Use the Lexology Navigator tool to compare the answers in this article with those from other jurisdictions.

Liquidation procedures


What are the eligibility criteria for initiating liquidation procedures? Are any entities explicitly barred from initiating such procedures?

Bankruptcy proceedings may be commenced against a company if it:

  • has debts of more than Rb300,000 rubles ($5,265) (excluding fines, penalty interest, damages and other financial penalties); and
  • has failed to settle such debts within three months of falling due.

Bankruptcy proceedings may be commenced at the petition of a creditor having a court decision confirming the debt. However, there is no requirement for a court judgment when the tax authorities initiate the insolvency proceedings. The tax authorities may file a petition with the court for the debtor’s bankruptcy within 30 days of their decision to recover mandatory payment by seizing the debtor’s funds or other assets.

A bank may file a petition for the debtor’s bankruptcy from the date on which the debtor first shows signs of insolvency, with no need for a court decision to recover the debt. The bank must publish a notice of its intention in this regard on the website of the Unified Federal Registry of Information on Companies’ Operations 15 days before commencement of the bankruptcy proceedings.


What are the primary procedures used to liquidate an insolvent company in your jurisdiction and what are the key features and requirements of each? Are there any structural or regulatory differences between voluntary liquidation and compulsory liquidation?

There are five types of bankruptcy procedure that may be applied against the debtor:

  • supervision;
  • financial rehabilitation;
  • external administration;
  • liquidation; and
  • settlement.

Debtors do not necessarily undergo all of these bankruptcy procedures.

Supervision During supervision, a temporary administrator analyses the current financial status of the debtor and takes an overview of claims against it. This stage aims to preserve the debtor’s property by restricting the actions of the debtor.

Financial rehabilitation Financial rehabilitation aims to restore the debtor’s solvency and arrange for outstanding debt to be discharged under scheduled debt repayment.

External administration That stage includes the appointment of an external administrator to collect debt, make an inventory of assets and prepare a plan for restoring solvency.

Liquidation Liquidation starts with a declaration of the debtor’s bankruptcy. This stage involves the appointment by the court of a liquidator in order to sell the assets of the debtor and thus satisfy its debts in accordance with the statutory order of priority.

Settlement As of the date of court approval of the voluntary agreement, the bankruptcy proceedings terminate and the debtor is obliged to begin repaying the creditors’ claims in accordance with the repayment schedule set out in the agreement.

How are liquidation procedures formally approved?

A court ruling is required to terminate one stage of bankruptcy proceedings and commence another. Generally, the court issues its ruling based on the decision of the creditors’ meeting.

If the court confirms that the creditor’s claim is well founded, shows signs of insolvency and remains outstanding at the time of the court hearing, it must rule in favour of the commencement of supervision.

Financial rehabilitation is initiated by the court on the petition of the first creditors’ meeting or the petition of the shareholders of the debtor or other persons willing to put up collateral for the debts of the company.

External administration is initiated by the court on the petition of the creditors’ meeting if there is a real possibility of restoring the debtor’s solvency.

The court initiates liquidation where the debtor shows signs of bankruptcy and there are no grounds on which to transfer to another stage of bankruptcy proceedings, approve a settlement or terminate the bankruptcy proceedings.

The creditors’ meeting can file a petition for settlement, to be approved by the court.

What effects do liquidation procedures have on existing contracts?

After supervision is initiated, claims under a contract can be dealt with through the stages of the bankruptcy proceedings. Enforcement against the assets of the debtor is suspended. Other actions against the debtor for the recovery of funds are terminated. 

During financial rehabilitation, the debtor pays no penalties for non-payment or overdue repayment of debts that fell due before financial rehabilitation.

During external administration and liquidation, the bankruptcy manager may terminate the debtor’s contracts if:

  • the contract will impede restoration of the debtor’s solvency; or
  • the debtor will incur losses from performance in comparison to similar transactions concluded in comparable circumstances.

