debtors in respect to which the state is a creditor;
- upon request from a creditor of the first or the second priority, have the right to initiate the process of bankruptcy of a debtor, in case the creditor has no ability or the knowledge to initiate the process of bankruptcy individually;
- implement other powers provided by laws and other normative legal acts.
3. The State agency in charge of bankruptcy cases may issue legal acts on issues related to bankruptcy that shall not contradict this Law, and other legal acts of the Kyrgyz Republic issued in compliance with this Law.
4. The State agency in charge of bankruptcy cases shall form territorial bodies the powers of which shall fall within the area of jurisdiction of the State agency in charge of bankruptcy cases.
5. For purposes of implementation of provision of this Law, concerning the implementation of the process of bankruptcy in respect to absent debtors and creation of additional guarantees for the activities of administrators the State agency in charge of bankruptcy cases shall have the right to establish a specialized fund. Regulation on the specialized fund under the state body for cases of bankruptcy shall be approved by the Government of the Kyrgyz Republic.
Article 18. Wrongful Acts During The Process Of Bankruptcy1. Acts made within the process of bankruptcy shall be considered as wrongful if committed by any person, including the staff of the state agency in charge of bankruptcy cases after emergence of any of the conditions prescribed in the paragraph 1, article 21 of the Law, if a person committing such acts knows of insolvency of the debtor in accordance with the paragraphs 1 and 2 of the article 9 of this Law. The following acts by shall be considered wrongful:
- initiation of a fraudulent process of bankruptcy;
- illegal concealment, arrest, seizure, appropriation, exaction, and transfer of property and concealment of debts of a debtor, including after the commencement of the process of bankruptcy;
- concealment or destruction, falsification of records, insertion of false records in the accounting books related to the debtor;
- making fraudulent claims in respect to a debtor;
- sale or pledge of any property of the debtor, purchased through a credit and unpaid, or used as a collateral, while it is prohibited to alienate or use the property for double collateral;
- giving, offering, receiving or attempting to obtain any money or assets, remuneration, compensation, reward, advantage for a promise to act or forbearing to act in any case of bankruptcy;
- refusal to cooperate with a special administrator in order to disclose the property of the debtor, or to obtain the property or other information about the debtor, or its debts and debt obligations, or provision of false information to the special administrator;
- direct or indirect acquisition of assets of the debtor by the administrator;
- using the name or trademark of a debtor subject to bankruptcy process or debtor that has terminated its activity in compliance with the procedure established by the legislation of the Kyrgyz Republic;
- deliberate creation or increase of the insolvency of the debtor, or incurring damage to the debtor in the personal interests or in the interests of other persons;
- impedes the administrator in performance of duties;
- failure to satisfy lawful claims of an administrator;
- concealment of information from the court or from the administrator, as to who, when and how has been transferred the property of debtor;
- concealment of information on any transactions, stipulated by the article 67 of this Law, from the court or from the administrator;
- any actions that fit the definition of predetermined or false bankruptcy;
- receiving any property or cash from the debtor by a creditor in case of illegal satisfaction of claims through the damage to the interests of other creditors.
2. Individuals who commit the wrongful actions stipulated by this Article shall be liable in accordance with the criminal, administrative and civil legislation of the Kyrgyz Republic.
3. This article shall not apply to persons listed in the paragraph 8 of the article 21 of this Law, when such persons act to exercise their rights given in accordance with the legislation of the Kyrgyz Republic.
Article 19. Fictitious And Predetermined Bankruptcy1. If a legal entity or individual entrepreneur who is able to fully satisfy the claims of the creditors makes a knowingly false declaration of himself a bankrupt for the purpose of misleading the creditors, and to receive a stay of repayment period or permission to repay by installments of sums payable to the creditors, or discount from debts, as well as release from the duty to pay (fictitious bankruptcy), the creditors may demand that the debtor indemnify the inflicted losses, and make the guilty persons answerable in compliance with the procedure established by law.
2. If the bankruptcy has been caused by actions (omissions) by the leader of the debtor (debtor's stake holder or individual entrepreneur) which led to predetermined creation or increase of insolvency in personal interests, or in the interests of other individuals (predetermined bankruptcy), the creditors may demand that guilty persons indemnify the inflicted damages and make them otherwise answerable in compliance with the procedure established by law.
Article 20 Invalidity Of DecisionThe court, the meeting of creditors, the creditors committee, the temporary administrator, the conservator, the external manager, special administrator as well as the debtor or its stake holder, shall have no authority to accept decisions, if such decisions contradict to the legislation of the Kyrgyz Republic law, or breach the rights of creditors, while decisions shall be held invalid.
Article 21 Disposal Of Assets Of A Debtor Under Threat Of Initiation Or Commencement Of The Process Of Bankruptcy1. Provisions of this article shall apply upon emergence of one of the following events:
- stake holders or managers of a debtor inform one of the creditors on the insolvency of a debtor in any way;
- the first notification on the meeting of creditors has been published by a debtor in a newspaper or the notification on the imitation of the process of bankruptcy by creditors;
- the court has accepted a petition on recognition of a debtor as bankrupt;
- the process of bankruptcy has been started in accordance with this Law;
- stake holders or the body authorized by founding documents or by decision of stakeholders of a legal entity, have made a decision on turning the liquidation of a solvent legal entity into the process of bankruptcy of a debtor.
2. Upon occurrence of any of the events stipulated in the paragraph 1 of this article, the stake holders of a debtor shall not have the right to claim their contributions into the capital of the debtor, or their share in the property of the debtor (in cash or in kind) or the right to withdraw their share (contribution) in any other way.
3. Upon occurrence of any of the events stipulate din the paragraph 1 of this article, no one, including the creditor or the body of the state (except persons and bodies, listed below) shall have the right to seize, arrest, exact or appropriate any property of the debtor, or establish control over the banking accounts, while stake holders or managers of a debtor or an individual entrepreneur shall not have the right to dispose of assets of the debtor or fulfill (accept) any obligations voluntarily without consent of the following:
- court of arbitration;
- administrator;
- meeting of creditors (in absence of an administrator).
4. In absence of a prohibition imposed by the court or the administrator, the debtor shall have the right to make following payments without agreeing with the persons and bodies listed in the paragraph 3 of this article:
• pay the monthly wage to workers (excluding the workers who are stake holders of the debtor at the same time) in accordance with the pay roll;
• pay for recurrent costs, required to maintain the operations of a debtor (phone, gas, electricity, utilities, power or supplies of already delivered goods used in the production), excluding expenses made prior to emergence of any of the events listed in the paragraph 1 of this article.
Rules required for the implementation of this provision shall be set by other normative acts on bankruptcy approved by the Government of the Kyrgyz Republic.
5. Any assets of the debtor disposed of by the debtor in violation of this article shall be exacted by the administrator from the third parties.
Creditors of other persons (bodies) hat have illegally seized, arrested, exacted or appropriated assets that belong to the debtor must by demand of the court, the administrator or the debtor return the assets or control over assets to the debtor. In this case the person or the body that demands to return the assets shall not have to prove that such creditor or other persons and bodies have acted illegally.
Dishonest creditors, persons or bodies must return assets or return the value of assets to the administrator.
6. The court shall make a decision to return the assets (or cost of assets) to third parties if they prove that assets have been purchased at a reasonable (market) price and they were not aware of the events listed in the paragraph 1 of this Article.
7. Persons who wrongfully disposed of assets of the debtor, or seize, arrest and exact assets of the debtor after occurrence of any of the events listed in the paragraph 1 of this article must compensate for the losses of creditors and be liable in accordance with the article 18 of this Law.
8. Provisions of this article shall not apply to the following rights:
- the right of a secured creditor to use the lien in respect to the collateral, if the agreement on collateral has legal force and has been made prior to the events listed in the paragraph 1 of this article, taking into account the requirements of the article 102 of the Civil Code of the Kyrgyz Republic and article 76 of this Law;
- the right of a stakeholder or any other person who has the right to transfer the property to the debtor, given by the stake holder (under an agreement on the transfer of property for ownership or use). When events stipulated in the agreement arise, a stake holder or any other person who has the right over such property shall be able to request such property from the debtor.
9. Provisions of this article shall not apply after the court decision on denial of recognition of a debtor as bankrupt has become effective, or since the moment of a decision made by the meeting of creditors to refuse to start a process of bankruptcy without involvement of the court, or since the National Bank of the Kyrgyz Republic has made a decision to refuse to start the process of bankruptcy of a bank.
Article 22. Consequences Of Recognition (Pronouncement) Of A Debtor As Bankrupt1. As of the moment of recognition or pronouncement of a debtor bankrupt with or without involvement of the court the following events shall occur:
• All promissory notes shall be considered to be due, unless it has already happened earlier.
• Accrual of all penalty surcharges and interest on promissory notes of debtor shall stop.
• Fines (penalties) and interest accrued as of the moment of commencement of the process of bankruptcy shall be due in accordance with this Law.
• Information regarding financial condition of debtor shall no longer be considered to be confidential or a commercial secret.
• Making deals regarding property alienation of debtor or resulting in passing its property to third party, shall be allowed exactly in the way set by this law.
• Actions aimed at execution of judicial decisions regarding debt paybacks of debtor and arresting the property of a debtor, and compulsive executions of liabilities of debtor shall be stopped.
• All requests to debtor that bear property-form can be done in bankruptcy process framework only.
• Secured creditor can lay his claims to administrator and have its claims satisfied in accordance with this law.
2. Rules of the paragraph 1 of this article shall apply after the debtor, due to a joint decision made with the creditors, pronounces its insolvency, unless otherwise stipulated by the agreement with creditors.
Article 23. Notification For The Public Body In Charge Of Registering Legal Entities And Individual Entrepreneurs1. The court or the administrator must within three days send a written notification to the public body in charge of registering legal entities and individual entrepreneurs in order to make a respective record in the state register. The notification is filed in the following cases:
- after recognition of a debtor bankrupt and after commencement of the process of bankruptcy, along with the indication of the procedure employed and the information on the administrator;
- after the procedure within the process of bankruptcy has been replaced with another procedure;
- upon completion of the procedure within the process of bankruptcy;
- upon completion of the process of bankruptcy.
2. In case of completion of the process of bankruptcy the record of bankruptcy of the debtor in the state register shall be annulled.
3. After completion of the process of bankruptcy through the liquidation of the debtor (in case of a legal entity) the debtor shall be excluded from the register and its activity shall be terminated.
4. As of the moment the court has recognized an individual entrepreneur bankrupt, registration of a person as an individual entrepreneur shall be terminated.
5. Actions by the public body registering legal entities and individual entrepreneurs listed in this article shall be taken within 10 days after receipt of a notification from the court or the administrator.
Article 24. Recognition Of A Debtor Insolvent1. A debtor, who has made all payments in favor of creditors in accordance with this law against their claims, shall be considered as solvent court (in case of a bankruptcy process with the involvement of the court) or by the administrator (in case of the bankruptcy process without involvement of the court). A debtor which is a legal entity shall have the right to continue its activities upon consent of all stake holders.
2. Claims made by creditors mentioned in the paragraph 1 of this article shall not include the claims made by creditors who are at the same time stake holders of the debtor, except cases stipulated by the paragraph 4, article 10 of this Law.
Article 25. Safekeeping Documents After Completion Of The Process Of Bankruptcy1. After completion of the process of bankruptcy, all reporting and other documents shall be forwarded for safe keeping to the state archives or the public body in charge of cases of bankruptcy or the stakeholders of the debtor, in case the debtor has been recognized solvent.
Article 26. Resuming The Process Of Bankruptcy1. Persons listed in the article 27-2 of this la shall have the right to appeal to the court within 10 years after completion of the process of bankruptcy in order to resume the case of bankruptcy if assets of the debtor concealed by the stake holders or the managers of the debtor have been revealed.
CHAPTER 1-1
CONSIDERATION OF CASES OF BANKRUPTCY IN THE COURT
Article 27. Consideration Of Cases By The Court
1. Cases of bankruptcy shall be identified as cases of specialized adjudication.
2. Cases of bankruptcy shall be considered in accordance with this article, unless otherwise stipulated by this Law.
3. Procedures of consideration of cases of bankruptcy shall be applied in accordance with this article, unless otherwise stipulated by this law.
4. Cases of bankruptcy may not be forwarded to the court of treaty for consideration.
Article 27-1. Jurisdiction1. Bankruptcy cases fall under the jurisdiction of the court in the place of residence of the debtor (location of the debtor).
2. Claims in respect to the debtor with unknown location (place of residence) may be presented to the court in the place of location of the debtor's property or at the last known place of residence (location) in the Kyrgyz Republic.
Article 27-2. The Right To Appeal To The Court1. The following persons and entities shall have the right to appeal to court:
- Debtor;
- Creditor or group of creditors;
- Body of the state, in charge of bankruptcy cases, as stipulated by this law;
- The National Bank of the Kyrgyz Republic, in cases stipulated by this law;
- Other persons and entities, in cases stipulated by this law.
2. Persons, listed in the paragraph 1 of this Article shall have the right to file a suit to the court concerning the recognition of debtor as bankrupt in absence of the pre-trial procedure for the dispute settlement.
Article 27-3. Parties To A Bankruptcy Case1. The following persons shall be the parties of a case of bankruptcy:
- petitioner;
- debtor;
- creditor or creditors.
2. Parties to a case of bankruptcy shall enjoy the rights and bear the responsibility in accordance with this Law and the Code of Arbitration Procedures of the Kyrgyz Republic. Whereas the petitioner shall have the rights and responsibilities stipulated by the Code of Arbitration Procedures in respect to the plaintiff, whereas the debtor has the rights and obligations stipulated by the Code in respect to the defendant.
3. Prior to making a decision on the essence of the case upon petitions from other creditors of the debtor, the court shall have to involve the creditors into the trial as parties to the case.
4. In cases of bankruptcy the rules of the third parties (that may or may not have their own claims), as well as the rules of replacement of inappropriate parties, stipulated by the Code of Arbitration of the Kyrgyz Republic shall not apply.
Article 27-4. Parties To An Arbitration Case1. In addition to parties involved into a case, the process of arbitration of the case of bankruptcy may involve the administrator, experts, translators, witnesses and other persons, in some cases, stipulate by this law.
2. Parties to the arbitration process to consider a case of bankruptcy shall enjoy their rights and bear obligation in accordance with this Law and the Code of Arbitration Procedures of the Kyrgyz Republic.
3. In order to explain any issues during consideration of a bankruptcy case, that shall require special expertise, the court may appoint experts by request of a person involved into the trial or by its own initiative. The costs associated with the involvement of experts shall be considered as the costs of the bankruptcy process.
4. Any person who may have any information or know about circumstances that shall matter for the correct adjudication of the bankruptcy case, including the parties, stake holders and employees of the debtor, representatives of the local self - government, other entities, etc. may act as witnesses.
5. The party that requests to call upon a witness must indicate: what information or circumstances that shall matter for the case may the witness confirm and disclose the name and place of residence (employment) of the witness.
6 . The following persons may not be called upon or questioned as witnesses:
- Attorneys (in a civil case) or defenders (in a criminal case) to speak about circumstances they have come to know due to the execution of their duties of an attorney or a defender;
- Persons who shall not be able to correctly perceive facts or interpret and testify due to their physical imparities or mental disabilities.
1. The court shall start a case of bankruptcy on the ground of a petition for recognition of a debtor bankrupt filed by a person that shall have the right to appeal to the court in compliance with the article 27-2 of this Law.
2. Petition to the court shall be filed in compliance with the requirements of this Law.
3. A petitioner filing a petition to recognize a debtor bankrupt shall pay the state duty through a procedure and at the rate established by the legislation of the Kyrgyz Republic.
Article 27-6. Petition By A Debtor1. A legal entity, the debtor, shall appeal to the court with a petition to recognize this legal entity as bankrupt on the grounds of a decision by the body authorized to make a decision on liquidation of the debtor, in accordance with the founding documents of the debtor, or on the grounds of a decision by the body authorized by the stakeholder of the debtor - state owned enterprise, unless otherwise stipulated by the law.
2. Petition by a debtor on recognition of the debtor bankrupt shall be filed in typewriting. The petition shall be signed by the debtor (in case of an individual entrepreneur) or by the manager of the debtor (in case of a legal entity) or an acting manager.
