SIGNS OF SUSTAINED INSOLVENCY OF A DEBTOR IN KAZAKHSTAN

Primary Marker: Excess of Liabilities Over Assets

The legislation of the Republic of Kazakhstan clearly distinguishes between a company's temporary and sustained financial distress. According to Paragraph 1 of Article 5 of the Law of the Republic of Kazakhstan "On Rehabilitation and Bankruptcy," the main sign of sustained insolvency is a condition in which the debtor's liabilities exceed the value of its assets.

At the same time, the excess of debt over assets is not a one-off indicator, but a recorded trend. The legislator requires confirmation of this fact on three control dates:

  • As of the date of filing the application to the court;
  • As of the beginning of the calendar year in which the application is filed;
  • As of the beginning of the year preceding the year of filing the application — if the debtor applies to court in the first quarter of the calendar year.

It is sustained insolvency that gives the debtor the right to initiate court proceedings for bankruptcy and liquidation.

How Does Sustained Insolvency Differ From Temporary Insolvency?

Understanding the distinction is critical, as the choice of judicial procedure depends on it:

  • Temporary insolvency serves as the basis for business recovery through a rehabilitation procedure or debt restructuring. It is fixed in the presence of overdue debt:
    • Over 3 months — for the payment of wages, alimony, compensation for harm to life and health, as well as mandatory pension and social contributions;
    • Over 4 months — to other creditors.
  • Sustained insolvency indicates a deep financial crisis where recovery through current income is impossible, requiring the liquidation of the legal entity or individual entrepreneur alongside the initiation of bankruptcy proceedings.

How Is Insolvency Established in Court?

The court determines the debtor's insolvency taking into account the conclusion on financial stability drawn up by the interim manager. Based on the results of the financial analysis, the debtor is assigned one of three classes:

  • Class I — financially stable enterprises (bankruptcy petition will be denied);
  • Class II — enterprises at risk of bankruptcy with potential for recovery (grounds for rehabilitation);
  • Class III — financially unstable enterprises regarding which grounds for declaring bankruptcy exist.

Creditors' Rights and Management Risks

Creditors may also initiate bankruptcy against a debtor; however, different procedural grounds are established for them: the presence of an unfulfilled monetary obligation confirmed by an effective judicial act, an executive document, or a written acknowledgment of debt (and for tax authorities — the exhaustion of all enforcement collection measures).

It is important to be aware of personal liability: If evasion of performance of obligations is achieved by hiding or alienating assets within three years prior to bankruptcy, such actions are classified as intentional bankruptcy. Founders and officers at fault bear subsidiary and joint liability to creditors with all their personal property.

Sustained insolvency in Kazakhstan is a strictly formalised legal criterion. It is expressed in a stable excess of liabilities over assets across three reporting periods and serves as the point of no return, shifting the company's operations into the scope of bankruptcy proceedings.

 

Дата публикации
10 сентября 2026