Home / Doing business in Russia 2020 / Lending in Russia / Bankruptcy considerations
  1. Introduction
    1. Political and administrative structure
    2. Legal environment
  2. Common forms of business structures for foreign investors
    1. Main types of structure
    2. Registration, liquidation and reorganisation of business structures
    3. Shareholders’ and participants’ agreements
    4. Strategic industries
  3. Anti-monopoly issues
    1. General legal and regulatory framework
    2. Scope of application of the Competition Law
    3. Anti-competitive practices and restriction of competition
    4. Liability
  4. Tax system
    1. General approach
    2. Corporate taxation
    3. Incentives
    4. Special tax regimes
    5. Taxation of individuals
    6. Double taxation treaties
  5. Customs regulations
    1. General approach
    2. Trade between EEU and non-EEU countries
    3. Mutual trade between the EEU members
  6. Currency control
    1. Foreign currency transactions
    2. Consequences of breach/Penalties
  7. Lending in Russia
    1. Lending documents and governing law
    2. Jurisdiction
    3. International finance transactions and repatriation requirements
    4. Security interests
    5. Recognition of security trusts
    6. Syndicated loans
    7. Enforcement
    8. Suretyships and guarantees
    9. Bankruptcy considerations
    10. Other lending related issues
  8. Employment and migration
    1. Formalising the employment relationship
    2. Managing employment relationships
    3. Terminating an employment agreement
    4. Specifics of employing foreign nationals
  9. Personal data protection
    1. General approach
    2. Scope of the Data Protection Law
    3. Liability
    4. Right to be forgotten
  10. Intellectual property
    1. General approach
    2. Contractual aspects of intellectual property rights
    3. Rights over the results of intellectual activity
    4. Company names, trade names, trademarks and appellations of origin
    5. Intellectual property rights infringements
    6. IP Court
  11. Advertising issues
    1. General approach
    2. Scope of application of the Advertising Law
    3. Violations of the Advertising Law
    4. Liability
  12. Anti-corruption and compliance
    1. General approach
    2. Legal framework
    3. Compliance requirements for companies
    4. Concept of corruption in Russian law
    5. Possible targets of bribery
    6. Liability and penalties for corruption
    7. Example of sector-specific anti-corruption measures
  13. Real estate and construction
    1. Rights to real estate
    2. Real estate transactions
    3. Resolution of real estate disputes
    4. Planning and construction issues
  14. Corporate bankruptcy
    1. Insolvency criteria
    2. Stages of bankruptcy proceedings
  15. Import substitution and production localisation in Russia
    1. Measures affecting goods importation and current import substitution legislation
    2. Localisation incentives
    3. Sector-specific impact of import restrictions and localisation requirements
  16. Banking sector
    1. Legislative and regulatory framework
    2. Licensing and operations
    3. Deposit insurance
    4. The anti-money laundering law
    5. Bank secrecy
    6. FATCA and CRS
  17. Environment, energy efficiency and renewables
    1. Environment
    2. Energy efficiency
    3. Renewables
  18. Infrastructure and public private partnerships
    1. General approach
    2. Key PPP legislation
    3. Russian PPP environment
    4. Financing
    5. Legal issues
    6. Prospects for infrastructure projects
  19. Oil & gas
    1. Legislative framework
    2. Ownership and licensing
    3. Restrictions on foreign investors
    4. Licences
    5. PSAs

Lending in Russia

We set out below a brief discussion on certain matters related to lending to companies in Russia, by banks and other companies, with particular focus on foreign currency and secured lending.

Key contacts

Contact
Baranov Konstantin
Konstantin Baranov
Partner
Head of Banking & Finance
Tchoubykina Elena
Elena Tchoubykina
Counsel
Banking & Finance

Bankruptcy considerations

Upon the bankruptcy of a debtor or a pledgor, a moratorium against enforcement of the security will be introduced whilst it is being determined if financial rehabilitation, external administration or bankruptcy liquidation should apply.

Repayments or arrangements in preference of other creditors are likely to be subject to anti-preference provisions set out in bankruptcy laws. For more information related to bankruptcy and insolvency in Russia generally, please see the Corporate bankruptcy chapter.

During bankruptcy procedures, Russian law applies mandatory priorities under which creditors of the same class would rank equally. In brief, these are: (i) “first priority claims” (personal injury); (ii) “second priority claims” (employee related, royalties); and (iii) “third priority claims” (all other claims, including tax liabilities). So-called “current claims” (e.g. insolvency costs, obligations incurred after the company was declared bankrupt by the relevant commercial court) are not included into the order of priorities and should be satisfied as they fall due.

Secured creditors fall within the category of “third priority claims”; however their claims are satisfied in accordance with a special procedure quite separate from unsecured creditors, i.e. out of the proceeds of the sale of the pledged or mortgaged assets, subject to the following statutory thresholds of recovery.

In connection with secured claims (other than under a credit agreement), a secured creditor is entitled to 70% of the proceeds from the enforcement of the relevant security, with the remaining 20% payable for first and second priority claims, and 10% payable to meet insolvency expenses. In connection with secured claims under a credit agreement, these percentages change to 80%, 15% and 5% respectively.

At the financial rehabilitation or external administration stage, to become entitled to enforce security, a secured creditor must waive its rights to vote at creditors’ meetings. In that case, Russian law allows this secured creditor, with the approval of the relevant commercial court and provided that the assets of the debtor are insufficient for the possible restoration of its solvency, to enforce its security and retain all the proceeds of such enforcement (ahead of the general liquidation of the debtor’s assets, which is usually undertaken during the last possible stage of the bankruptcy proceedings, namely bankruptcy liquidation).


Key contacts

Baranov Konstantin
Konstantin Baranov
Partner
Head of Banking & Finance
Tchoubykina Elena
Elena Tchoubykina
Counsel
Banking & Finance