3. The following must be indicated in the petition by the debtor:
- title of the court appealed to;
- name (title) of the debtor and postal address;
- all creditors known by the debtor, including secured creditors, and amounts due to them;
- request to recognize the debtor bankrupt and start the procedure of bankruptcy (special a administration, sanation, rehabilitation, conservation - in respect to banks);
- data on the approximate value of assets of the debtor;
- other data, the debtor should believe necessary to indicate for the correct settlement of the bankruptcy case, as well as recommendations available;
- check list of all documents attached.
4. The requirement of the smallest size of the debt, established by the article 9-1 of this Law shall not apply for the petition on recognition of the debtor as bankrupt by the debtor.
5. The debtor shall not have to send copies of the petition and documents attached to the creditors.
Article 27-7. Documents To Be Attached To A Petition By A DebtorThe following documents shall have to be attached to the petition for recognition of the debtor bankrupt, filed by the debtor:
1. Copies of founding documents;
2. Copies of the certificate of the state registration as a legal entity or a an individual entrepreneur;
3. Balance sheet as of the last reported date or replacing documents;
4. Decision of stake holders of the debtor (in case of a state owned enterprise) or stake holders of a legal entity that the debtor should appeal to the court with a petition on recognition of the debtor bankrupt;
5. Documents that confirm the existence of the debt and lack of ability of the debtor to satisfy fully claims of creditors;
6. Documents that prove the payment of the state fee and postal expenses, as required.
Article 27-8. Petition By Creditor1. Creditor shall file a petition to the court in typewriting. The petition shall be signed by the creditor (in case of an individual entrepreneur) or by the manager of the creditor (in case of a legal entity) or their representatives.
2. The following must be indicated in the petition:
- title of the court appealed to;
- name (title) of the debtor and postal address;
- name (title) of the petitioner and postal address
- size of claims of the creditor in respect to the debtor and amount of fines and interest due;
- obligations of the debtor in front of the creditor which has given rise to the claim and dates of maturity of the obligations;
- request to recognize the debtor bankrupt and start the procedure of bankruptcy (special administration, sanation, rehabilitation, conservation - in respect to banks);
- other data, the creditor believe necessary to indicate for the correct settlement of the bankruptcy case, as well as recommendations available;
- check list of all documents attached.
3. The creditor shall have to send the copy of the petition to the debtor. In case the location (place of residence) of the debtor is unknown, the copy of a petition may be sent to the place of location of the property of debtor or the last known address (place of residence) of the debtor in the Kyrgyz Republic.
4. Petition filed by the National Bank of the Kyrgyz Republic, or the state body in charge of bankruptcy cases shall be filed to the court through the compliance with the requirements stipulated by this law in respect to a petition by a creditor, unless otherwise stipulated by the legislation of the Kyrgyz Republic.
Article 27-9. Joint Claims Of Creditors1. Petition by a creditor on recognition of a debtor bankrupt may be based upon the consolidated debt and various obligations.
2. Creditors shall have the right to put their claims in front of the debtor together and appeal to the court with one single petition. This petition shall be signed by all creditors concerned. Creditors may assign one of them to deal with the case.
Article 27-10. Documents To Be Attached To A Petition By A Creditor1. The following documents shall have to be attached to the petition for recognition of the debtor bankrupt, filed by a creditor:
- evidence of the grounds for claims, including the evidence of obligations of the debtor in front of creditors, as well as the evidence of existence and the amount of debt;
- evidence of the grounds for the petition by a creditor, including the following, if applicable: effective decision of the court of arbitration, the court or the court of treaty, that has considered the claims of the creditor in respect to the debtor; evidence that the debtor has recognized such claims; executive documents (list of execution, claims of payment, accepted by the debtor, endorsement by the notary, etc.);
- other grounds for the claim of the creditor;
- payment of the state fee and postal expenses as required;
- evidence of a copy sent to the debtor;
- decision of the general meeting of creditors (if available) concerning the petition to the court for starting the process of bankruptcy through the court involvement, made in accordance with the article 30 of this Law.
2. If a petition has been signed by a representative of the creditor, the petition must also be accompanied with a power of attorney that confirms the powers of the person that has signed the petition.
3. If creditors request one of the creditors to deal with the case, the petition must also be accompanied with a power of attorney, that confirms the powers of such person to deal with the case, signed by all creditors.
Article 27-11. Acceptance Of A Petition For Recognition Of The Debtor Bankrupt1. The judge must individually decide to accept a petition for recognition of a debtor bankrupt.
2. The court must accept the petition, filed through the compliance of all requirements set by this Law.
3. The court shall draw a conclusion about accepting the petition, which must be sent to the creditors and the debtor within 5 days from the day the petition has been received in the court.
4. In the conclusion on acceptance of the petition the judge shall also indicate what actions are going to be taken to prepare the case for the examination, for appointment of the date and the place of consideration by the court.
5. Execution of all judicial and other actions in respect to the satisfaction of claims and arresting assets of the debtor shall be suspended as of the moment the petition has been accepted for the consideration, for the whole period of consideration of the case. Provisions of this paragraph shall not apply to the rights of persons listed in the paragraph 8, article 21 of this Law.
6. Restrictions as to the right of the debtor to dispose of the property may be imposed upon the debtor only within the framework of the process of bankruptcy.
7. Conclusion on acceptance of the petition may not be lodged a complaint against.
Article 27-12. Rejection Of A Petition For Recognition Of A Debtor Bankrupt1. The court shall reject a petition for recognition of the debtor bankrupt in the following cases:
- a debtor may not be recognized as the bankrupt in accordance with this Law;
- a debtor has been previously recognized as bankrupt (without involvement of the court) and the procedure of bankruptcy in respect to the debtor has been started;
- a debtor has been liquidated (activity of an individual entrepreneur has been terminated) and excluded from the state register;
- amount of the debt is below the minimal size established by the article 9-1 of this Law;
- petitioner has no right to appeal to the court in accordance with the article 27-2 of this law;
- there is a valid decision of the court concerning the case of bankruptcy between the same parties, the same subject and the same grounds.
2. In case of rejection of a petition the court shall make a justified conclusion, to be sent to the petitioner and the debtor within five days from the day the petition has been receive in the court. The conclusion to deny acceptance may be lodged a complaint against.
3. In case of reversal of the conclusion through the procedure of supervision, the petition shall be considered as filed as of the day of the initial appeal to the court.
Article 27-13. Returning The Petition For Recognition Of The Debtor As Bankrupt1. The court shall return the petition for recognition of the debtor bankrupt in the following cases:
- requirements set in the articles 27-6 through 27-10 of this law have not been met;
- the case shall not fall under the jurisdiction of this court;
- creditor has failed to provide the evidence of sending (handing in) a copy of the petition to the debtor;
- absence of other documents, that prove the payment of the state duty and other court expenses as required, and in cases of deferral of payment allowed by law, evidence of the deferral of payment of the state duty or reduction of the amount of the state duty, or absence of a request for reduction of the size of the duty or rejection of such a request;
- petitioner has applied to withdraw the petition prior to the conclusion on acceptance of the petition for consideration.
2. In case the Law requires the debtor to appeal to the court and petition is not accompanied with documents required by the article 27-7 of this Law, such a petition shall be accepted by the court, while missing documents shall be needed for the preparation of the bankruptcy case for the consideration by the court.
3. The judge shall draw an opinion to return the petition and this conclusion shall be forwarded to the petitioner and the debtor within five days after the petition has been received by the court.
4. In case of reversal of the conclusion through the procedure of supervision, the petition shall be considered as filed as of the day of the initial appeal to the court.
5. Return of the petition may not prevent second appeal to the court after drawbacks have been fixed.
Article 27-14. Measures To Secure The Claims Of Creditors1. The court upon request from the petitioner must take necessary precautions to secure the claims of creditors in accordance with the Code of Arbitration of the Kyrgyz Republic.
2. In addition to measures stipulated by the Code of Arbitration of the Kyrgyz Republic, the court shall have the right to take the following measures:
- appoint the temporary administrator by request from the petitioner in order to maintain the assets until the decision on the essence of the case has been made;
- draw an opinion on suspension of the execution of all judicial and other actions, associated with the payment of debts and arresting assets of the debtor (except actions by persons listed in the paragraph 8, article 21 of this Law);
- prohibit that bodies of management of the debtor (or the individual entrepreneur) should make any transactions without consent of the court or the temporary administrator (if applicable) associated with the alienation or disposal of property: leasing property, pledging, making an in kind contribution into the capital of companies and partnerships, etc.; any transactions associated with obtaining and issuing loans, issuing guarantees, transfer of the debt, waiving the right to claim, and establishment of the assets property trust management, etc.;
- prohibit that bodies of management of the debtor (or the individual entrepreneur) should make any decisions without consent of the court or the temporary administrator (if applicable), concerning the following: reorganization (merger, spin up, division, separation and transformation) and liquidation of the debtor; termination of activities of an individual entrepreneur: establishment of legal entities or involvement with other legal entities; establishment of branches and subsidiaries; payment of dividends; issue of bonds or other securities by the debtor; withdrawal from the number of stake holders of the debtor; acquisition of previously issued shares from shareholders; participation in associations, unions, holding companies, financial and industrial groups and other associations of legal entities, etc.;
- other measures aimed at safe keeping the property of the debtor.
3. Measures for securing claims of creditors shall be in effect respectively: until the court has made a decision to recognize the debtor bankrupt or until the court has made a decision to deny the recognition of the debtor bankrupt.
4. Upon request from a party to the case of bankruptcy the court shall have the right to cancel such measures for securing the claims of creditors until occurrence of events, listed in the paragraph 3 of this article.
Article 27-15. Opinion Of The Debtor Concerning The Petition To Recognize The Debtor Bankrupt1. The debtor shall have the right to provide the court with its opinion concerning the petition of the creditor, the state body for cases of bankruptcy, the National Bank of the Kyrgyz Republic, accompanied with documents that serve as the evidence for challenging the petition and the evidence that the petitioner has been sent a copy prior to the day of consideration of the case.
2. In addition to the data, prescribed by the Code of Arbitration of the Kyrgyz Republic, the debtor's opinion must include the following information:
- debtor's arguments against the claims of the petitioner;
- total amount of arrears of the debtor in respect to the creditors;
- information about the property of the debtor, including cash at accounts with banks and other financial lending institutions, accounts numbers and postal addresses of banks and other financial institutions;
- evidence of satisfaction of claims of the petition should the debtor recognize such claims prior to the conclusion by the court on acceptance of the petition;
- other information the debtor believes necessary to provide for purposes of the correct consideration of the bankruptcy case, as well as recommendations available.
3. Absence of an opinion of the debtor shall not impede the consideration of the bankruptcy case.
Article 27-16. Time Frame For Consideration Of The Bankruptcy CaseBankruptcy case shall be examined by court within a month, starting from the day when petition has been submitted. Period mentioned above may be protracted in exceptional circumstances approved by court, but for no longer than a month.
Article 27-17. Issues Considered By The Court Prior To Making A Decision1. Prior to making a decision the court shall consider the issues stipulated by this Law as well as the Code of Arbitration of the Kyrgyz Republic. In addition the court must establish the following circumstances of importance for the case:
• whether the petitioner has the right to file a petition on recognition of the debtor bankrupt in accordance with the article 27-2 of this Law;
• whether the debtor is liable to the process of bankruptcy;
• whether the size of the debt meets the requirements set by the articles 9-1 and 11 of this Law;
• whether obligations of the debtor in front of the creditor comply with the requirements of the legislation of the Kyrgyz Republic or an agreement between the parties;
• existence of grounds for claims of the petitioner.
2. If in front of the court, the debtor claims the ability to repay the debt, the court may give the debtor an opportunity to repay the debts within the time frame and through the procedures set by the article 26-27 of this Law. Otherwise the debtor must be recognized as bankrupt and one of the procedures of the process of bankruptcy must be employed.
Article 27-18. Grounds For Recognition Of The Debtor Bankrupt1. Presence of any circumstances stated in paragraphs 1 and 2 of the article 9 of this law shall be enough for finding debtor bankrupt.
2. In case, court establishes the existence of circumstances stated above and in paragraph 1 of the Article 27-17 of this Law, and any of the circumstances listed in the paragraph 1 of this article, the following factors shall not be considered as the grounds for recognizing the debtor non bankrupt:
- debtor's ability to pay back its debts in the future;
- presence of significant financial reserves, not included into the assets, existence of unaccomplished construction, profit in the past, reputation, demand for products, raw materials, developed infrastructure, potential customers, etc.
1. The court shall draw its opinion in the following circumstances:
- accepting petition of finding debtor bankrupt;
- rejecting petition;
- handing back the petition;
- suspending the bankruptcy process;
- postponing case examination;
- leaving petition without examination;
- turning one bankruptcy case into another;
- termination of the proceedings;
- in different circumstances stated in this law.
2. The court shall draw its opinion in a separate act by the rules of the Code of Arbitration of the Kyrgyz Republic.
3. Court's opinion shall be effective as of the moment it has been taken.
4. Court's opinion may be appealed within 10 days from the moment it has been taken through the procedure of supervision.
Article 27-20. Decision Of The Court1. The court shall make a decision in the case of bankruptcy in the following circumstances:
- debtor has been recognized as bankrupt and the process of bankruptcy has been started;
- rejection of recognition of the debtor bankrupt;
- completion of the process of bankruptcy of a debtor.
2. Court's decision shall be effective as of the moment it has been taken.
3. Court's decision may be appealed within 10 days from the moment it has been taken through the pre established procedure.
Article 27-21. Court's Decision Of Finding Debtor Bankrupt And Setting A Bankruptcy Process1. Decision of the court to recognize the debtor bankrupt and set the procedure of bankruptcy shall be made in case the features of bankruptcy of the debtor, stipulated in the articles 9, 9-1, 27- 17, paragraph 1 of the article 27-18 of this Law, have been established.
2. The decision should contain following aspects:
• finding debtor bankrupt;
• setting bankruptcy process procedure;
• appointing an administrator.
3. A decision on recognition of an individual entrepreneur as bankrupt must contain instructions as to the termination of the registration of the debtor as an individual entrepreneur.
4. Any creditor, debtor, the state bankruptcy agency or the National Bank of the Kyrgyz Republic shall have the right to nominate an administrator.
5. Any person that meets requirements of this Law shall have the right of self nomination in front of the court.
6. Candidate for the administrator must meet the requirements set in the article 8 of this Law.
7. In absence of any nomination the court shall appoint the administrator.
8. In presence of several nominations the administrator shall be appointed through a competition. Terms, conditions and procedures for a competition shall be identified by the court in accordance with the requirements of this Law.
Article 27-22. Publication Of The Decision On Recognition Of The Debtor Bankrupt1. Notification of the recognition of the debtor bankrupt shall be published by the administrator within five calendar days after the decision has been made by the court at the expense of the debtor. These costs shall be referred to as the bankruptcy expenses. Same procedure shall apply to the publication of a notification on reversal of the court decision through the procedure of supervision.
2. Publication of the court decision on recognition of a debtor bankrupt shall contain:
• name and other data of the debtor, recognized as bankrupt;
• name of the court considering the case of bankruptcy of the debtor;
• date of the decision on recognition of the debtor bankrupt made by the court and appointment of the procedure of bankruptcy;
• period of time allocated for the presentation of claims of creditors, in accordance with this Law;
• data of the administrator.
3. The publication of a notification on reversal of the court decision through the procedure of supervision must contain the following:
• name and other data of the debtor, recognized as bankrupt;
• name of the court considering the case of bankruptcy of the debtor;
• date when the court has made a resolution on reversal of the decision on recognition of the debtor bankrupt made by the court and appointment of the procedure of bankruptcy.
Article 27-23. Decision Of The Court On Denial Of Recognition Of The Debtor Bankrupt1. Decision of the court on denial of recognition of the debtor bankrupt shall be made in case the court has not established the features of bankruptcy as stipulated in the 9, 9-1, 27-17, paragraph 1 of the article 27-18 of this Law.
2. Decision of the court on denial of recognition of the debtor bankrupt shall serve as the grounds for termination of any consequences of acceptance of the petition for recognition of the debtor bankrupt and (or) appointment of the temporary administrator.
3. T he debtor shall have the right to claim the compensation of losses caused through the submission of an unjustified petition for recognition of the debtor bankrupt. The issue of compensation of losses of the debtor shall be considered at the same session of the court which has denied recognition of the debtor bankrupt.
Article 27-24. Court's Decision Of Ending Bankruptcy Process Of Debtor1. Court shall decide to end bankruptcy case in the following cases:
a. Debtor has been found bankrupt in accordance with this law.
b. Presence of factious/fake bankruptcy.
