Insolvency Law at Kazakhstan
Kazakhstan's insolvency framework is governed by the Law on Rehabilitation and Bankruptcy (Z1400000176), enacted on March 7, 2014, and subsequently amended, including significant revisions in 2019. This law provides a structured approach to managing the financial distress of businesses and individuals engaged in economic activities.
⚖️ Legal Framework and Scope
The Law on Rehabilitation and Bankruptcy applies to:
Legal Entities: Including limited liability partnerships, joint-stock companies, and other business forms.
Individual Entrepreneurs: Individuals conducting business activities.
However, it does not apply to state-owned enterprises, pension funds, banks, insurance companies, and other entities regulated by specific legislation. (On Rehabilitation and Bankruptcy - "Adilet" LIS)
🏛️ Insolvency Procedures
Kazakhstan's insolvency law outlines several procedures to address debtor distress:
Debt Restructuring Procedure: Allows a debtor to reorganize and restructure debts to avoid bankruptcy.
Rehabilitation Procedure: Involves court-supervised efforts to restore a debtor's solvency, including the development of a rehabilitation plan. (On Rehabilitation and Bankruptcy - "Adilet" LIS)
Bankruptcy Procedure: If restructuring or rehabilitation fails, the debtor may be declared bankrupt, leading to liquidation.
These procedures aim to balance the interests of debtors and creditors, ensuring fair treatment and maximizing the satisfaction of creditors' claims. (On Rehabilitation and Bankruptcy - "Adilet" LIS)
📊 Priority of Claims in Bankruptcy
In the event of bankruptcy, creditors' claims are satisfied in a specific order: (On Rehabilitation and Bankruptcy - "Adilet" LIS)
Secured Creditors: Those with collateral backing their claims are paid first.
Unsecured Creditors: Including suppliers and service providers.
Employees: Claims related to wages and benefits.
Government Claims: Such as taxes and statutory dues.
This hierarchy ensures a structured and equitable distribution of the debtor's assets. (On Rehabilitation and Bankruptcy - "Adilet" LIS)
🔄 Rehabilitation and Business Continuity
The law emphasizes rehabilitation over liquidation, aiming to:
Restructure: Allow businesses to reorganize and continue operations.
Protect: Safeguard employees' rights and maintain business relationships.
Supervise: Court-appointed insolvency agents oversee the process to ensure fairness. (On Rehabilitation and Bankruptcy - "Adilet" LIS)
A rehabilitation plan must be developed within three months of initiating the procedure and can last up to five years. It may include measures such as debt forgiveness, restructuring, or asset sales. (On Rehabilitation and Bankruptcy - "Adilet" LIS)
🛡️ Legal Protections for Debtors
Upon the declaration of insolvency:
Asset Protection: Creditors are prohibited from seizing the debtor's assets.
Contract Continuity: Existing contracts, including employment and administrative agreements, remain in effect.
Management Control: Debtors may retain control over operations under supervision, with interest and penalties on debts suspended. (On Rehabilitation and Bankruptcy - "Adilet" LIS)
📈 Impact on Business Environment
The introduction of the Insolvency Law has been viewed positively, with stakeholders noting:
Enhanced Investment Climate: The law aligns Kazakhstan with international best practices, improving its ranking in ease of doing business.
Support for Troubled Companies: It provides a legal avenue for companies facing financial distress to restructure and continue operations.
Economic Stabilization: By facilitating business continuity, the law aims to mitigate the impact of economic downturns.
RELATED Blog
0 comments