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The Supreme Court allowed withdrawal of funds received in bankruptcy under government contracts KXan 36 Daily News

Date: October 4, 2023 Time: 15:01:24

As the Presidium of the Supreme Court of Russia explained in a review of judicial practice in resolving bankruptcy disputes, “the terms of the agreement on settlement through a special account with bank support for the transaction do not separate the funds stored in this account of the creditors’ claims”.

As Nikita Filippov, vice-president of the Russian Lawyers Guild, explained, as a rule, such special accounts are opened for agreements with a “special subject”, that is, with a public authority that is responsible for spending budget funds. In other words, these accounts may contain money received by debtors under government contracts.

“The Bankruptcy Law establishes as a requirement that all the assets of the debtor at the time of the opening of the external administration procedure or bankruptcy proceedings are included in the bankruptcy estate, regardless of their location or special accounts,” Nikita Filippov emphasizes.

For her part, Daria Ivanova, Senior Associate of De Jure Bankruptcy Dispute Resolution Practice, clarifies that the Supreme Court of the country in its review indicated the following: funds that are kept in special accounts that are not related to the normal behavior of debtors The activities must not elude the bankruptcy estate of the debtor, despite its target orientation in the presence of a special subject of the transaction. Therefore, such money has no protection against creditors. Therefore, as part of the procedure, it is necessary to recalculate and distribute among creditors, including funds from special accounts.

“As a rule, the Supreme Court of the Russian Federation in its rulings formulates a certain legal approach to judicial practice on controversial issues, and we often ignore the judicial acts of the Supreme Court of the Russian Federation, in which it reminds of the fundamentals of the functioning of legal norms”, says Daria Ivanova.

Therefore, the Supreme Court regularly recalls its important legal positions in judicial practice reviews. For example, in this review, it also indicated that the court is not empowered to terminate the bankruptcy for lack of sufficient funds to reimburse the costs of the proceedings, “without checking the validity of the plaintiff’s reference to the existence from a source where the named expenses come from.” Simply put: if creditors claim there is money for the bankruptcy proceeding, their arguments should be heard. It is possible, by the way, that there is no money right now, but they can be find contesting some transactions of the debtor.

“It seems that this definition was no longer included in the revision because it constitutes a fundamentally new approach, but because of the need to remind the courts that the refusal to introduce a procedure in the presence of sources for the formation of the bankruptcy estate will not contribute to the protection of the rights and legitimate interests of creditors “, – says Daria Ivanova. – Bankruptcy proceedings are a way to protect the property rights of creditors in situations where the usual methods of forced collection of debt from the debtor are ineffective due to the lack of mechanisms related to the formation of the bankruptcy mass through the return of assets belonging to the debtor”.

But, the lawyer continues, it is also true that the bankruptcy procedure requires financing at least for the payment of the remuneration of the arbitration manager and the costs associated with the publication of messages, etc. “Financing is allowed through the receipt of funds in the bankruptcy estate from the sale of assets, both previously owned by the debtor, but disposed of in bad faith, and property of the debtor at the time of the opening of the bankruptcy procedure”, Explain. .the mass is directed to the transformation of the assets into cash for their subsequent liquidation with the creditors. This means that when considering the possibility of carrying out the bankruptcy procedure, the method of obtaining the debtor’s assets in the bankruptcy procedure does not is of decisive importance: said assets were in the debtor’s possession at the time the bankruptcy proceedings were opened or were returned as a result of the measures taken to restore them.

Thus, he stresses, the bankruptcy procedure can and should be initiated, even if the court establishes the absence of assets, but the creditor proves the possibility of returning the debtor’s assets to the bankruptcy estate through mechanisms to challenge operations or debt collection. and subsequent sale of goods or receipt of funds from debtors debtors. “This approach allows you to protect the financial interests of the creditor by starting a bankruptcy case and paying off the debt to the creditor,” says Daria Ivanova.

Hansen Taylor
Hansen Taylor
Hansen Taylor is a full-time editor for ePrimefeed covering sports and movie news.

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