2. Court's decision to end bankruptcy case shall constitute a legal basis for excluding debtor from the state register, if bankruptcy process resulted in liquidation of debtor (for legal entities).
3. If debtor has been recognized solvent as a result of bankruptcy process, court's decision to end bankruptcy case shall give the legal basis to a legal entity to continue its business activities (if stake holders agree).
4. An individual entrepreneur shall continue the activities in accordance with the article 122 of this Law.
Article 27-25. Suspending Proceedings In Bankruptcy Process1. Suspension of bankruptcy case, unless otherwise stipulated by this Law, means suspension of trial for indefinite period of time (depending on the duration of the event that prevent the case consideration).
2. The court shall suspend the bankruptcy process in case:
• It is impossible to examine the case until decision for different case has not been made or different issue considered in the constitutional, arbitration, civil, administrative or criminal court;
• It is impossible to examine the case until decision for different case has not been made or different issue considered the court of treaty or foreign court;
• If plaintiff and debtor have submitted a joint petition with a request to suspend the case.
• If debtor has agreed to satisfy plaintiff's claims to full (extent), after bankruptcy case has been initiated in compliance with the requirements of Article 27-26 of this law.
This list of grounds for suspending a case of bankruptcy is exhaustive and may not be extended by a decision of the court.
3. The court shall make a justified conclusion on the suspension of the process of bankruptcy which may not be appealed.
4. In case of suspension of the process of bankruptcy the court must appoint a temporary administrator by request of the petitioner in order to maintain the assets pending the final decision of the court.
Article 27-26. Satisfaction Of Claims Of The Creditor By The Debtor Or Another Person After The Petition Has Been Accepted By The Court1. The court shall have the right to suspend the proceedings in the case if the debtor has agreed to satisfy fully claims of the creditor after the petition to recognize the debtor bankrupt has been accepted by the court. The court shall make a decision on suspension of the proceedings.
2. In order to satisfy claims of the creditor the debtor shall have to take the following actions within 10 days after the court has made its decision, as mentioned in the paragraph 1 of this article:
• pay an amount sufficient to satisfy fully all claims of the creditor to the account of the court;
• pay all court expenses, including the state duty, to refund to the petitioner in accordance with the paragraph 3 of the article 27-5 of this Law and pay the reward to the temporary administrator (if applicable);
• publish a notification in mass media of its decision to repay debts to the creditor;
• send written notifications to all creditors that have claims in excess of 100 minimal salaries.
- All of the actions above may be taken by another person in lieu of the debtor.
3. The court shall satisfy the claims of creditors through the deposit at the account of the court in 10 days after the last notification has been published or sent, as mentioned in the paragraph of this article.
4. The court shall resume the proceedings of the case:
• if debtor fails to take the actions, stipulate din the paragraphs 1 and 2 of this article;
• if other creditor(s) have appealed to the court with their claims during the period of time, mentioned in the paragraph 3 of this article.
The court shall make a decision to resume the proceedings of the case which may not be appealed.
5. After the process has been resumed, any cash at the account of the bank shall be kept at the account pending the final decision on the essence of the case.
6. In case the court makes a decision to refuse to recognize the debtor bankrupt, the cash from the account shall be refunded to the debtor or the person that have made the deposit instead of the debtor.
7. In case the court makes a decision to recognize the debtor bankrupt and start a procedure of bankruptcy the cash shall be used to cover the cost of the process of bankruptcy and repay the claims of creditors.
Article 27-27. Postponing the case consideration.1. If case of bankruptcy may not be considered at a session of the court, including due to absence of any party to the case or process of arbitration, or due to the need to present additional evidence, the court shall have the right to postpone the case consideration.
2. Absence of a debtor or a representative of the debtor without a solid reason shall not serve as the grounds for postponing the case consideration.
3. Consideration of a case may be postponed for a period of time indicated in the article 27-16 of this law. The court shall make a decision to postpone the case consideration, indicating the time and the place for a new session of the court. Decision of the court shall be sent to the parties to the case a via registered mail or handed to their representatives against a receipt.
4. Decision to postpone the case consideration may not be appealed against.
Article 27-28. Grounds For Not Considering The Petition1. Court may chose not to consider bankruptcy case petition if:
• Court finds/sets circumstances stated in the paragraph of Article 27-13 of this law (circumstance when court rejects petition).
• Absence of plaintiff or his representative in bankruptcy case proceeding and absence of a petition to consider the case without participation of the creditor.
2. The court shall make a decision to leave the case without consideration. The decision of the court may, in cases stipulated by the legislation, contain issues of distribution of the court expenses, complete or partial refunding the state duty. Decision to leave the case without consideration may be appealed against.
3. Plaintiff can resubmit a petition on general basis, after circumstances mentioned above have been eliminated.
Article 27-29. Grounds For Termination Of The Proceedings In The Case Of Bankruptcy1. Before the court makes a decision on the case the court may terminate the bankruptcy case proceedings, in case:
• Plaintiff who is not a debtor has given up the claim to recognize the debtor bankrupt;
• Debtor has satisfied claims of creditor(s) to full extent;
• Both sides signed an amicable agreement approved by court;
• The court has established the fact of fictitious (pre determined) bankruptcy;
• The court has discovered the circumstances mentioned in the paragraph 1, article 27-12 of this Law;
• The debtor, who is an individual entrepreneur has died or become disable.
2. The court shall make a decision to terminate the proceedings which can be appealed.
3. In case of termination of bankruptcy case repeated petitioning to court on the same dispute between the same parties, regarding the same subject, and on the same ground shall not be not allowed.
Article 27-31. Consideration Of Petitions And Complaints1. Administrator's petition, including disputed issues that arose between administrator and creditors, as well as complaints of debtor, creditors, State Agency regulating cases of bankruptcy, or the National Bank of the Kyrgyz Republic submitted to court in accordance with articles established by this law during bankruptcy case proceeding shall be considered by court within no later than 10 days starting from the day petition(s)/complaints were submitted.
2. After considering petitions/complaints mentioned above, court shall pronounce a decision which can be appealed.
Article 27-32. Proceedings In The Appellate Instance1. Proceeding in the appellate body in respect to the bankruptcy cases shall be implemented with accordance to the Code of Arbitration procedures of the Kyrgyz Republic and peculiarities established by this article.
2. Appeals must be submitted to the court (that pronounced decision) within 10 days after decision has been taken.
3. Judge of judge committee shall pronounce decision within 5 days starting from the moment appealing petition has been submitted.
4. Appealing petition/complaint shall be considered within 10 days by court, starting from the moment it has been submitted to the court.
Article 27-33. Consideration Of The Case By The Supervising Instance1. Supervision of cases of bankruptcy shall be implemented in accordance with the Code of Arbitration procedures of the Kyrgyz Republic, with peculiar features established by this article.
2. Appeal to review the decision of the court shall be submitted to the Supreme Court of Arbitration through the court that has made a decision within 10 days after the decision has been made by the court of the first instance.
3. Supreme Arbitration Court justice of the Kyrgyz Republic shall make a decision within five days after the appeal has been received by the supervising instance as to the acceptance of the appeal to review the decision.
4. Appeal to have the decision reviewed along with the case shall be considered by the Supreme Court of Arbitration of the Kyrgyz Republic within 1 month. In exceptional cases the period of consideration may be prolonged, for up to one month.
CHAPTER 2
SPECIAL ADMINISTRATION
Article 27-34. Initiation Of The Procedure Of The Special Administration
1. Special administration procedure shall be considered as initiated after a special administrator has been appointed by the National Bank of the Kyrgyz Republic.
2. Initiation of special administration procedure shall entail consequences established by the Article 22 of this law.
2. SPECIAL ADMINISTRATION WITHOUT COURT INVOLVEMENT
Article 28. Initiation Of A Process Of Special Administration Without Court Involvement
1. The process of special administration without court involvement may be initiated by creditor or by the debtor in accordance with the requirements of this Law.
2. The rule of the minimal size of the debt shall not apply for the initiation of the procedure of the special administration without involvement of the court by the debtor.
Article 29. Conditions Of Proceeding Special Administration Without Court InvolvementThe following conditions must be met for the initiation of the procedure of the special administration without involvement of the court:
1. Decision to initiate shall be made by stake holders of debtor in compliance with the requirements of law/inaugural agreement or by creditors after seven-day period when a proposal (in written form) calling debtor to voluntarily start special administration process has been proposed. Consent of the National Bank of the Kyrgyz Republic must be obtained in respect to banks.
2. Announcement regarding initiation of special administration process has to be published in Republican and local newspaper(that's closest to debtor's business activities location) no less than 2 times on each and with duration of minimum 10 calendar days. The time, date and location of creditors meetings are to be pointed out on every announcement.
3. Special administration initiation notifications are to be mailed to creditors, who have debts that exceed or equal to 100 som or one minimum wage.
4. No earlier than 14 calendar days after last announcement was made and last notification was send, a creditors meeting must take place at the address and time indicated in notification.
5. A decision, that debtor accepted, must be pronounced in creditor's meeting that found debtor bankrupt and initiates a special administration procedure without court involvement and appoints a special administrator in compliance with the requirements of this law.
Article 30. Decisions Of Creditors' Meeting1. The creditors at their general meeting may decide:
- to commence a process of special administration without court involvement;
- to file a petition to the court to conduct a process of special administration with involvement of court;
- to neglect the process of special administration of the debtor without court involvement (in this case, the debtor may apply to court);
- to defer their decision pending the subsequent creditor's meeting, the time and date and place of which must be established at the current meeting.
2. Decision of the creditors' meeting shall be sent to the creditors by registered mail with the notice on delivery, or delivered against the signature within three days after adoption of the decision.
3. A creditor or the debtor who does not agree to the decision of the creditors' meeting, is entitled to appeal this decision to court within seven (7) calendar days after adoption of such decision by the creditors.
Article 30-1. Consequences Of Absence Of Creditors At The Creditors' Meeting Organized By Debtor1. If none of the creditors appear in the meeting organized by the debtor to solve special administration issues, following aspects considered to be true:
• Debtor is considered to be bankrupt. A bankruptcy case is filed against him in compliance with the article 22 of this law.
• Appointee, proposed by debtor as a candidate for special administrator considered to be appointed.
2. Special administrator performs all functions established by this law. Also, he must submit a petition with a request to ratify him as a special administrator.
3. Petition must be typewritten and filed to the court in the place of location of the debtor. This petition shall be signed by the special administrator. The petition must indicate the following:
• title of the court appealed to;
• name (title) of the debtor and postal address;
• all creditors known by the debtor, including secured creditors, and amounts due to them;
• request to recognize the debtor bankrupt and approve the person nominated for the special administrator and start the procedure of special administration without involvement of the court;
• data on the approximate value of assets of the debtor;
• recommendations available of the special administrator;
• check list of all documents attached.
4. The requirement of the smallest size of the debt, established by the article 9-1 of this Law shall not apply for the petition on recognition of the debtor as bankrupt by the debtor.
5. The debtor shall not have to send copies of the petition and documents attached to the creditors.
6. The following documents shall be attached to a petition by a debtor:
• Copies of founding documents;
• Copies of the certificate of the state registration as a legal entity;
• Balance sheet as of the last reported date or replacing documents;
• Copy of the decision of stake holders of the debtor to start the procedure of the special administration without involvement of the court;
• Copy of the protocol of the meeting, indicating that creditors have not showed up at the meeting;
• Documents that certify as to the qualifications of the special administrator and compliance with the requirements of the article 8 of this Law;
• Documents that prove that the debtor has properly called up the meeting;
• Documents that confirm the existence of the debt and lack of ability of the debtor to satisfy fully claims of creditors;
• Documents that prove the payment of the state fee and postal expenses, as required.
7. The court must take a decision within 14 days starting from the moment petition has been submitted to the court. During the period mentioned above creditors can file complaints against actions taken by the special administrator.
8. The court can take following decisions:
• Find debtor bankrupt, appoint an appointee proposed by debtor as a special administrator and approve special administration process without court involvement, if creditors' complaints lack reasonable arguments and appointee, proposed by debtor suits requirements established by the article 8 of this law.
• Find debtor bankrupt, approve special administration procedure without court involvement and appoint a special administrator, if the appointee proposed by debtor does not suit requirements established by the article 8 of this law.
• Refuse to recognize the debtor bankrupt under the circumstances stipulated by the paragraph 1, article 27-23 of this Law.
Article 31. Effect Of Appointment Of The Special Administrator1. From the moment of appointment of the special administrator, all actions aimed at enforcement of the decision of the court and other decisions related to repayments of debts of the debtor or seizure of his assets shall be terminated.
2. The appointment of a special administrator shall in no way affect the rights of a secured creditor. The secured creditor may dispose of the subject of pledge in compliance with the procedure established by the legislation of the Kyrgyz Republic.
3. The special administrator must publish information concerning his appointment in the national and oblast (or local) newspaper at the place of the debtor's principal activity no later than 5 calendar days after such decision has been taken by the meeting of creditors or decision taken by the court on approval of the special administrator, in accordance with the article 30-1 of this Law. Such information must also include the following:
• name and other data of the debtor, recognized as bankrupt;
• date of the decision on recognition of the debtor bankrupt and commencement of the procedure of the special administration taken by the meeting of creditors;
• need to make claims of creditors;
• data of the administrator.
Article 51. General Provisions
1. Liquidation is a method of procedure of special administration which provides for withdrawal and alienation of all assets of the debtor for the purpose of satisfying the claims of creditors in compliance with their priority.
2. The liquidation shall be carried out by a specially appointed person - special administrator (liquidator). In this case, the special administrator (liquidator) enjoys the rights and bears liabilities provided by this Law and other legislative acts.
3. Upon completion of the liquidation, the activity of the debtor shall be terminated, and the record in the state registry shall be canceled in accordance with the requirements of this Law. The liquidation of the debtor shall not entail the succession of rights.
4. Liquidation carried out in case of special administration may at any stage be transformed into procedures provided by this Law in accordance with the established procedure.
Article 52. Time Frame Of The Liquidation1. The procedure of liquidation shall last for up to twelve months. By the decision of the court or the creditors' meeting (in case of procedure without involvement of the court) this period may be extended.
Article 53. Authority Of The Special Administrator In Liquidation Of Debtor1. After appointment of the special administrator, all the powers of management of assets and activities of the debtor shall be given to the special administrator from the stake holders and bodies of management of the debtor.
2. Bodies of management of debtor after appointment of special administrator shall ensure the handing over of accounting and other documentation, seals and stamps, material and other values to the special administrator. In case of ignoring this duty the bodies of management of the debtor (manager) shall bear liability in accordance with the legislation of the Kyrgyz Republic.
3. In case of liquidation, the special administrator shall enjoy the rights, and bear liabilities provided by this Law, and also:
- manage the property of the debtor, take an inventory and evaluation of such property, and make measures to preserve this property;
- analyze financial status of the debtor;
- notify the employees of the debtor on the coming dismissal in accordance with the Labor Legislation of the Kyrgyz Republic;
- present objections on claims presented to the debtor by creditors, in compliance with the established procedure;
- take other necessary measures which do not contradict this Law.
1. In case of liquidation of the debtor, the special administrator must use only one account of the debtor in the bank in the national currency and in the foreign currency (if necessary) or in the other credit institution (the principal account). Other accounts of the debtor in banks and other credit institutions known by the moment of the liquidation, and found within the period of liquidation, must be closed down by special administrator. The remaining balances of such amounts must be transferred to the principal account of the debtor.
2. Funds received in the course of liquidation shall be transferred to the principal account. The costs of bankruptcy procedure shall be paid from the same account.
3. The special administrator shall submit the report on the use of the debtor's funds to the court (meeting, creditors' committee) upon request, no more than once a month.
Article 55. Debtor Restructuring
1. Restructuring is a method of procedure of special administration which provides for creation of one or several new legal entities, based on the assets of the debtor for further sale in the creditors' interests.
2. If a special administrator decides that restructuring of the debtor who is a legal entity is expedient, he may do that by establishing a new legal entity (or more than one). Special administrator shall at his/her own discretion contribute assets of the debtor into the authorized capital of the newly established entities. Newly established entity or entities must be sold subsequently and proceeds of the sale must be spent for the satisfaction of claims of the creditors.
3. A new legal entity established for the purposes of restructuring may be established in any organizational and legal form, permitted by the legislation of the Kyrgyz Republic. While special administrator shall act as the founder of new legal entities. This must be pointed out in the founding documents of a new legal entity.
