MANAGEMENT OF THE PROPERTY AND AFFAIRS OF THE DEBTOR DURING THE REHABILITATION PROCEDURE

The legislation of the Republic of Kazakhstan stipulates that within the framework of the rehabilitation procedure, any measures consistent with the legislation may be applied to an insolvent debtor, the purpose of which is to restore the solvency of the debtor. However, the question arises as to who receives the rights to manage the affairs and property of the debtor when the rehabilitation procedure is introduced?

 

CAN A DEBTOR’S PARTICIPANT RETAIN THE RIGHT TO MANAGE PROPERTY AND AFFAIRS DURING THE REHABILITATION PERIOD?

According to paragraph 1 of Article 69 of the Law of the Republic of Kazakhstan “On Rehabilitation and Bankruptcy” , based on the decision of the meeting of creditors, the court, from the moment the rehabilitation plan is approved, has the right to retain the right to manage the property and affairs of the debtor for the following persons:

  • founder (participant) of a legal entity-debtor, or
  • the owner of the debtor’s property.

The condition for the founder (participant) or owner of the debtor’s property to retain the right to manage property and affairs is his will expressed in a written application.

Thus, in order to retain the right of the founder (participant) or the owner of the property to manage the property and affairs of the debtor, it is necessary to have:

  1. Written application of the founder (participant) or the owner of the debtor’s property, on the retention of the right to manage the debtor’s property and affairs.
  2. Decisions of the meeting of creditors, which decided to retain the rights of the founder (participant) or the owner of the debtor’s property to manage the property and affairs of the debtor.
  3. Court ruling on the appointment of a person who retains the right to manage the property and affairs of the debtor.

WHO ELSE CAN BE APPOINTED AS A REHABILITATION MANAGER?

The Law of the Republic of Kazakhstan “On Rehabilitation and Bankruptcy” provides for the possibility of appointing as a rehabilitation manager a person registered with the authorized body (State Revenue Department) as an administrator.

Thus, another person may be appointed as a rehabilitation manager if:

  1. The founder (participant) or the owner of the property did not express his will to retain the right to manage the debtor’s property and affairs.
  2. The meeting of creditors adopted a decision to cancel the right of the owner of the debtor’s property, founders (participants) to manage the debtor’s property and affairs.
  3. The owner of the debtor’s property or the founder (participant) is removed from the administration of the debtor’s property and affairs.

In this case, according to paragraph 8 of the Order of the Deputy Prime Minister of the Republic of Kazakhstan – the Minister of Finance of the Republic of Kazakhstan dated April 28, 2014 No. 189 “On approval of the Rules for accounting for a temporary administrator, rehabilitation, temporary and bankruptcy managers, appointment and removal of rehabilitation and bankruptcy managers, and See also the Rules for the Advanced Training of a Temporary Administrator, Rehabilitation, Temporary and Bankruptcy Managers”, the meeting of creditors submits the selected candidate for a rehabilitation manager to the territorial subdivision of the authorized body (Rehabilitation and Bankruptcy Department of the State Revenue Department), which within 5 working days issues an order on the appointment of this person as a rehabilitation manager.

This sequence of actions is applicable when the owner of the property or the founder (participant) has not expressed a desire to retain the right to manage the property and affairs of the debtor.

WHO CAN’T BE A REHABILITATION MANAGER?

Paragraph 3 of Article 12 of the Law of the Republic of Kazakhstan “On Rehabilitation and Bankruptcy” defines persons who cannot be appointed as a rehabilitation manager. These include:

  1. Affiliated persons (individuals or legal entities that have the ability to directly and (or) indirectly determine decisions and (or) influence the decisions made by the participant in the rehabilitation or bankruptcy proceedings).
  2. Persons with an outstanding or unexpunged conviction.
  3. Persons registered in a narcological or neuropsychiatric dispensary.
  4. Persons recognized by the court as incapable or partially capable.

IN WHAT CASES IS THE PARTICIPANT DEPRIVED OF THE RIGHT TO MANAGE THE PROPERTY AND AFFAIRS OF THE DEBTOR?

Paragraph 5 of Article 69 of the Law of the Republic of Kazakhstan “On Rehabilitation and Bankruptcy” stipulates cases in which the owner of the debtor’s property, the founder (participant) are deprived of the right to manage the property and affairs of the debtor. These cases include the following:

  • Non-fulfillment of the schedule of repayment of accounts payable for a period of more than three months.
  • Identification of other violations provided for by the Law of the Republic of Kazakhstan “On Rehabilitation and Bankruptcy” (such, for example, may be the affiliation of persons in the rehabilitation procedure, etc.).

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