As part of the rehabilitation procedure, work is being carried out on the financial and economic recovery of insolvent enterprises.
Thanks to the rehabilitation procedure, it is possible to restore the solvency and continue the activities of the company experiencing temporary financial difficulties.
What is the rehabilitation procedure and who can use it, we will tell you in this publication.
What is a rehabilitation procedure?
Rehabilitation procedure – a procedure applied in court, in which the debtor is applied to:
reorganization plans;
organizational and economic issues;
management services;
investment;
technical;
financial and economic;
legal and other measures that do not contradict the legislation of the Republic of Kazakhstan, aimed at restoring solvency.
The basis for applying the rehabilitation procedure to the debtor is its temporary insolvency, when the debtor has not fulfilled its obligations to creditors under the claims within 3 months from the date of the deadline for their performance:
compensation for damage caused to life and health;
recovery of alimony;
obligations to pay for labor;
payment of compensation under employment contracts;
payment of arrears of social contributions to the State Social Insurance Fund, mandatory pension contributions and mandatory professional pension contributions;
deductions or contributions to compulsory social health insurance;
on remuneration to authors for official inventions, utility models, industrial designs.
In addition, the rehabilitation procedure is applied if the debtor has not fulfilled its obligations to other creditors within 4 months from the date of the deadline for their performance.
How is the rehabilitation procedure applied and its consequences?
This procedure is introduced in court at the request of the debtor or creditor.
From the date of entry into force of the court decision on the application of the rehabilitation procedure, the following consequences occur:
it is prohibited to make transactions with property outside the framework of ordinary commercial transactions;
accrual of interest on loans received and bonds issued ceases;
the execution of court decisions, arbitration decisions, decisions of state revenue bodies, as well as individual entrepreneurs – debtors, property owners, founders of a legal entity – debtors in respect of its property is suspended, with the exception of payments to citizens to whom the debtor is responsible for causing harm to life or health, without taking into account claims for compensation for non-pecuniary damage, the payment period of which occurred after the application of the rehabilitation procedure.
Also, from the moment of entry into force of the decision on the application of the rehabilitation procedure, the debtor, together with the creditors and the rehabilitation manager, must develop a rehabilitation plan within 3 months.
What does the rehabilitation plan include?
A rehabilitation plan is a set of interrelated measures aimed at improving the health of the debtor when applying the rehabilitation procedure and carried out on the basis of mutual agreement between the debtor and creditors, in order to restore the debtor's solvency and preserve jobs, indicating the terms of implementation, including the schedule for meeting creditors ' claims, as well as the results achieved, resources used and possible risks.
The rehabilitation plan should contain specific measures to restore the debtor's solvency and a schedule for satisfying creditors ' claims.
The standard form of the rehabilitation plan is approved by the authorized body (Order of the First Deputy Prime Minister of the Republic of Kazakhstan-Minister of Finance of the Republic of Kazakhstan dated April 20, 2020 No. 396 "On Approval of the standard form of the debtor's rehabilitation Plan").
The developed rehabilitation plan should provide for equal conditions for satisfying the claims of creditors of the same queue.
Rehabilitation measures consist of measures aimed at restoring the debtor's solvency, including:
rehabilitation;
sale of property by electronic auction;
financial leasing;
assignment of the rights of the debtor's claims;
factoring;
reverse factoring;
debt forgiveness;
write-off of penalties and fines;
exchange of debts for shares;
conclusion of a settlement agreement and others.
What happens after the rehabilitation plan is approved?
After the rehabilitation plan is approved, the debtor is managed by a person determined by the creditors ' meeting (the rehabilitation manager or individual entrepreneur of the debtor, or by a body or person authorized by the owner of the property, the founder (participant) of the debtor's legal entity).
Transactions with property outside the framework of ordinary commercial transactions, with the exception of those provided for in the rehabilitation plan, are made with the consent of the creditors ' meeting.
Based on the debtor's application and a copy of the court's ruling on the approval of the rehabilitation plan that has entered into force, all restrictions and encumbrances on the debtor's property (collection orders to the debtor's accounts, property arrests, etc.) are removed.) without making the appropriate decisions of the bodies that imposed them.
In case of changes and additions to the rehabilitation plan, all changes and additions are made with the consent of the creditors ' meeting and approved by the court.
After the court ruling on the approval of the rehabilitation plan comes into force, the rehabilitation manager is obliged to ensure the implementation of the rehabilitation plan.
According to article 181 of the Code of the Republic of Kazakhstan "On Administrative Offenses", administrative liability is provided for failure to provide or improper provision for the implementation of the rehabilitation plan. http://adilet.zan.kz/rus/docs/K1400000235
On the progress of the rehabilitation procedure, the rehabilitation manager submits the current and requested information to the territorial bodies of state revenue for the regions, cities of republican significance and the capital.
The duration of the rehabilitation procedure?
The duration of the rehabilitation plan should not exceed five years.
The term of the rehabilitation procedure is established by the court when making a ruling on the approval of the rehabilitation plan and is calculated from the date of entry into force of such a ruling. The court may, at the request of the rehabilitation manager, with the consent of the creditors ' meeting, extend this period once, but not for more than six months, unless otherwise established by Article 64 of the Law of the Republic of Kazakhstan "On Rehabilitation and Bankruptcy".