4. A newly established legal entity shall not be the legal successor of the debtor, and shall not bear liability for any debts of the debtor, including debts on obligatory payments into the budget and extra-budgetary funds.
5. Bodies of state government, local self-administration, and judicial bodies may not withdraw assets, including funds of a new legal entity, to repay the debts of the debtor.
6. A special administrator may sell the new legal entity as a running concern or sell stocks and shares of capital in a newly established legal entity, and use the proceeds from sale to pay to the creditors.
7. All reasonable expenses made by the special administrator associated with the establishment and registration of a new legal entity must be referred to as costs of the process of bankruptcy.
5. COMPLETION OF THE PROCEDURE OF THE SPECIAL ADMINISTRATION
Article 55-1. Completion Of Procedure Of Special Administration
1. Special administrator shall have the authority to take decision on completion of the special administration procedure, if:
- Special administrator acquired and sold all assets of debtor, which he/she considered acquirable during special administration process.
- Came to conclusion that he realized/sold all assets of debtor at acceptable price during special administration process.
- Managed all non realizable/un sellable assets in compliance with the requirements of this law.
- Submitted assets to persons listed in sub - paragraph 8 of Article 21 of this law, who have legal claims to those assets.
- Submitted rights to assets of debtor, that debtor could have received after completion of special administration process and which are not familiar to the special administrator, Government registration agency by compromising/giving up rights to claim. Compromises are to be made with accordance to Civil Code of KR.
- Covered all expenses that arose during special administration process, by founds recovered during special administration process in accordance with the requirements of this law.
- Granted all demands of creditors by funds raised from sale of debtor's assets and funds recovered during special administration process in accordance with the requirements of this Law.
- Submitted a report to the court or creditor's meeting in compliance with the requirements of this law.
- Performed other requirements of this law as well as other normative documents concerning the bankruptcy.
2. In case, assets of debtor are at third party's possession on basis of agreement and special administrator can't sell assets in stated period (including cases when assets have been leased out to third parties for a period of time ending after completion of the time frame of the special administration), the special administrator shall be allowed to sell debtor's assets to the third party at reasonable price.
3. In case special administrator fails to sell debtor's assets at reasonable price and in stated period of time, he/she can sell debtors assets at negotiable price in following order:
- can sell to any creditor
- other parties stated in sub - paragraph 2 of this article.
- to the members of debtor.
- In case special administrator doesn't manage to realize debtor's assets stated in sub - paragraph 3 or this Article at negotiable price, he/she is authorized to pass debtor's assets to local governmental body for free, or to State Bankruptcy Agency in case local governmental body rejects the assets.
- In case special administrator doesn't manage to realize debtor's assets at reasonable price or didn't manage to sell(pass) to parties stated above in sub - paragraph 2-4 of this Article, such assets will be considered ownerless, and special administrator shall manage it in compliance with the Civil Code of Kyrgyz Republic. Movable assets may be left abandoned or left in any other way.
- Person/party that receives/obtains debtor's assets in compliance with sub-paragraphs 2-4 of this Article shall be granted same rights to assets as debtor had.
- In case assets may possess potential threat for the population and may not be given to persons, in accordance with the paragraphs 2-4 of this article, the special administrator shall pass these assets to the state agency for emergency situations or hall have the right to take actions in accordance with the paragraph 3, article 71 of this law.
- In case, assets are to be obtained from third party in future(when agreement term expires) and special administrator is informed about it, he/she must sell rights to these assets in compliance with order/requirements of this law.
- After completion of special administration procedure rights to assets, not identified by special administrator, shall pass to the state agency in charge of bankruptcy cases.
- In case of assets stated in the sub - paragraph 8 of this Article, the state agency for bankruptcy shall obtain special administrator's rights of realizing and distributing debtor's assets in compliance with order/requirements of this law.
4. Assets shall be used to cover the costs of the state bankruptcy agency, while the remainder shall be distributed among creditors according to the established priorities, as indicate din the report of the special administrator, and afterwards used to satisfy claims of creditors that have applied with their claims after completion of the procedure of the special administration.
5. State agency for cases of bankruptcy shall not be obliged to announce facts of obtaining assets or it's intention to distribute funds raised from sale of stated assets or look for other creditors whose claims/requests were not granted or to call up a creditors meeting.
CHAPTER 3
TEMPORARY ADMINISTRATOR
Article 61. Role Of Temporary Administrator
1. The principal objective of the temporary administrator is to ensure that assets of the debtor are safe, and to conduct analysis of the financial state of the debtor within the period pending rendering a decision by the court on the bankruptcy case.
2. After appointment of a temporary administrator, the debtor may continue his/her activity under the control of the temporary administrator.
Article 62. Appointment Of Temporary Administrator1. At initiation of the procedure of special administration without involvement of the court, the court may appoint a temporary administrator by the petition of any creditor for a period pending the first meeting of creditors. Creditor shall file a petition to the court in typewriting. The petition shall be signed by the creditor (in case of an individual entrepreneur) or by the manager of the creditor (in case of a legal entity) or their representatives. The following must be indicated in the petition:
• title of the court appealed to;
• name (title) of the debtor and postal address;
• name (title) of the petitioner and postal address
• request to appoint a temporary administrator.
2. The following documents shall have to be attached to the petition, containing:
• evidence of payment of the state fee as required;
• decision of the general meeting of creditors (if available) for starting the process of bankruptcy without the court involvement, made in accordance with the article 29, paragraph 1 of this Law;
3 . Should the creditors make a decision to commence the procedure of special administration of the debtor without involvement of the court, the creditors may appoint the temporary administrator to the position of a special administrator. Should the creditors decide to refrain from commencement of the procedure of special administration without involvement of the court, the temporary administrator shall be relieved from his/her duties after seven calendar days after the meeting of the creditors. Within the indicated period, a petition on conduct of the procedure of special administration with the involvement of the court may be filed to court.
Article 63. Rights And Duties Of The Temporary Administrator1. A temporary administrator from the moment of his appointment by the court shall carry out the duties to manage the debtor and control its activities. All the assets of the debtor are taken into the possession and control of the temporary administrator in order to preserve them pending the final decision of the court. At that time, the powers of the management and stake holders of the debtor shall cease, unless the court orders otherwise or the temporary administrator decides otherwise.
2. All managers, employees and stake holders of the debtor have a duty to cooperate with the temporary administrator, and to make no impediments while carrying out his duties, including provision of the full access to the premises, assets, bank accounts, and documentation of the debtor. Appointment of the temporary administrator shall not serve as the grounds for termination of duties of third parties with respect to the debtor, including the temporary administrator.
3. The temporary administrator may order that a full or partial audit, taking inventory or audit of the debtor be carried out at the expense of the debtor.
4. The temporary administrator shall have the right to order all managers and stake holders, including those who have been managers or stake holders within the last year, to present him all records and information related to the debtor, and to cooperate with him otherwise. The temporary administrator has no right to divulge the obtained commercial information, and use such information only in the interest of the debtor. The temporary administrator must reveal such information to the court, the Special administrator (if appointed) and to other persons, as specified in the legislation of the Kyrgyz Republic.
5 . The temporary administrator may limit access of stake holders or managers of the debtor to the premises, including offices and production facilities of the debtor.
6. Persons obstructing the temporary administrator in carrying out his powers, are considered to obstruct the court, and are held liable in accordance with the legislation of the Kyrgyz Republic .
7. When a temporary administrator is appointed, court or other actions in relation to establishment of obligations of the debtor shall proceed, but may not be enforced in any way (except for actions of a secured creditor).
8. The temporary administrator may renew or continue the debtor's activity, if he considers it necessary in order to preserve the assets, or if he is unable to do so for some reason.
9. The temporary administrator shall have the right:
• to receive explanations and information from stake holders, managers, employees and other persons related to the enterprise, including persons who have been related to the debtor during the previous financial year;
• to request and receive for his own disposition, any accounting books or records to which the debtor is entitled, (or copies of them if he is willing to accept copies) from the debtor or from persons connected with him.
10 . The temporary administrator within a period of 14 days of his appointment is obligated to make a report to the court on the financial position of the debtor. If he has insufficient information, this report may be a intermediary report. The court shall take the report of the temporary administrator into account when making its final decision on special administration, or on removing the temporary administrator. In case of bankruptcy process without involvement of the court, the temporary administrator provides the report about the financial position of the debtor to the meeting of creditors.
11 . Other rights and obligations of the temporary administrator may be established by the court at appointment. When necessary, the temporary administrator may apply to the court concerning issues pertaining to his rights and obligations.
Article 64. Cessation Of Powers Of A Temporary Administrator1. If the court decides not to find the debtor bankrupt and to terminate the proceeding on the case after the appointment of the temporary administrator, the court is to make a justified decision on dismissing the temporary administrator from the office. From the moment such decision of the court is made, the powers to manage the debtor shall be transferred to its management and stake holders.
CHAPTER 4
SPECIAL ADMINISTRATOR
Article 65. General Provisions
1. Regardless of the procedure for special administration, with or without involvement of the court, the special administrator shall have similar rights and obligations.
2. In case of disputable issues and obstructions to perform powers of the special administrator, the court based on principles set forth in this Law and other acts published in accordance with this Law, in order to secure special administration proceedings, shall have the right to render a judgment enabling the special administrator (including the one appointed by the creditors) to abstain from or perform certain actions with regard to the debtor or its assets.
3. The main task of the special administrator shall be to alienate assets of the debtor in the interest of creditors and allocate means in accordance with the priorities set forth in this Law, after secured creditors have been satisfied and expenses on the bankruptcy process have been covered.
4. The special administrator shall be the only legal representative of the debtor subject to the process of special administration.
5. The debtor shall be held liable for obligations arising from transactions entered into by the special administrator in compliance with the powers granted by this Law. However, the special administrator shall be liable for such obligations, if:
• the special administrator acted on behalf of himself/herself while making deals, without pointing out that he/she is a special administrator of the debtor;
• the special administrator has accepted the liability in writing.
Article 66. Rights Of A Special Administrator1. The special administrator shall have the right:
• to carry out any lawful acts with the assets of the debtor, in compliance with the legislation, in order to satisfy creditors' claims in the most optimal way, take measures to collect debts due to the debtor, and take measures to find, identify and return the property of the debtor in accordance with requirements of the legislation. Should the claim on collection of debt be filed to the court, the special administrator shall not pay the state fee established in this case;
• to transfer without payment ownership rights or other rights in respect of any property, and to waive them, if they cannot be alienated (sold) with profit, including rights related to accounts receivable due to the debtor;
• to waive any obligations of the debtor including transactions being performed, which would not bring profit or would lead to liabilities (without satisfying the claims of persons, who will then become creditors of the debtor during the special administration process for any losses inflicted to any persons by the refusal to perform any legally effective obligations or duties);
• to verify grounds for claims and to reject ungrounded claims completely (or ungrounded parts of claims).
2. Creditors may petition to court for satisfying the withdrawn claims or for determining the priority of the satisfaction thereof. The court shall consider these petitions within one month after receipt thereof;
- to manage the activity of the debtor in place of the existing management. If necessary to hire or dismiss managers, employees (personnel) of the debtor, including categories of persons who have guarantees on dismissal set forth in the labor legislation, unless otherwise provided by this Law;
- to make a decision and restructure the debtor in accordance with this Law;
- to sell or alienate in any way the property complex (fully or partially), assets of the debtor, and of the new legal entity (or entities) created during the special administration process as provided by the legislation;
- receive information from any individual:
• related to the debtor by labor and other relations during one year prior to adoption of the decision to commence the special administration process;
• stake holder or persons who were stake holders of the debtor during one year prior to adoption of the decision to commence the special administration process;
• close relative, spouse, parent or children of the stake holder of the debtor or person mentioned in sub - paragraph (a) and (b) of this paragraph;
- to request and obtain for his disposal any account books or records or other documents concerning the debtor or its activity;
- to receive compensation for his work, which amount shall be defined by this Law and other acts;
- to call regular or special meetings of creditors or creditors committee (if any) as necessary;
- to make partial payments to creditors in accordance with the rules and procedure established by this Law;
- to appeal to the court with complaints against decision of the meeting (committee) of creditors, made through the violation of the law or beyond the competence of the meeting (committee) or limiting the powers of the special administrator;
- to take inventory and assess assets of the debtor; to hire assessors and other experts and pay for the services at the expense of the assets of the debtor, unless otherwise decided by the meeting of creditors; in case assets of the debtor for sale through the process of the special administration consist of real estate, the assets shall be assessed prior to sale with the assistance of an independent assessor, unless otherwise decided by the meeting of creditors;
- to set the starting prices for sale of assets at an auction. Special administrator shall not have the right to set up the lowest price and must sell property to bidders that offer the highest prices at properly organized auctions.
1. A transaction, including those concluded by the debtor before the process of special administration may be invalidated by the court upon petition of the special administrator on grounds set forth in the civil legislation.
2. A transaction concluded by the debtor with the interested person within one year prior to filing the application on finding the debtor bankrupt may be invalidated upon the petition of the special administrator, in the event the performance of this transaction lead to the debtor's insolvency.
3. A transaction concluded with a certain creditor or another person after the receipt of the application for bankruptcy and (or) concluded within one year prior to filing the application on finding the debtor bankrupt may be invalidated upon the petition of the special administrator or by the creditor, in the event such transaction leads to preferential satisfaction of claims on debtor's monetary obligations of some creditors over others.
4. Rules required for the implementation of this article shall be established by other normative legal acts.
Article 68. Rights Of The Special Administrator In Respect To Shares (Stocks) Of Another Enterprise In Possession Of The Debtor1. In cases directly stipulated by the legislation or founding agreements of a company or partnership, the special administrator shall have the right to claim:
- value of shares in possession of the debtor (redemption of funds paid into the capital) of a joint stock company, shares of which are held by the debtor;
- value of the share of the debtor (redemption of the funds paid into the capital) of a company in which the debtor has been a founder or a stake holder.
2. The special administrator has the right to alienate the share (stock) of the debtor, mentioned in the paragraph 1 of this article to third parties in compliance with the legislation of the Kyrgyz Republic.
Article 69. Rights Of The Special Administrator In Respect Of The Assets Of The Debtor At The Disposal Of Third Persons Based On A Contract1. The special administrator can waive any obligations of the debtor, but has no right to demand back the property of the debtor which is disposed of by third parties on the basis of a contract until the expiry of the period provided in the contract. If the contract with the third parties permits the return of the property (for example, in case of breach of the contract) the special administrator may demand the property back.
2. The special administrator shall have the right to demand accounts and accounting documents (make copies) from third parties which are related to the debtor.
3. The special administrator may sell the property to another party which is willing to assume the obligations of the debtor in relation to the contract before the expiry of the period specified in the contract with prior notice to the third party which holds this property.
Article 70. Obligations Of The Special Administrator1. The special administrator shall:
- publish an announcement in accordance with Article 48 of this Law;
- from the moment of his appointment exercise management and control over the activities of the debtor including debts and other obligations owed by other parties to the debtor and also over assets and obligations which the debtor acquired or will acquire after the commencement of special administration process;
- sell (alienate) all assets which are in non-cash form in the shortest possible period taking into account the requirements of this Law, and distribute the proceeds of sale of the assets among creditors in accordance with the priorities in the procedure and based on rules set forth in Chapter 7 of this Law. He shall not be liable, if he fails to sell them with profit;
- report to the court or to the creditors' meeting in the scope and in the procedure established in this Law and inform the registration agency in accordance with the requirements of this Law;
- ensure that all out coming documents of the debtor (letters, invoices and financial documents) contain the information which notifies that the debtor is subject to a process of special administration;
- in case of the special administration of a government-owned enterprise which has not been denationalized and privatized, the special administrator shall dispose of the facilities of the social infrastructure in accordance with the requirements of the legislation;
- publicly announce the sale of assets and sell assets without any unreasonable delays at the formed market price taking into account that the sale of assets is done under forced circumstances within restricted periods of time, and that the price may be lower than the one under more favorable conditions;
- the special administrator shall sell the assets as soon as possible following proper public advertisement. Without the assent of the court, the committee or the creditors' meeting, the Special administrator has no right to postpone the sale of assets for a long period in order to await changes in the market situation with the hope to sell the assets at a higher price;
- where there is a valid reason, the special administrator has the right to sell the assets at a price which the creditors or the debtor disagree with. Valid reasons shall be the following:
• if the assets are alienated within the period indicated in the announcement of sale, even if the price received is lower then the price which can be received by selling at another time;
• if the assets are alienated without notification of sale because of lack of time resulting from the deterioration in the quality of the (perishable) assets, or for other objective reasons;
• if the assets cannot be alienated because of lack of demand, or when alienation costs exceed the value of assets, or if for some other valid reason the assets cannot be sold (in which case the Special administrator has the right to waive the assets pursuant to paragraph 2 of Article 66 of this Law);
Article 71. Obligations Of The Special Administrator In Case Of Insufficiency Of Assets1. The main duty of the special administrator shall be to secure the safety of assets of the debtor, and to carry out financial analysis of the financial state of the debtor. The analysis of the financial state of the debtor shall be carried out in order to define sufficiency of assets owned by the debtor (less assets subject to pledge) to cover court costs, compensation to the special administrator, and secure the opportunity for restoration of the solvency of the debtor.
