MINSK, 27 April (BelTA) – The bill on managing the insolvency is meant to get rid of ineffectiveness and preserve manufacturing and businesses. Belarusian Economy Minister Aleksandr Chervyakov made the relevant statement as he presented a bill designed to manage insolvency in the House of Representatives of the National Assembly on 27 April, BelTA has learned.
According to Aleksandr Chervyakov, the bill takes into account fundamental remarks of the head of state and brings procedures for bankruptcy prevention and pretrial rehabilitation of troubled enterprises into compliance with up-to-date economic development tasks. The bill also regulates reasons for finding a debtor insolvent and regulates how judicial cases are supposed to proceed.
The economy minister recapitulated the key blocks of the draft document. “First, bankruptcy cannot be used by defense enterprises, power engineering enterprises, and gross earners, including state-run enterprises and private companies. With this in mind the government is authorized to compile a list of the relevant corporations,” Aleksandr Chervyakov said.
Second, crisis management in the public sector will be improved. Aleksandr Chervyakov noted: “We are expanding the authority of government agencies. Municipal authorities are granted the right to organize the prevention of bankruptcy of private enterprises in their responsibility areas.”
Third, the protection of worker collectives will be enhanced: a worker collective representative will necessarily be involved in the work of the creditor committee and in the indisputable collection of pension contributions.
Fourth, financial rehabilitation will be subdivided into two stages. During the first stage enterprises can undergo rehabilitation for 36 months. The period can be prolonged by 24 months. The time period matches the medium-term business planning horizon. Within this time period the business can mobilize resources for rehabilitation, discipline all the participants of the rehabilitation, and get rid of “the habit” of forgetting its debts, the economy minister said. However, some enterprises may not return to normal operation due to objective reasons. To address their case, the procedure for a voluntary settlement with creditors is being improved to grant a respite on payments after rehabilitation, for instance, for a period of 3-10 years as the second stage of the rehabilitation.
Apart from that, the bill balances interests of the troubled enterprise and interests of its creditors. “Without waiting for a crisis to occur, the CEO can initiate rehabilitation if the enterprise has been unable to settle its debts for half a year. Once the period of forcible execution of the same length is over, the creditor can file a lawsuit with the court,” the economy minister said.
Priorities in distributing earnings from security are stipulated. The money will be spent on salaries and pension contributions first. Demands of creditors and banks come second minus 20% for the benefit of the state budget and court fees.
Apart from that, the liquidation of debtors without any property (aka abandoned businesses) will be financed by the party initiating bankruptcy procedures. The state budget covers the expense for now. The measure is supposed to reduce the burden.
A single creditor – a tax body accumulating everything the state budget is owed – will act on behalf of the state.
The court will take care only of opening and closing the case. “The other decisions relating to rehabilitation or liquidation will be made by a government agency and an assembly of creditors,” the economy minister noted.
Aleksandr Chervyakov stressed that the main goal of the legislation on managing insolvency is to keep a business running, rehabilitate it, and enhance its effectiveness. A business can be liquidated only as an exception when due to economic reasons it is no longer advisable to keep it afloat. However, the release of manpower will be managed and people will be offered new jobs.
“The legislation system will ensure timely applications for rehabilitation and will suppress attempts to exploit insolvency procedures for the sake of redistributing property. But individual enterprises with no prospects of rehabilitation and unaffordable revival costs will be liquidated without creating negative social consequences. As a rule, by selling a property complex to the investor. From the point of view of economic sense it will liquidate ineffectiveness and preserve manufacturing and businesses,” Aleksandr Chervyakov concluded.
The House of Representatives of the National Assembly passed the bill in the first reading.