What is the typical timeframe for completion of liquidation procedures?

Supervision can last up to seven months.

Financial rehabilitation can last no more than two years.

External administration can last up to 18 months and can be extended by a further six months.

Liquidation can last up to six months and can be extended by a further six months.

Role of liquidator

How is the liquidator appointed and what is the extent of his or her powers and responsibilities?

At the supervision stage, the court approves a temporary manager. During supervision, the company’s management remains in place, albeit with restricted authority. The temporary manager’s written consent is required to enter into certain transactions. The temporary administrator must take measures:

  • concerning assurance of the debtor’s property preservation;
  • to indicate the debtor’s creditors; and
  • to summon and manage the first creditors’ meeting.

The temporary manager is entitled to file a claim on his or her behalf to invalidate any transactions entered into by the debtor in contravention of the law and to raise defences against the creditors’ claims.

At the financial rehabilitation stage, the court approves an arbitrage manager who supervises implementation of the debt repayment schedule and the financial rehabilitation plan. During this stage, the company’s management remains in place, albeit with even more restricted authority than at the supervision stage. The arbitrage manager must:

  • maintain a register of the creditors’ claims;
  • summon the creditors’ meetings; and
  • exercise control over the execution of the financial rehabilitation plan and repayment schedule.

The arbitrage manager is entitled to submit a motion for removal of company directors.

At the stage of external administration, the court approves an external manager. When external administration commences, the powers of the management are terminated and the duty to manage the affairs of the debtor is vested in the external manager. The external manager must:

  • take the debtor’s property into administration and draw up an inventory of such property; and
  • develop an external administration plan.

The external manager is entitled to manage the property of the debtor in accordance with the external administration plan, and to make a declaration of refusal to perform the debtor’s contracts.

In a liquidation procedure, the court approves the liquidator, who replaces the management of the company. The debtor’s shareholders’ rights are also terminated. The liquidator is entitled to:

  • manage the debtor’s property;
  • dismiss the debtor’s employees;
  • make a declaration of refusal to perform the debtor’s contracts; and
  • file claims to invalidate transactions entered into by the debtor.

The bankruptcy manager must recover damages to the debtor, creditors and other persons, if their losses were caused by non-performance or undue performance of his or her obligations in terms of the debtor’s bankruptcy.

Court involvement

What is the extent of the court’s involvement in liquidation procedures?

All bankruptcy procedures are supervised by the court.

The court exercises the following powers, among others:

  • initiates, completes and terminates bankruptcy proceedings;
  • approves the administrators in bankruptcy proceedings;
  • applies interim measures;
  • invalidates transactions of the debtor;
  • prohibits the debtor from entering into transactions without the bankruptcy manager’s consent; and
  • approves the voluntary agreement.

Creditor involvement

What is the extent of creditors’ involvement in liquidation procedures and what actions are they prohibited from taking against the insolvent company in the course of the proceedings?

Creditors recognised by the court have to form the creditors' committee. Creditors included in this committee in terms of the bankruptcy procedure have the power to:

  • apply to the court to initiate the bankruptcy procedure;
  • stipulate additional requirements for bankruptcy manager candidates;
  • exercise control over the activities of the bankruptcy manager; and
  • raise claims under obligations with a later maturity date, but which fell due on initiation of the bankruptcy procedure.

The creditors are prohibited from:

  • raising claims against the debtor outside the bankruptcy procedure;
  • claiming for penalties, interest or other financial sanctions for the period starting from the initiation of the bankruptcy procedure;
  • foreclosing on the debtor’s assets; and
  • taking any other actions against the debtor outside the bankruptcy procedure.

Director and shareholder involvement

What is the extent of directors’ and shareholders’ involvement in liquidation procedures?

The managing bodies of the debtor (directors and the shareholders’ meeting) may exercise their powers of managing the company’s affairs and disposing of its property, with certain limitations. On commencement of external administration, the managing bodies are discharged from performing their duties.

Click here to view the full article.