2. If the analysis of the financial state of the debtor reveals insufficiency of assets to cover court expenses, the special administrator shall inform the court thereon and shall present recommendations on conducting the special administration process. In this case the court shall rule to stop special administration process and terminate the activity of the special administrator.
3. The special administrator shall terminate his activity after notification of the registration agency.
4. Where there are insufficient assets, the special administrator shall receive compensation in the amount of twenty minimum wages established by the legislation. This amount shall be paid from the special fund of the agency of the state in charge of bankruptcy cases.
5. . In the event a building, equipment or other property of the debtor constitutes potential danger for the population, the special administrator must determine the amount necessary to prevent the danger (including expenses on securing safety of these assets). These expenses shall be the expenses of the bankruptcy process. Where the assets of the debtor are insufficient to cover all the expenses of the bankruptcy process, the Government Agency for Emergency Situations shall provide the special administrator with the requisite funds upon his/her request, or the Government Agency for Emergency Situations shall assume the responsibility on prevention or elimination of the danger. Otherwise the court shall order the Government Agency for Emergency Situations to pay the requisite funds to the special administrator within the period established by the court.
Article 72. Liability Of The Special Administrator (Temporary Administrator)1. Debtor or creditor shall have the right to appeal to the court with a petition for compensation of losses by the special (temporary) administrator, caused as a result of wrongful acts by the special administrator (temporary administrator).
2. The court may deprive a special administrator (temporary administrator) of the right to conduct activities of an administrator (be disqualified) for a period of time and on conditions set by the legislation of the Kyrgyz Republic.
Article 73. Specific Aspects Of Passing Title To Assets Of Debtor Based On The Right Of Economic Management1. Where a legal entity is founded on the right of economic management, in special administration process the stake holder of this legal entity, or agency controlling the government legal entity shall transfer all property rights to the assets of the debtor (including the right to alienate).
Article 73-1. Remuneration For A Special Administrator1. Size of the remuneration and procedure for disbursement of the remuneration for the special administrator shall be identified by the meeting of creditors (in case of special administration without involvement of the court) and by the court in accordance with the requirements and procedures established by this article.
2. Remuneration for the special administrator shall be paid at the expense of the assets of the debtor and referred to as costs of the bankruptcy process.
3. In case of special administration of a missing debtor, the remuneration for a special administrator shall be paid at the expense of a specialized fund under the state body for cases of bankruptcy and subsequently recovered fully or partially at the expense of assets of the debtor.
4. Remuneration of the special administrator shall consist of the following:
- current (monthly) payments during the whole term of a contract of a special administrator;
- additional bonus payment depending on the progress and performance.
5. Current payments shall be made once a month, unless otherwise decided by the court or a meeting of creditors.
6. Additional bonus payments at the expense of funds for the satisfaction of claims of creditors shall be paid to the administrator along with each payment for the satisfaction of claims of creditors.
7. Deductions for the remuneration of the administrator shall be made at the same time as each payment for satisfaction of claims of creditors.
8 . Current monthly payments for the special administrator shall be equal to 20 minimal monthly salaries, established by the legislation of the Kyrgyz Republic .
9. Size of additional bonus payments for the special administrator must not exceed 5% of the funds for the satisfaction of claims of creditors.
10. In case of termination of proceedings in the case of bankruptcy due to the conclusion of an amicable agreement, the calculations shall be based upon the size of claims, that have been actually satisfied or recognized in accordance with the approved amicable agreement.
1. Upon completion of all payments for creditors and performance of other duties, stipulated by this Law, the special administrator shall present a final report to the:
- court, if the process of bankruptcy involves the court;
- meeting of creditors, in case of bankruptcy without involvement of the court.
2. The following shall be attached to the final report:
• liquidation balance sheet;
• register of claims of creditors and results of satisfaction of claims, indicating the size of satisfied claims;
• evidence of disposal of the remaining assets of the debtor;
• evidence of the remuneration received by the administrator;
• evidence of reasonable and expedient costs of the process of bankruptcy;
• evidence of wrongful acts committed by the managers and stake holders of the debtor (if applicable);
• other data as necessary.
3. The court (meeting of creditors) must consider approval of the final report of the special administrator within 7 days after submission.
4. Meeting of creditors that has not agreed with the final report shall have the right to appeal to the court with a complains concerning the final report of the special administrator within 7 days after expiration of the term, stated in the paragraph 3 of this article.
5. In case of approval of the final report of the special administrator the court or the meeting of creditors shall make a decision on finalization of the procedure of the special administration and notify the body that registers business entities.
CHAPTER 5
SPECIAL ADMINISTRATOR AND SECURED CREDITORS
Article 74. Rights And Obligations Of A Secured Creditor
1. The procedure of special administration shall not entail any limitation as to the right of the secured creditor to collect the collateral, including cases when a stake holder of a debtor is a creditor secured with collateral. Secured creditor shall have the right to collect the collateral in accordance with the provision of the Law of the Kyrgyz Republic "On collateral". Special administrator shall provide collateralized property to the secured creditor upon request of the latter in accordance with the provision of the law "On collateral". Special administrator shall have the right to sell the collateral upon a written consent of the secured creditor. This shall not result in the termination of the rights of a secured creditor to have the claims satisfied in the order of priority, stipulated by this Law.
2. Rights and obligations of a secured creditor shall be regulated by the legislation on collateral, unless otherwise stipulated by this Law.
3. In case proceeds from liquidation of property used as the collateral are not sufficient to cover the claims of a secured creditor the latter shall have the right to cover the difference as an unsecured creditor of respective priority.
Article 75. Holding Collateral Ineffective.1. Special administrator must verify the effectiveness of an agreement concerning the collateral and claims of the creditor.
2. An agreement shall be found ineffective in the following cases, except for cases stipulated by the civil legislation of the Kyrgyz Republic and article 76 of this law:
- if agreement has been made after emergence of events, stipulated in the article 21 of this law;
- if agreement has been found ineffective in accordance with the provisions of the article 67 of this Law.
1. Agreement on collateral made by a special administrator after commencement of the procedure of the special administration shall be held ineffective, except collateral agreements made to satisfy claims of creditors or recover the solvency of the debtor upon consent of the court (in case of the court involvement) or the meeting of creditors.
Article 77. Transfer Of The Right To Collect Collateralized Property1. Secured creditor shall have the right to transfer the right to collect the property used as the collateral to a third party in exchange for coverage of the claims in respect to such property. Whereas the third party shall keep the right to collect the property used as the collateral in accordance with the order of priority, established by this Law.
CHAPTER 6
PRINCIPLES OF LIABILITY IN THE BANKRUPTCY PROCESS
Article 78. Full Liability Of A Legal Entity
1. A debtor being a legal entity in the process of bankruptcy shall be fully liable for the debts and obligations with all its assets and may not bear limited liability.
Article 79. Full And Extended Liability Of Stake Holders Of The Debtor1. If stake holders of a debtor in accordance with the legislation of the Kyrgyz Republic have accepted voluntarily the unlimited liability under a contract in respect to arrears of the debtor (full liability) or accepted the liability in respect to obligations of the debtor equally for all stakeholders, proportionately to the size of their contributions, additionally established by the founding documents of a legal entity (extended liability), they shall respectively bear the full or extended liability in respect to the arrears of the debtor subject to the process of bankruptcy.
2. If some claims have been left uncovered after distribution of all assets of a debtor, the special administrator must demand that all or several stake holders of the debtor that have accepted the full or extended liability should satisfy the uncovered part of claims.
3. If a stake holder that bears the full or extended liability has voluntarily covered the whole debt (or part) for other stake holders bearing the full or extended liability such stake holder shall have the right to get compensation from other stake holders.
4. If a stake holder of a debtor bearing the full or extended liability is the state or a body of the state, the state itself or the body of the state shall not be liable to the process of bankruptcy, but some property that belongs to the state or the body of the state may be exacted in accordance with this Law, to the extent established by the legislation.
Article 80. Limited Liability Of Stake Holders Of The Debtor1. Limited liability shall be understood as liability in accordance with which stake holders of the debtor are liable for obligations of the debtor to the extent of the value of their contributions (value of stock).
2. Stake holders that have not made their contribution in full shall bear the liability in solidarity in respect to the obligations to the extent of the unpaid part of the contribution of each stake holder.
Article 81. Liability Of A Guarantor1. A person with limited liability that has provided personal guarantees (including through an endorsed transferable promissory note or a similar document signed as a guarantor), or has provided personal guarantees to a third person in respect to the debt or obligations of the debtor shall be liable to the extent of given guarantees.
Article 82. Full Liability Of An Individual Entrepreneur1. An debtor individual entrepreneur in the process of bankruptcy shall bear the liability in respect to his/her obligations to the extent of all the assets owned, that may be subject to exaction in accordance with the legislation.
Article 83. Liability Of Managers Of A Troubled Debtor1. Provisions of this article shall apply to managers of a troubled debtor. A debtor shall be considered troubled when any of the following occur:
- a debtor is considered insolvent in accordance with the requirements of the articles 9 and 9-1 of this law;
- one of the conditions mentioned in the paragraph 1, article 21 of this Law;
- a debtor involved into loss-making activity;
- a debtor is expected to carry out a loss-making activity, unless the situation changes
2. For purposes of this Article the following persons shall be considered as managers of a troubled debtor:
- a person appointed in compliance with the established procedure to manage a legal entity (director, manager, head, etc., including their deputies and persons acting as managers);
- an stake holder holding stock (or shares), enabling him to control the legal entity through orders binding for a person set forth in sub-paragraph 1 of this paragraph.
3. Persons indicated in paragraph 2 of this Article shall be held liable in accordance with the civil legislation, if they fail to perform their duties to manage the economic activity of a troubled debtor (duty to be prudent, duty to prevent losses, obligation to prevent bankruptcy). Issues associated with the liability of a manager of a troubled entity debtor shall be regulated by other normative legal acts on bankruptcy.
Article 84. Wrongful Transfer1. Where a manager or stake holder of a troubled debtor (knowing that the debtor is troubled), transfers its property to third parties without receiving full payment in cash or in kind for the transferred property, so that the creditors of the debtor are deprived of these assets - those managers or stake holders will be fully liable for the losses inflicted to creditors by such transfer.
2. Articles 102 and 104 of the Civil Code of the Kyrgyz Republic and Article 23 of this Law shall also apply to wrongful disposal of the debtor's property.
CHAPTER 7
CONDITIONS AND PRIORITY OF DEBT REPAYMENT
Article 85. General Rules On Observation Of Priorities In Repayment Of Debts
1. The Special administrator shall distribute the proceeds received from sale of the assets of a debtor, in accordance with the following rules:
- he/she may sell assets and distribute the proceeds from the sale among creditors, or transfer assets directly to creditors in repayment of debts;
- claims of each creditor of the higher priority must be fully satisfied before satisfaction of claims of creditors of the lower priority;
- in satisfaction of claims of the same level of priority, all creditors shall be treated equally, and have equal rights to compensation, dependent on the amount payable to them.
- If there are insufficient funds to repay all creditors of the same priority, the creditor who has claims for a bigger part of the share of debt of the debtor will receive proportionately bigger compensation:
- should any property be subject to several valid pledges, the priority among such secured creditors shall be defined in accordance with requirements of the legislation of the Kyrgyz Republic;
- claims of creditors presented after expiration of the period established by the legislation shall be satisfied from the assets of the debtor which remain after satisfaction of timely filed creditors' claims;
- claims of creditors shall be considered discharged in the following cases:
• when claims have not been satisfied due to insufficiency of the debtor's assets, except in cases stipulated by this law and article 104 of the Civil Code of the Kyrgyz Republic;
• if claims of creditors have not been recognized by the special administrator and creditor has not filed a law suit to the court, or claims have been rejected by the court;
• if claims have been made after completion of the procedure of the special administration and the state body for cases of bankruptcy has received additional assets in accordance with the paragraph 9 of the article 55-1 of this Law after the completion of the procedure of special administration but the creditor has not notified the state bankruptcy agency of its claims prior to the distribution of proceeds from sale of additional assets by the state bankruptcy agency;
- recognition of claims discharged shall mean that such claims may not be presented to the debtor any more. Respective amounts must be written off by the creditor from the accounts receivable.
1. All property of the debtor available at the time of commencement of the special administration process and identified during this process shall constitute the pool of liquidation assets subject to other paragraphs of this Article.
2. The property withdrawn from circulation, property rights related to the personality of the debtor who is an individual entrepreneur, including rights which are based on permission (license) to carry out certain types of activity, and other property and rights set forth in the legislation shall be excluded from the property of the debtor which comprises the pool of liquidation assets.
3. Where the property withdrawn from circulation is part of the debtor's assets, the special administrator must transfer that property to the stake holder of such property. The stake holder of the property shall accept or assign this property to another person within one month period from the time of receipt of the notice of the special administrator. Otherwise, upon expiration of one month period all expenses on maintenance of the said property shall be imposed on the stake holder.
4 . The subject of pledge shall not be part of the pool of liquidation assets. A secured creditor shall have claims to the debtor's property (subject of pledge) by virtue of his right to enforce the security, provided that the grounds set forth in the law or the pledge agreement occur.
5. Upon agreement with the creditor who is a pledge holder the special administrator may alienate the subject of pledge in any way and in compliance with the procedure provided by the law or the agreement between the parties and transfer the proceeds from the alienation to the secured creditor less expenses incurred by the special administrator.
6. In this case the claims of a secured creditor shall be recovered out of turn within the amount received from sale of the pledge.
7 . In the event the proceeds are not sufficient to satisfy the claims of the secured creditor in full, the remaining part of the claim must be paid up subject to general rank of priority in compliance with the procedure and based on the conditions set forth in this Law.
8 . After alienation of the pool of liquidation assets by the special administrator, the amount distributed among the creditors shall constitute the proceeds from alienation of the unsecured assets minus expenses on the bankruptcy process (net sale proceeds).
9 . Expenses of the bankruptcy process shall include expenses on publication of the notice on the bankruptcy process, court expenses, expenses of the special administrator (temporary administrator), remuneration to the special administrator, and possible expenses of the debtor for the period during which the special administrator (temporary administrator) considered it necessary to continue the economic activity of the debtor and other expenses.
10. Costs of the special (temporary) administrator may include the obligations (including the salary of personnel hired by the special or temporary administrator), compensation of losses caused by the failure to execute or improper execution of obligations arising from deals made by the special administrator (temporary administrator).
Article 87. Payment Priorities1. Net sale proceeds shall be distributed as follows:
- - first in priority are claims of citizens to whom the debtor is liable for damages inflicted to their life or health by means of capitalizing the corresponding periodical payments in the procedure established by the law;
- - second in priority are settlements on retirement and social benefits and salary payments for workers employed under labor agreement (contract), but for no more than a 3 month period;
- - third in priority are claims of unsecured creditors on the principal and interests thereto and principal payments for the mandatory public insurance. Meanwhile, regardless of claims of other creditors with the same order of priority, claims of non affiliated individuals depositors of banks shall be satisfied prior to the claims of affiliated individuals - depositors of banks;
- - forth in priority are settlements on the principal amount of obligatory payments to the budget and extra budgetary funds;
- - fifth in priority are claims on payment of penalty (fine) of creditors of the third and forth priority including interests on the principal amount of obligatory payments to the budget and extra budgetary funds.
3. After all claims are satisfied the balance shall be paid to the stake holders of the debtor.
4 . When stake holder of a debtor is also a creditor, the claims of the creditor shall be satisfied along with other creditors in accordance with the priority.
5. State holder of a debtor is not a creditor in respect to claims to refund the contribution into the capital of a debtor in case of special administration of a debtor. Such claims shall not be considered as claims to repay debt and shall only be satisfied after satisfaction of all claims of creditors, include into the register of claims.
6. After satisfaction of all claims of creditors the balance shall be distributed among stakeholders of the debtor.
7. . The right to claim owned by a creditor under the obligation may be transferred to another person including a creditor of any priority in a transaction (assignment of a claim) in the procedure and on conditions established in the legislation.
8. Where the assets of the debtor are insufficient, the funds (property) shall be distributed among creditors of the corresponding priority in proportion to the amount of the claim subject to satisfaction, unless otherwise established by this Law.
9 . Where the special administrator denies satisfaction of creditor's claims or evades their consideration, prior to approval of the liquidation balance of the debtor, the creditor may file a lawsuit to the court against the special administrator. The claim of the creditor may be satisfied from the remaining assets of the debtor by the court decision in accordance with this Law.
Article 88. Mutual Settlements1. f in the course of the special administration it is found out that the debtor has debt on the obligation (existing debt) or will have the debt (future debt) or may have the debt (possible debt) to another person, and at the same time this person has an existing, future or possible debt to the debtor, then:
- the difference between the two debts which become due before the commencement of the special administration process, expressed in the monetary or other form, which difference is payable by one party to the other party shall be taken into consideration (mutual settlements);
- if the monetary expression of the debt is not established, it shall be defined by the special administrator in order to carry out mutual settlements in the procedure set forth in sub - paragraph (1) hereof;
- settlement of any debts which arose after the commencement of the special administration process shall be prohibited.
2. Mutual settlement set forth in paragraph 1 of this Article shall be prohibited in the event:
- a third party is related to the debt of either party, and its rights may be violated;
- one of the claims is the demand to refund the contribution of an stake holder to the authorized capital of the debtor;
- debts have been incurred after the commencement of the special administration procedure.
1. Pursuant to the Civil Code of the Kyrgyz Republic accrual of interests and penalty (fine) on all debt obligations of the debtor shall be suspended from the time established in Article 23 of this Law or from the time of appointment of the special administrator.
2. Interests and penalty which the creditor was to receive before the bankruptcy process shall be included in the amount of creditors' claims and shall be paid in accordance with priority set forth in this Law.
Article 90. Collection Of Under-Received Profit1. Creditors shall have the right to collect unreceived revenues (lost profit) from the debtor, by including them in the amount of the principal claim.
Article 91. Consideration And Enforcement Of Creditors' Claims1. The special administrator shall evaluate the payments due on creditors' claims.
2. Should the special administrator refuse to perform contractual or other obligations assumed by the debtor before the bankruptcy process, the person who is affected by such refusal may demand from the debtor in court compensation of damages at the expense of the property (assets) of the debtor in compliance with priorities set forth in this Law.
3. If debts or obligations of the debtor refer to the future, the period of their enforcement shall be considered shifted to an earlier period, so that the right to seize emerge immediately. In this case the special administrator must indemnify the damages, taking into account that the obligation or debt was paid up early. The special administrator shall independently calculate the amount of claims (damages) on such obligations or debts, unless the procedure for such calculation is established by subordinate normative legal acts.
4. The special administrator shall capitalize funds meant for payment of benefits and compensations for labor injury of workers of the debtor and shall transfer such funds to the Social Fund of the Kyrgyz Republic in accordance with the first priority set forth in this Law.
5. Stake holders of the debtor shall have the right to receive their contributions to the debtor's capital at the expense of the property (assets) left after satisfaction of all claims of debtor's creditors.
6. In accordance with this Law no one has the right to change the procedure and priorities of settlement with creditors, except in the instances of assignment of claims carried out in compliance with the legislation.
7. Public agencies and agencies of local self-government shall have no right to seize money or other property (assets) of the debtor, and to arrest this property (assets) after initiation of the bankruptcy case or declaration of the debtor as bankrupt in the extra-judicial procedure.
8. In order to save the property (assets) of the debtor, government agencies and agencies of local self-government shall have the right to file a claim to the court on ensuring safety of the property (assets) of the debtor before the court makes a final decision on the bankruptcy process.
Article 93. Concept Of Sanation
1. Sanation shall consist of implementation of a set of financial, or economic, or organizational measures by the authorized agency upon the court decision aiming at restoration of the debtor's solvency in order to enable it to settle with creditors within the period established by the court.
2. Sanation shall apply only to the debtor which is a legal entity, in case the claim on finding the legal entity bankrupt was filed to court.
3. If the claim to find the debtor bankrupt (insolvent) was not filed in the court procedure, the sanation may be carried out upon the agreement of the debtor with its creditors in the procedure and on conditions defined in such agreement.
Article 94. Application For Sanation1. Within seven calendar days after filing an application to commence the special administration process (or after the National Bank of the Kyrgyz Republic has made a decision) the debtor or stake holder of its property may file a claim to court for suspension of the case hearing and on conducting sanation.
2. The court shall consider the expediency of sanation within further fourteen days. In the event the court fails to render a judgment on sanation within this period, the special administration process shall commence. Time periods specified in this paragraph may not be extended.
3. A petition for conducting sanation may be filed in court, in the event:
- the stake holder acknowledges the fact of the debtor's insolvency;
- the debtor (stake holder) assumes additional losses of creditors incurred while the court considers expediency of sanation, unless the court renders a judgment on sanation.
1. The surety (guarantee) by a third party that all claims of creditors, including all court expenses will be recovered may be a valid condition for suspension of the special administration by the court and commencement of the sanation.
2. Persons ready to assume obligations related to the sanation shall bear duty to indemnify additional losses of creditors arising during sanation including expenses on organization of competition, otherwise the court cannot render a judgment on sanation.
3. Surety (guarantor) or a person willing to conduct the sanation of the debtor must present evidence of their solvency and sufficiency of their financial means to pay the creditors.
4. Where the debtor is a bank, the court must make sure that the surety (guarantor) has enough funds to pay debts to depositors, in order to protect depositors' interests. In this case the court considers the opinion of the National Bank of the Kyrgyz Republic on the solvency of the surety (guarantor).
Article 96. Court Judgment1. Should there be no surety (guarantee) of third parties with regard to creditors' claims to the debtor including the one on compensation of court expenses to creditors, the court shall advertise in mass media (no later than three weeks after filing an application on commencement of the special administration) a competition of legal entities and individuals willing to undertake sanation of the debtor.
2. In the event there is no person willing to undertake sanation of the debtor within one month after publication (no later than seven weeks after filing an application for commencement of the special administration) or the debtor disagrees with the conditions of sanation set by the person, the court shall render a judgment on commencement of the special administration.
Article 97. Procedure For Conducting Sanation1. A temporary administrator must be appointed to manage the affairs of the debtor for the time of considering the issue on sanation by the court. The persons who petitioned to the court on sanation shall pay the compensation to the temporary administrator.
2. The period of sanation may not exceed six months. At the expiration of this period the debtor or its stake holder or sureties (guarantors) must provide evidence to the court that the debtor paid all the debts to creditors which existed at the time of commencement of the special administration. If the evidence is not presented or a creditor files a claim on renewal of the special administration process on the ground that the debtor failed or refused to pay the debt, the court shall immediately render a judgment on renewal of special administration process.
3. The sanation of the debtor may not be conducted during 12 months after termination of the period of sanation.
4. During the period of sanation all actions aimed at enforcement of court judgments and other decision on recovery of debtor's debts and arrest of its assets shall terminate. Calculation of interests and penalty (fine) on obligations may continue during the period of sanation, however the requirement to pay may be presented only at the expiration of this period.
5. The fact of filing a petition to the court on sanation or court judgment on appointment of a temporary administrator or conducting the sanation shall not deprive the secured creditor of the right indicated in the paragraph 8, article 21 of this Law.
Article 98. General Provisions
1. Rehabilitation of a debtor may be carried out with or without involvement of the court. Procedure of rehabilitation shall apply both to an individual entrepreneur and a legal entity.
2. Rehabilitation shall include the following:
- development and submission of the written plan of rehabilitation of the debtor to the properly assembled creditors' meeting to have a corresponding decision rendered. The said plan must include justified suggestions on restoration of the debtor's solvency within the period of rehabilitation established by the plan;
- approval or denial of the plan by the creditors' meeting. Rehabilitation process of the debtor shall start after approval of the plan;
- after the plan has been approved, the creditors may appoint an external manager of the debtor for the period of rehabilitation;
- rehabilitation of the debtor without the court participation may be carried out with the court participation upon the petition of any party related to rehabilitation;
- the approved plan may be changed only upon agreement between the debtor and creditors;
- rehabilitation process shall end after performance of the plan or upon the agreement between the debtor and all creditors.
3. In the event the rehabilitation plan is approved and signed by the debtor, external manager and all creditors who voted for it, it shall be binding for all creditors.
4. After the commencement of rehabilitation all judicial and other actions aimed at enforcement of judicial and other decisions on payment of the debt or arrest of the debtor's assets and on enforcement of obligation must be terminated (except for actions of the secured creditor). Any property claims may be filed only within the scope of the rehabilitation process.
5. Penalty (fine) provided by the obligation shall not be calculated for the period of rehabilitation. Interests on monetary claims (bank credit, loan, etc.), shall not be calculated within first three months after commencement of rehabilitation.
Article 99. Rehabilitation And Special Administration1. The process of rehabilitation may be converted into the special administration process at any stage by the initiative of the following persons:
- debtor - through petitioning to the court (in case of rehabilitation with the involvement of the court) or to the properly assembled creditors' meeting (in case of rehabilitation without the court participation) with the request on termination of the rehabilitation process and commencement of the special administration;
- creditors - through petitioning to the court (in case of rehabilitation with the involvement of the court) with the respective request or through rendering such decision at the properly assembled creditors' meeting. The only ground for the above action may be debtor's failure to perform or improper performance of the adopted rehabilitation plan. The debtor may appeal this decision within 7 calendar days and petition to the court for restoration of the effect of the previous decision;
- court - by its own initiative (in case of rehabilitation with the court participation) through rendering the corresponding decision, in case of debtor's failure to perform or improper performance of the rehabilitation plan.
2. The special administration process of the debtor may be converted into the process of rehabilitation at any stage by the initiative of the following:
- debtor - through development and submission of the rehabilitation plan to the properly assembled creditors' meeting to have a corresponding decision rendered;
- the court - in case of special administration with the court participation the debtor must inform the court about the creditors' meeting called to consider the issue on rehabilitation and about the decision made at the meeting. In the event the decision on rehabilitation is made the court shall approve the decision provided all requirements of this section are met.
1. Rehabilitation procedure may be initiated by the debtor or a creditor (a group of creditors) through filing a petition to the court or by assembling a creditors' meeting.
2. To initiate a rehabilitation procedure the debtor must have an unsatisfactory balance or be unable to recover its debts after they become due, in this case the minimum amount of the debt is not required.
Article 101. Conditions For Conducting Rehabilitation1. After the decision on conducting rehabilitation is made in accordance with this Law, the debtor shall:
- publish an announcement in the republican and oblast (or local) newspaper in the region which is closest to its main location. This announcement must be published minimum twice with the interval no less than ten calendar days. The announcement must indicate the time, date and place and purpose of holding the creditors' meeting;
- send the following to all creditors:
• a notice indicating the time, date, place and purpose of the creditors' meeting;
• a preliminary financial statement including the balance statement and the list of all creditors with names and amounts due;
• preliminary rehabilitation plan;
- no earlier than 14 calendar days after publishing the last announcement and sending written materials set forth in the sub-paragraph (2) of this paragraph, conduct the creditors' meeting in the place and at the time set forth in the announcement.
2. At the first meeting of creditors the debtor must present full financial information about itself and the written rehabilitation plan.
Article 102. Decisions Of The Creditors' Meeting1. At the first meeting the creditors may decide to:
- adopt the rehabilitation plan and appoint a temporary manager, if necessary;
- make changes and amendments to the plan and suggest it to the debtor, who must accept or refuse the changed plan within 14 calendar days. Should the debtor reject the changed plan, the rehabilitation process may be converted into the special administration process in accordance with this Law;
- postpone their decision for the period of no more than 14 calendar days. At the expiration of this period the second meeting shall be called;
- decline the rehabilitation plan;
- decline the rehabilitation plan and initiate the special administration process.
2. The decision of the first and any subsequent creditors' meeting shall be considered made, if the creditors claiming 60 and more per cent of the debtor's debt payable to those present at the meeting voted for it. The amount of debt payable to those absent from the meeting shall not be taken into account.
3. Creditors shall have the right to establish a creditors' committee pursuant to this Law.
4. Any creditor or the debtor shall have the right to appeal the decision of the creditors' meeting in court within seven calendar days. In this case the applicant must attach to the claim the text of the rehabilitation plan, minutes of the creditors' meeting and written objections to the rehabilitation plan of other interested persons, if any.
5. Subsequent creditors' meetings may be initiated by the external manager (if appointed), stake holder of the debtor or creditors who have claims for 20% or more of the total debt amount. Subsequent meetings may be called to change the plan, convert the rehabilitation process into the special administration process or for other legal purposes.
Article 102-1. Approval Of The Plan Of Rehabilitation By The Court1. Debtor or an external manager within five days after adoption of the plan of rehabilitation by the meeting of creditors, shall file an application for approval of the plan of rehabilitation to the court.
2. The following must be attached to the application:
- description of the plan of rehabilitation;
- minutes of the creditors' meeting;
- list of creditors, indicating their addresses and size of the debt;
- objections of creditors in writing, if they have not participated in voting or voted against adoption of the plan of rehabilitation.
3. The court shall consider the application within 10 days. This period may not be extended. The court shall notify the debtor, creditors, and third parties to the process of rehabilitation as to the date of the consideration. Absence of notified persons shall not prevent the consideration of the case.
Article 102-2. Rejection Of The Plan Of Rehabilitation By The Court1. The court shall reject the plan of rehabilitation:
- if plan of rehabilitation contains conditions that provide for the preference or damage to rights and lawful interests of certain creditors, secured with collateral, except in cases when secured creditor has agreed;
- if plan of rehabilitation contains provisions that create advantages and violate the rights and lawful interests of certain creditors of the 3-rd, 4-rth, and 5-the priority, except in cases when certain creditors have agreed;
- if plan of rehabilitation contains conditions that violate the rights and lawful interests of the third parties, including persons, pointed out in the paragraph 8, article 21 of this Law, except in cases such third parties have agreed;
- if the procedure of recovery of the costs of the bankruptcy process, established by this Law has been violated;
- if requirements for the format of the plan of rehabilitation or the procedure of conclusion of the plan of rehabilitation, established by this chapter have not been met;
- if requirements of other laws of the Kyrgyz Republic have been violated.
2. The court shall render a judgment on refusal to approve the plan of rehabilitation which may be appealed.
3. If court has made a decision to reject the plan of rehabilitation, the plan shall be considered as not effective.
4. The court judgment on rejection of the plan of rehabilitation shall not impede development and adoption of a new plan of rehabilitation.
Article 103. External Manager1. An external manager shall be the only legal representative of the debtor in the rehabilitation process. His main function shall be the implementation of the rehabilitation plan.
2. The external manager shall use the rights and obligations of the special administrator, unless otherwise established by this section and the rehabilitation plan.
3. The debtor shall pay compensation to the external manager. The amount and procedure for payment shall be established upon the agreement of the parties.
4. The external manager shall inform the registration agency about the rehabilitation of the debtor to have necessary entry made in the register.
5. After appointment of the external manager, the powers of the managers and stake holders of the debtor shall cease, unless otherwise stipulated by the plan of rehabilitation.
Article 104. Rehabilitation Plan1. In development of the rehabilitation plan the debtor shall not have the right to:
- infringe the rights of secured creditors and creditors of the first and second priority set forth in Article 87 of this Law, unless otherwise established by the agreement of the parties;
- provide for the amount payable to any creditor which is less than the one he would have received in case of liquidation in the special administration process, unless otherwise established by the agreement of the parties;
- establish different conditions for creditors of one and the same group, unless otherwise established by the agreement of the parties;
- establish different conditions for creditors who voted against the plan (or did not take part in the voting) against creditors who voted for the plan.
2. The rehabilitation plan must establish the precise procedure for satisfaction of creditors' claims.
3. The rehabilitation plan must envisage the following:
- maintenance of all or part of assets by the debtor;
- sale (alienation) or distribution of any part of assets of the insolvent debtor;
- reorganization of the debtor in accordance with the legislation;
- renegotiation of contractual terms including the change in the interest rate;
- changes in management;
- production of new goods, and new marketing strategies;
- termination of debtor's obligations through forgiveness of debt, compensation for release from obligation, postponement or restructuring obligations, discount or other means provided by the civil legislation;
- performance of debtor's obligations by third parties;
- satisfaction of creditors' claims by other means consistent with the civil legislation.
Article 105. General Provisions
1. At any stage of the bankruptcy process the debtor and creditors shall have the right to enter into an agreement which provides for termination of the debtor's obligations, decrease in the amount of creditors' claims to the debtor on these obligations and (or) postponement of their performance (amicable agreement).
2. Unilateral refusal to perform the amicable agreement which came into effect shall be prohibited.
3. Third parties which assume obligations set forth in the amicable agreement shall be allowed to participate in the amicable agreement.
4. The amicable agreement must be approved by the court through the compliance with the requirements of the articles 110, and 112 of this Law. The amicable agreement shall become effective from the day of its approval and shall be binding upon all creditors.
5. T he amicable agreement approved by the court upon the agreement between certain creditors and the debtor may not be rescinded.
Article 106. Format Of The Amicable Agreement1. The amicable agreement shall be made in writing.
2. On behalf of the debtor the amicable agreement shall be signed correspondingly by a debtor who is an individual entrepreneur or by a debtor's manager, temporary administrator, external manager or special administrator and by all creditors who voted for it.
3. In the event third parties participate in the amicable agreement, on their behalf the amicable agreement shall be singed correspondingly by an individual, manager of a legal entity or by their representatives.
Article 107. Contents Of The Amicable Agreement1. The amicable agreement must contain provisions on the amount, periods and procedure for performance of obligations of the debtor and (or) on termination of debtor's obligations through forgiveness of debt, compensation for release from obligation, renewal of the obligation or by other means stipulated in the civil legislation.
2. The amicable agreement may contain the following provisions:
- on postponement or installment performance of obligations;
- on discount from the debt;
- on assignment of the debtor's right to claim;
- on performance of debtor's obligations by third parties;
- on exchange of debt for stocks;
- on satisfaction of creditors' claims by any other means consistent with the legislation.
1. The decision of the creditors' meeting shall be considered adopted, if the creditors claiming 60 and more per cent of the debtor's debt payable to those present at the meeting voted for it. The amount of debt payable to those absent from the meeting shall not be taken into account.
2. In the event the decision on entering into the amicable agreement is made, the amicable agreement may not set forth less favorable conditions for the creditors who did not take part in voting on the issue of the amicable agreement and for those who voted against it in comparison to those creditors of the same priority who gave their consent to the amicable agreement.
3. The court judgment on approval of the amicable agreement may be appealed.
Article 110. Conditions For Approval Of The Amicable Agreement By The Court1. The amicable agreement may be entered into provided that claims of the first and second priority creditors have been satisfied.
2. An individual entrepreneur, manager of the debtor or administrator must submit an application to court for approval of the amicable agreement within five days from the time of signing the amicable agreement.
3. The following must be attached to the application:
- text of the amicable agreement;
- minutes of the creditors' meeting;
- list of creditors indicating their addresses and amount of debt;
- documents confirming the recovery of accounts payable of the first and second priority;
- written objections of creditors who did not participate in voting or who voted against the amicable agreement.
4. The court shall consider the application within 10 days after arrival of the application to the court. This period may not be extended. The court shall notify the interested parties about the date of consideration of the amicable agreement. Failure of the notified parties to appear in court shall not impede the hearing of the case.
Article 111. Consequences Of Approval Of The Amicable Agreement By The Court1. Approval of the amicable agreement shall serve the grounds for termination of the bankruptcy process and powers of the administrator.
2. The administrator shall continue to perform his duties until a manager of the debtor is appointed (elected).
3. Approval of the amicable agreement shall serve as the grounds for the termination of limitations established by this Law or the court in respect to the debtor and (or) creditors.
4. A debtor (in case of an individual entrepreneur), or the manager of the debtor (legal entity) or the administrator shall start the repayment of the debt in front of creditors as soon as the amicable agreement has been approved.
Article 112. Rejection Of An Amicable Agreement1. The court may reject and refuse to approve the amicable agreement in the event:
- claims of the creditors of the 1-st and the 2-nd priority have not been satisfied;
- the amicable agreement contains conditions that provide for the preference or damage to the rights and lawful interests of certain creditors, secured with collateral, except in cases when secured creditor has agreed;
- amicable agreement contains provisions that create advantages and violate the rights and lawful interests of certain creditors of the 3-rd, 4-rth, and 5-the priority, except in cases when certain creditors have agreed;
- amicable agreement contains conditions that violate the rights and lawful interests of the third parties, including persons, pointed out in the paragraph 8, article 21 of this Law, except in cases such third parties have agreed;
- the procedure of recovery of the costs of the bankruptcy process, established by this Law has been violated;
- requirements for the format of the amicable agreement or the procedure of conclusion of the amicable agreement, established by this chapter have not been met;
- requirements of other laws of the Kyrgyz Republic have been violated.
2. The court shall render a judgment on refusal to approve the amicable agreement which may be appealed.
3. If court has made a decision to reject the amicable agreement, the agreement shall be considered as not effective.
4. The court judgment on rejection of the amicable agreement shall not impede entering into a new amicable agreement.
Article 113. Invalidity Of The Amicable Agreement1. Upon the petition of the debtor or a creditor, the amicable agreement may be found invalid by the court:
- in the event it contains clauses providing for privileges to certain creditors or infringing the rights and legal interests of certain creditors;
- in the event the performance of the amicable agreement may lead the debtor to bankruptcy;
- where there are other grounds for invalidity of transactions set forth in the civil legislation.
1. Invalidation of the amicable agreement shall serve the grounds for renewal of proceedings on the debtor's bankruptcy. The court shall render a judgment on renewal of the proceedings which may be appealed.
2. In the event the court invalidates the amicable agreement, claims of creditors which satisfaction has been postponed and (or) was made by installments or which were subject to the debt discount shall be restored in their unrecovered part.
3. Invalidation of the amicable agreement shall not result in the obligation of creditors of the first and second priority to return to the debtor the funds received in recovery of the debt.
4. In the part not regulated by this Article consequences of the invalidity of transactions set forth in the civil legislation shall apply.
5 . In the event of invalidation of the amicable agreement the notice about the renewal of bankruptcy proceedings of the debtor shall be published in the republican press by the court at the expense of the debtor.
6 . Claims of creditors who have been paid through the amicable agreement complying with this Law shall be considered as satisfied. If claims of creditors have been satisfied through an amicable agreement that has created preferences or violation of rights and lawful interests of other creditors, shall have to return what they have gained as a result of the amicable agreement.
Article 115. Consequences Of Failure To Perform Or Of Improper Performance Of Amicable Agreement1. In the event of failure to perform or improper performance of the amicable agreement by the debtor, the debtor shall bear the liability set forth in the civil legislation for breach of obligations.
2. In the event of initiation of the bankruptcy proceedings against the debtor, restructuring and sanation may not be applied to a debtor which failed to perform or improperly performed the previously entered amicable agreement.
CHAPTER 11
PECULIARITIES OF BANKRUPTCY OF BANKS
Article 116. Rehabilitation Of A Bank
1. Where there is a threat for the creditors in connection with the unstable financial situation, the rehabilitation process may be applied to the bank, during which any restructuring, organizational and business, financial and economic, legal, technical, investment and other measures consistent with the legislation and aimed at restoration of the bank's solvency in order to prevent its liquidation may be taken. Rehabilitation process shall apply to a bank in accordance with the provisions of this Law and with its prior approval by the National Bank of the Kyrgyz Republic .
2. The bank may be reorganized only with the consent of the National Bank of the Kyrgyz Republic.
Article 117. Conservation Of A Bank1. When the National Bank of the Kyrgyz Republic, after consideration of the application of the bank, or of its stakeholders or creditors on commencement of the bankruptcy process of the bank, or after examination on his own initiative of the state of affairs in the bank, decides that conservation of the bank would be more expedient than the special administration, then it may take a decision on conservation of the bank and may appoint a qualified specialist as bank's conservator.
2. T he special status of the bank - its conservation - shall commence from the moment the National Bank of the Kyrgyz Republic takes a decision and from the moment of appointment of a conservator.
Article 118. Powers Of The Conservator1. The conservator shall decide the issue of the expediency of applying bankruptcy proceedings provided by this Law.
2. From the time of appointment of the conservator powers of all stakeholders and managers of the bank shall terminate and shall be transferred to the conservator.
3. The main duty of the conservator shall be to conduct conservation of the bank. He shall have the right to conduct conservation with or without the present management of the bank.
4 . The conservator shall have the right to solicit borrowed funds in order to conduct conservation.
5. In this case claims of creditors who lend to the conservator during the period of conservation of the bank shall be satisfied away from priorities set forth in Article 87 of this Law.
4. Unless otherwise established by the conservator or the National Bank of the Kyrgyz Republic, from the moment of appointment of the conservator the following shall apply to the bank:
- stakeholders and managers of the bank may not make a decision on initiation of the special administration process and any decision made earlier shall be considered invalid;
- only the National Bank of the Kyrgyz Republic or the conservator shall have the right to initiate the bankruptcy process and any application to commence the bankruptcy process filed earlier must be dismissed;
- enforcement of the effective court judgment on collection of the debt from the bank shall be suspended;
- enforcement of the pledged property which the bank holds or repossession of the property in bank's possession shall be prohibited;
- creditors (depositors) having the right to receive satisfaction of their claims pursuant to the legislation on protection of deposits shall have the right to file their claims to the conservator after his appointment.
5. The conservator of the bank with the consent of the National Bank of the Kyrgyz Republic shall have the right to pay certain or all depositors the amounts due partially or in full.
6. The bank shall bear full liability for all transactions entered into on behalf of the bank including conservation expenses.
7. The National Bank of the Kyrgyz Republic and the conservator shall bear no liability on transactions and expenses of the bank related to its conservation and appointment of the conservator.
8. The National Bank of the Kyrgyz Republic shall have the right to extend conservation:
- until the solvency of the bank is restored and mandatory normative set forth in the legislation are performed;
- until the decision on commencement or initiation of the special administration process is made.
9. The National Bank of the Kyrgyz Republic shall have the right to appoint conservation for the period not exceeding six months. This period may be extended for up to two years. In exceptional cases the period of conservation may be extended for the second time, but in any case, the total period of conservation may not exceed three years.
Article 119. Special Administration Of A Bank1 . The National Bank of the Kyrgyz Republic shall decide the issue on expediency of special administration of the bank.
2. Unless the National Bank of the Kyrgyz Republic sustains the application of a creditor (creditors) or the bank itself (bank owners) on the special administration, the bank may not be subject to the special administration process.
3. A person initiating the special administration process of the bank must file an application/petition to the National Bank of the Kyrgyz Republic .
4 . The National Bank of the Kyrgyz Republic shall have right to:
- sustain the application of the creditor on initiation of special administration process in the judicial or non-judicial procedure;
- sustain the decision of the bank owners on initiation of special administration process of the bank without court participation;
- commence special administration process of the bank on its own behalf by appointing a special administrator, in this case the National Bank of the Kyrgyz Republic must notify the corresponding bank about the commencement of the process and appointment of special administrator within three calendar days in writing.
5. In the event the application of the creditors or the bank itself on commencement of the special administration process is sustained, the bank license shall be revoked.
6 . Stake holders or creditors (depositors) shall have the right to petition to the court on suspension of decision of the National Bank of the Kyrgyz Republic and commencement of sanation process in accordance with this Law.
7. The special administration process may not be suspended, unless the court renders a judgment on commencement of the sanation. From the time of commencement of special administration process the National Bank of the Kyrgyz Republic must call creditors meeting, in order to inform the creditors about the decision made.
8 . Provisions of the sub - paragraph 5 of Article 29 and Article 30 of this Law shall not apply to banks.
9 . The decision on sustainment or non-sustainment of the application of the National Bank of the Kyrgyz Republic must be taken by the court within the period not exceeding one month. This period may not be extended. In case court fails to make decision at expiration of the one month period, the suggestion of the National Bank of the Kyrgyz Republic shall be considered adopted and the special administration process shall be considered commenced upon and the National Bank of the Kyrgyz Republic shall appoint a special administrator.
10 . The petition of the National Bank of the Kyrgyz Republic to the court on sustainment of the decision on the special administration process of the bank with the court participation must be considered within one month period. The court may not extend this period.
11. In the event the court does not make a decision on the petition of the National Bank of the Kyrgyz Republic within one month period, the petition shall be considered approved and the special administration process may be commenced with the appointment of the special administrator by the National Bank of the Kyrgyz Republic .
Article 120. Particular Features Of The Special Administration Of A Bank1. The special administration process of a bank shall be conducted in accordance with this Law and on conditions set forth for other debtors, unless otherwise established by this Law.
2. The National Bank of the Kyrgyz Republic shall have the right to issue detailed recommendations and rules concerning the special administration, rehabilitation and other measures for an insolvent bank complementary to this Law and not contradictory to it.
3. When the National Bank of the Kyrgyz Republic in accordance with its authority granted to it pursuant to the Laws of the Kyrgyz Republic on Banks and Banking Activity and on the National Bank of the Kyrgyz Republic, requires the bank to have specific amount of the authorized, reserved and other funds, and the amount of these funds of the bank is insufficient, the missing amount shall be added to bank liabilities.
4. In evaluation of assets of the bank, debts payable to the bank shall not be taken into account, in the event the repayment of the principal and interests is overdue. Instructions of the National Bank of the Kyrgyz Republic may allow full or partial set-off of some of such bad debts and may specify the conditions of when such debt is considered overdue.
Article 121. Sanation Of Banks1. Stakeholders or managers of the bank may petition to the court for sanation within one week from the date when the National Bank of the Kyrgyz Republic made a decision on commencement of the special administration process.
CHAPTER 12
BANKRUPTCY OF AN INDIVIDUAL ENTREPRENEUR
Article 122. Particular Features Of The Special Administration Of An Individual Entrepreneur
1. Rules governing the procedure of special administration of a legal entity, with the particularities established by this Article and other normative acts concerning bankruptcy shall apply to the relationships relevant to the procedure of special administration of an individual entrepreneur.
3. Individual entrepreneur shall be found bankrupt only by the decision of the court. As of the moment of effectuation of the court decision on finding an individual entrepreneur bankrupt, his registration as a entrepreneur shall be invalidated. The court shall inform the registration agency which carries out registration of entrepreneurs, for the purpose of entering records into the state registry.
4. Other claims on the obligations which are not related to activity of the individual entrepreneur may be presented to the special administrator. In such instances, these claims shall be satisfied in accordance with the priority established by this Law.
5. Upon termination of the procedure of special administration in accordance with the article 55-1 of this Law, the individual entrepreneur shall be relieved of the liability on all obligations and claims of the creditors relevant to his/her business activity, submitted to performance and taken into consideration while finding the entrepreneur bankrupt.
6. Claims of creditors not relevant to the business activity, and which were not submitted while the special administration process, shall remain effective and may be presented for collection to the debtor, as an individual.
7. Property of an individual entrepreneur which may not be collected is determined by the civil procedure legislation.
8. An individual entrepreneur who is found bankrupt by the court may be prohibited to engage in business activity within a certain period which should not exceed 3 years. Failure to comply with this decision of the court shall entail the liability of the offender in accordance with the legislation.
9. After an individual entrepreneur has been found bankrupt three times during 7 years running and each time found guilty (grave bankruptcy of an individual entrepreneur) the court may disqualify the individual entrepreneur or a period of 10 years in accordance with the paragraph 10 of this article.
10 . In determination of the period of disqualification of a bankrupt individual entrepreneur, the court shall take into account the degree of responsibility of the individual entrepreneur for the insolvency, size of the debt, previous records of insolvency and other circumstances, as the court shall deem necessary.
11. An individual entrepreneur shall be disallowed to do the following for the whole period of disqualification:
- undertake enterprising activities;
- hold senior positions in the bodies of management or supervision in any legal entities;
- accept any monetary obligations without notifying a respective counter-agent on the fact of disqualification;
- hold any public (elected) office without notification of the fact of disqualification in all advertisements for the elections (including oral);
1 2 . The court in its decision of recognition an individual entrepreneur bankrupt must indicate the personal responsibility of the individual entrepreneur.
1 3 . Finding an individual entrepreneur not guilty of bankruptcy (without disqualification) shall not touch on the rights and duties of a special administrator granted by this Law in respect to assets of an individual entrepreneur.
1 4 . The procedures of special administration for an individual entrepreneur shall come to an end:
- after expiration of the period of disqualification - in case of disqualification of an individual entrepreneur;
- after alienation and distribution of all assets of the bankrupt individual entrepreneur among creditors, in case the individual entrepreneur has been found not guilty;
15. Disqualification of an individual entrepreneur shall cease upon expiration of the period of disqualification without an additional decision to be made by the court.
1 6 . Assets of a disqualified (guilty) individual entrepreneur that may be alienated by a special administrator in favor of creditors may consist of the following:
- assets owned by the individual entrepreneur prior to the commencement of the procedure of special administration and that may be collected;
- assets acquired by the bankrupt individual entrepreneur after the commencement of the procedure of special administration and that may be collected.
1 7 . Throughout the period of disqualification the bankrupt individual entrepreneur must regularly report to the special administrator and voluntarily (without a reminder) provide the special administrator with the information about any changes of the income or assets situation.
18 Rules stipulated by the sub-paragraph 1, paragraph 13 and paragraph 14 of this article shall not apply to a bankrupt individual entrepreneur found not guilty.
CHAPTER 13
BANKRUPTCY OF INDIVIDUALS ENGAGED IN THE AGRICULTURE
Article 123. Bankruptcy Of Individuals Engaged In The Agriculture
1. The court may decide to find an individual (peasant's) farm, collective farm, and other agricultural enterprises bankrupt, in accordance with the petition by the creditors of this farm.
2. Farms listed in this Article may announce themselves bankrupt by the decisiBack To Topon taken jointly with the creditors, without recourse to court.
3 . An individual entrepreneur engaged in agricultural production may be found bankrupt only by court, in compliance with the requirements of Article 122 of this Law.
Article 124. Legal Framework For A Process Of Bankruptcy Of Individuals Engaged In The Agriculture1. Unless otherwise provided by the legislation, rules of this Law shall apply in the bankruptcy process of individual (peasant's) farms, collective farms, other agricultural enterprises and individual entrepreneurs engaged in agricultural production.
CHAPTER 14
BANKRUPTCY OF A MISSING DEBTOR
Article 125. Peculiarities Of Submission Of A Petition For Recognizing A Missing Debtor Bankrupt
1. Debtor shall be considered missing if the debtor has actually terminated its activities, or physical person that keep the operations of the debtor (an individual entrepreneur, manager or a stake holder of a legal entity) have been missing for over six months, while their location may not be established.
2. The creditor, or the bankruptcy agency, irrespective of the amount of the accounts payable may file a petition to court on finding the debtor bankrupt.
3. Only the special administration procedure may apply to a missing debtor.
Article 126. Consideration Of Case Of Bankruptcy Of A Missing Debtor1. The court within 10 days after initiation of proceedings on the petition on finding the debtor bankrupt shall make a decision to find the debtor bankrupt and to commence the process of special administration. Creditor and (or) the state bankruptcy agency nominate a candidate for the position of a special administrator.
2. The decision of the court shall be sent to the creditor, the public bankruptcy agency and the public agency that registers legal entities and individual entrepreneurs.
3. Notice of recognition of the missing debtor bankrupt shall be published by the state bankruptcy agency at the expense of a specialized fund. Creditors may file their claims with the special administrator within one month after the publication.
Article 127. Satisfying Claims Of Creditors Of A Missing Debtor1. Creditors' claims shall be satisfied in accordance with the priority provided by this Law. Creditors may appeal the results of consideration of their claims by the special administrator to court, as of the moment of approval of the liquidation balance.
2. After settlements with the creditors, the special administrator shall compile the liquidation balance, and submit it to court along with the report on his/her activity.
3. Should the property of debtor be discovered, the amount gained from the sale thereof shall be used to cover judicial expenditures, and payment of compensation to the special administrator.
Article 128. Application Of Provisions On Bankruptcy Of Missing Debtor1. Rules provided by this Section shall also apply in instances when the property of the debtor is knowingly insufficient to indemnify judicial expenditures in case of debtor's bankruptcy, or when within the last twelve months no operations with his accounts were performed, and in the presence of other signs which testify for the absence of business or other activity of the debtor.
CHAPTER 15
BANKRUPTCY OF INSURANCE COMPANIES
Article 129. General Provisions
1. Issues related to the process of bankruptcy of insolvent insurance companies shall be regulated by this Law, taking into account the peculiarities stipulated by this article.
2. In case of any of the events, mentioned in the article 9-1 of this Law, and also in case of insolvency an insurance company must immediately inform the body of the public administration in charge of the insurance supervision in the Kyrgyz Republic. After notification to the body of the public administration in charge of the insurance supervision of the Kyrgyz Republic the insurance company must manage its assets in accordance with the article 21 of this Law.
3. The body of the public administration in charge of the insurance supervision of the Kyrgyz Republic shall also have the right to initiate the process of bankruptcy of an insurance company through the court involvement or without the court.
4. The body of the public administration in charge of the insurance supervision of the Kyrgyz Republic shall bear the responsibility for the timely organization of the process of bankruptcy of an insurance company. Damage caused through the actions or lack of actions by the body of the public administration in charge of the insurance supervision of the Kyrgyz Republic in violation of this Law shall be compensated through the court.
5. Other peculiarities of the bankruptcy process of insurance companies unregulated by this Law may be stipulated by other normative legal acts of the Kyrgyz Republic in respect to bankruptcy.
Article 130. Consideration Of Cases Of Bankruptcy Of Insurance Companies In The Court1. The body of the public administration in charge of the insurance supervision of the Kyrgyz Republic shall also have the right to appeal to the court of arbitration with a petition to recognize an insurance company as bankrupt, including in cases when such body performs the function of supervision and issuing licenses to insurance companies. The petition shall be filed with the court in compliance with the requirements stipulated by this Law in respect to petitions by a creditor, unless otherwise stipulated by the legislation of the Kyrgyz Republic.
2. In accordance with the article 27-3 of this Law, the body of the public administration in charge of the insurance supervision of the Kyrgyz Republic shall be recognized as the party to the case (petitioner), whenever case of bankruptcy of an insurance company should be considered on the grounds of the petition of such a body.
3. In accordance with the article 27-4 of this Law the body of the public administration in charge of the insurance supervision of the Kyrgyz Republic may be recognized as the entity involved into the consideration of a case of bankruptcy of an insurance company.
4. A decision of the court on recognition of the debtor, an insurance company, as bankrupt, must include an indication that the body of the public administration in charge of the insurance supervision of the Kyrgyz Republic has withdrawn a license from such an insurance company.
5. In cases stipulated by this law, the body of the public administration in charge of the insurance supervision of the Kyrgyz Republic, along with other persons listed in the paragraph 7, article 8 of this Law, shall have the right to nominate a candidate for a position of the special administration to the court.
Article 131. Special Administration Of An Insurance Company Without Involvement Of The Court1. In case of a decision to initiate the procedure of the special administration without involvement of the court an insurance company must notify the body of the public administration in charge of the insurance supervision of the Kyrgyz Republic and apply to the body of the public administration in charge of the insurance supervision of the Kyrgyz Republic for withdrawal of the license for insurance activity. Procedures of withdrawal of a license shall be established by normative legal acts on licenses.
2. In cases, stipulated by the paragraph 1, article 29 of this Law, creditors shall also have the right to appeal to the body of the public administration in charge of the insurance supervision of the Kyrgyz Republic with a request to withdraw a license from an insurance company and initiation of the procedure of the special administration of an insurance company along with filing a request to the debtor demanding voluntary imitation of the procedure of special administration.
3. The body of the public administration in charge of the insurance supervision of the Kyrgyz Republic shall within 7 days consider the petition filed by creditors and make one of the following decisions:
• to withdraw a license and initiate a procedure of the special administration of an insurance company without involvement of the court;
• to withdraw a license and appeal to the court with a petition to recognize the insurance company bankrupt;
• to suspend the license and assign the insurance company the status of "conservation", in presence of grounds for taking measures stipulated by the article 27 of the Law "On he organization of the insurance in the Kyrgyz Republic".
• to reject the petition from creditors in absence of conditions stipulated by the articles 9, 9-1 and 11 of this law.
4. C reditors as well as the insurance company may appeal to the court against a decision of the body of the public administration in charge of the insurance supervision of the Kyrgyz Republic within 7 days after they receive such a decision. Procedure of appeals shall be established by other normative legal acts on bankruptcy.
5. The fact of consideration of petitions from creditors by the body of the public administration in charge of the insurance supervision of the Kyrgyz Republic and rendering a decision shall not serve as the obstacle for taking other actions stipulated by this law.
Article 132. Satisfaction Of Claims Of Creditors1. Beneficiaries (bearers of an insurance policy) entitled to the insurance benefits prior to the moment of the decision on recognition of the insurance company as bankrupt shall have the right to claim their insurance benefits.
2. Other beneficiaries (bearers of an insurance policy) shall have the right to claim repayment of a part of the insurance contributions paid to the insurer, proportionately to the unexpired period of the insurance.
3. Claims of creditors of the third priority, stipulated by the paragraph 1, article 87 of this Law, shall be entitled to the satisfaction, as follows:
- first priority - claims of creditors of an insurance company, who are the beneficiaries and have concluded contracts for mandatory personal insurance, entitled to the insurance benefits prior to the moment of the decision on recognition of the insurance company as bankrupt;
- second priority - claims of creditors, beneficiaries who have concluded contracts for other mandatory insurance, entitled to the insurance benefits prior to the moment of the decision on recognition of the insurance company as bankrupt;
- third priority - claims of creditors, beneficiaries who have concluded contracts of personal and property insurance, entitled to the insurance benefits prior to the moment of the decision on recognition of the insurance company as bankrupt, including the claims mentioned in the paragraph 2 of this article;
- fourth priority - claims of other creditors.
CHAPTER 16
BANKRUPTCY OF PROFESSIONAL AGENTS
OF THE MARKET OF SECURITIES
Article 133. General Provisions
1. Issues related to the process of bankruptcy of insolvent professional participants of the stock market shall be regulated by this Law, taking into account the peculiarities stipulated by this article.
2. In case of any of the events, mentioned in the article 9-1 of this Law, and also in case of insolvency an professional participant of the stock market must immediately inform the body of the public administration regulating the market of securities in the Kyrgyz Republic. After notification to the body of the public administration regulating the market of securities of the Kyrgyz Republic the professional participant of the stock market must manage its assets in accordance with the article 21 of this Law.
3. Limitations as to the transactions made by professional participant of the market of securities, stipulated by the article 21 of this Law shall not apply to transactions with securities of its clients, by request of clients, confirmed by the clients after occurrence of any of the events stipulated by the paragraph 1, article 21 of this Law.
4. The administrator shall within 5 days after appointment send the notification on the imitation of the process of bankruptcy and acquisition of the rights of an administrator to the clients, securities of which are managed by the debtor-professional participant of the market of securities. Such a notification must include the data, stipulated by the paragraph 2, article 27-22 or the paragraph 3 of the article 31 of this Law, and a suggestion to give an instruction as to what actions must be taken in respect to the securities, that belong to a client.
5. Other peculiarities of the bankruptcy process of professional participants of the stock market unregulated by this Law, as well as ways for protection of the rights and interests of clients of the professional participants of the market of securities may be stipulated by other normative legal acts of the Kyrgyz Republic in respect to bankruptcy.
Article 134. Consideration Of Cases Of Bankruptcy Of Professional Participants Of The Stock Market In The Court1. In accordance with the article 27-3 of this Law, the body of the public administration regulating the market of securities of the Kyrgyz Republic shall be recognized as the party to the case.
2. In cases stipulated by this law, the body of the public administration regulating the market of securities of the Kyrgyz Republic shall have the right to nominate a candidate for a position of the special administration to the court (meeting of creditors).
3. A decision of the court on recognition of the debtor, an professional participant of the stock market, as bankrupt, must include an indication that the body of the public administration regulating the market of securities of the Kyrgyz Republic has withdrawn a license from such an professional participant of the stock market.
Article 135. Special Administration Of An Professional Participant Of The Stock Market Without Involvement Of The Court1. In case of a decision to initiate the procedure of the special administration without involvement of the court an professional participant of the stock market must notify the body of the public administration regulating the market of securities of the Kyrgyz Republic and apply to the body of the public administration regulating the market of securities of the Kyrgyz Republic for withdrawal of the professional license. Procedures of withdrawal of a license shall be established by normative legal acts on licenses.
2. In cases, stipulated by the paragraph 1, article 29 of this Law, creditors shall also have the right to appeal to the body of the public administration regulating the market of securities of the Kyrgyz Republic with a request to withdraw a license from an professional participant of the stock market and initiation of the procedure of the special administration of an professional participant of the stock market along with filing a request to the debtor demanding voluntary imitation of the procedure of special administration.
3. The fact of consideration of petitions from creditors by the body of the public administration regulating the market of securities of the Kyrgyz Republic and rendering a decision shall not serve as the obstacle for taking other actions stipulated by this law.
Article 136. Satisfaction Of Claims Of Creditors.1. In accordance with the requirements of the paragraph 8, article 21 of the Law, securities and other assets of clients at the disposal of a professional participant of the market of securities shall not be included into the liquidation pool of assets.
2. Administrator shall have the right to transfer the securities managed by a professional participant of the market of securities to other a licensed professional participants of the market of securities on behalf of clients if such clients agree. Remaining securities of clients must be returned to the clients unless otherwise stipulated by the agreement between the administrator and clients.
3. In case claims of clients to return their securities of a single kind (the same issuer, the same category, same type and same series) exceed the number of such securities at the disposal of a professional participant of the market of securities, such securities shall be returned to the clients proportionately to the claims of clients.
4. Unsatisfied claims of creditors shall be referred to as cash obligations and shall be satisfied in accordance with the procedure set by this Law.
CHAPTER 17
BANKRUPTCY OF PUBLIC FOUNDATIONS
Article 137. Regulating Cases Of Bankruptcy Of Public Foundations
1. Issues related to the process of bankruptcy of insolvent public foundations shall be regulated by this Law, taking into account the peculiarities stipulated by this article.
2. A public foundation may be recognized as bankrupt only through the involvement of the court. Only the procedures of special administration (liquidation) or amicable settlement may be applied within the process of bankruptcy of a debtor - public foundation. Procedures of sanation or rehabilitation shall not be applied.
3. Manager of a public foundation may initiate the process of the bankruptcy through the involvement of the court on the grounds of a decision by the supervisory board of the foundation or another body that is in charge of the supervision over activities of the public foundation in accordance with its founding agreements.
4. In case of liquidation of a public foundation, its assets remaining after satisfaction of claims of creditors shall be used by the administrator for the social, charitable, cultural, educational and other public-significant purposes, reflected in the charter of the foundation.
5. Other peculiarities of the bankruptcy process of public foundations unregulated by this Law may be stipulated by other normative legal acts of the Kyrgyz Republic in respect to bankruptcy.
CHAPTER 18
BANKRUPTCY OF CONSUMERS' COOPERATIVES
Article 138. Regulating Cases Of Bankruptcy Of Consumers' Cooperatives
1. Issues related to the process of bankruptcy of consumers' cooperatives shall be regulated by this Law, taking into account the peculiarities stipulated by this article.
2. One of the conditions, in addition to the conditions set in the paragraph 1, article 9 of this Law, for recognition of the consumers' cooperative as bankrupt through the involvement of the court and liquidation of the cooperative shall be the failure to cover the losses through additional contributions within three months after approval of an annual balance sheet.
3. Members of a cooperative shall bear subsidiary responsibility for the obligations of the cooperative to the extent of unpaid part of the additional contribution, indicated in the paragraph 2 of this article, by each member of the cooperative. In such case, members of the cooperative shall bear responsibility in solidarity.
5. Other peculiarities of the bankruptcy process of consumers' cooperatives unregulated by this Law may be stipulated by other normative legal acts of the Kyrgyz Republic in respect to bankruptcy.
President of the Kyrgyz Republic A.Akaev
Passed by the Legislative Assembly of
the Jogorku Kenesh of the Kyrgyz Republic on September 22, 1997