July 19, 2021

The procedure for the liquidation of legal entities in the Republic of Kazakhstan

The procedure for the liquidation of legal entities in the Republic of Kazakhstan

  1. Legislation of the Republic of Kazakhstan in the field of liquidation of legal entities
  2. The procedure for voluntary liquidation of legal entities
  3. Procedure for debt restructuring, rehabilitation and bankruptcy of legal entities. Pros and cons
  4. Intentional, false bankruptcy. Subsidiary liability for deliberate and false bankruptcy

1. Legislation of the Republic of Kazakhstan in the field of liquidation of legal entities

The procedure for the liquidation of legal entities is provided for by the following regulatory legal acts of the Republic of Kazakhstan:

Civil Code of the Republic of Kazakhstan (General Part), adopted by the Supreme Council of the Republic of Kazakhstan on December 27, 1994;

Code of the Republic of Kazakhstan dated December 25, 2017 No. 120-VI “On taxes and other obligatory payments to the budget (Tax Code)”;

Labor Code of the Republic of Kazakhstan dated November 23, 2015 No. 414-V;

Law of the Republic of Kazakhstan dated March 7, 2014 No. 176-V “On Rehabilitation and Bankruptcy”;

Law of the Republic of Kazakhstan dated April 17, 1995 No. 2198 “On state registration of legal entities and record registration of branches and representative offices”;

Law of the Republic of Kazakhstan dated May 13, 2003 No. 415-II “On Joint Stock Companies”;

Law of the Republic of Kazakhstan dated May 2, 1995 No. 2255 “On business partnerships”;

Law of the Republic of Kazakhstan dated April 6, 2016 No. 482-V “On employment of the population”;

Law of the Republic of Kazakhstan dated December 22, 1998 No. 326-I “On the National Archival Fund and Archives”;

Resolution of the Government of the Republic of Kazakhstan dated September 25, 2001 No. 1232 On approval of the Rules for fulfilling obligations to compensate for damage to the health of employees of enterprises liquidated by decisions of the Government of the Republic of Kazakhstan;

Rules for opening, maintaining and closing customer bank accounts, approved by the Resolution of the Board of the National Bank of the Republic of Kazakhstan dated August 31, 2016 No. 207.

2. The procedure for voluntary liquidation of legal entities

The general procedure for the liquidation of legal entities is provided for by the Civil Code of the Republic of Kazakhstan, in terms of the fulfillment of tax obligations – by the Tax Code.

Stages of voluntary liquidation of a legal entity:

1) Making a decision by the owner of its property or an authorized owner of the body, as well as by the body of a legal entity authorized to do so by the constituent documents on liquidation, in accordance with paragraph 1 of Article 49 of the Civil Code of the Republic of Kazakhstan;

2) Notification of the justice authorities about the decision on voluntary liquidation, in accordance with paragraph 1 of Article 50 of the Civil Code of the Republic of Kazakhstan;

3) Notification of the tax authority about the decision on voluntary liquidation in accordance with paragraph 1 of Article 58 of the Tax Code of the Republic of Kazakhstan;

4) Notification of the employment center about the upcoming release of employees of a legal entity in connection with voluntary liquidation, in accordance with paragraphs. 2) clause 2 of Art. 28 ZRK “On employment of the population”;

5) Publication of information on the liquidation of a legal entity, as well as on the deadline for filing claims by creditors of a legal entity (at least two months from the date of publication) in printed publications distributed throughout the territory of the Republic of Kazakhstan, in accordance with paragraph 3 of Art. 50 of the Civil Code of the Republic of Kazakhstan;

6) After the expiration of the 2-month period for the presentation of claims by creditors, the liquidation commission draws up an interim liquidation balance sheet, which contains information on the composition of the property of the legal entity being liquidated, the list of claims filed by creditors, as well as the results of their consideration, in accordance with paragraph 4 of Article 50 of the Civil Code of the Republic of Kazakhstan. The interim liquidation balance sheet is approved by the owner of the property of the legal entity or the body that made the decision to liquidate the legal entity.

7) Submission to the tax committee of an application for a tax audit and sending them liquidation tax reports, in accordance with paragraph 2 of Article 58 of the Tax Code of the Republic of Kazakhstan;

8) Payment of taxes, payments to the budget and social payments, reflected in the liquidation tax reporting, in accordance with paragraph 4 of Article 58 of the Tax Code of the Republic of Kazakhstan;

9) Satisfaction of claims by creditors, in accordance with paragraph 6 of Article 50 of the Civil Code of the Republic of Kazakhstan;

10) Transfer to the archive of documents to be transferred in accordance with paragraph 4 of Article 8 of the Law “On the National Archival Fund and Archives”;

11) The transfer of the remaining property to the founders, in accordance with paragraph 5 of Article 51 of the Civil Code of the Republic of Kazakhstan, is either directed for the purposes specified in the constituent documents, in accordance with paragraph 8 of Article 50 of the Civil Code of the Republic of Kazakhstan;

12) Distribution of property among the participants of the liquidated partnership, in accordance with subparagraph 4) of paragraph 1 of article 11 of the Law of the Republic of Kazakhstan “On limited and additional liability partnerships” or among shareholders, in accordance with article 89 of the Law of the Republic of Kazakhstan “On joint stock companies”;

13) Drawing up a liquidation balance sheet after the completion of settlements with creditors, which is approved by the owner of the property of the legal entity or the body that made the decision to liquidate the legal entity, in accordance with paragraph 7 of Article 50 of the Civil Code of the Republic of Kazakhstan;

14) Provision of the liquidation balance sheet within three working days from the date of completion of the tax audit, in accordance with paragraph 13 of Article 58 of the Tax Code of the Republic of Kazakhstan;

15) Obtaining certificates of absence of arrears of customs duties, taxes and customs duties;

16) Closing a bank account is carried out by the bank at the request of the client at any time. The procedure for closing an account is regulated by Chapter 4 of the Rules for Opening, Maintaining and Closing Bank Accounts of Clients, approved by the Resolution of the Board of the National Bank of the Republic of Kazakhstan dated August 31, 2016 No. 207;

17) Destruction of seals is carried out in the firms that manufacture them. After destruction, an appropriate act will be issued;

18) Registration of liquidation of a legal entity with the justice authorities, in accordance with article 16 of the Law of the Republic of Kazakhstan “On state registration of legal entities and record registration of branches and representative offices.”

3. Procedure for debt restructuring, rehabilitation and bankruptcy of legal entities. Pros and cons

Debt restructuring procedure

The basis for the debtor’s appeal to the court for the application of the debt restructuring procedure is his temporary insolvency.

Insolvency is temporary if, on the date of filing the application, there are one or more circumstances:

1) liabilities to creditors for claims for compensation for harm caused to life and health, recovery of alimony, obligations for remuneration of labor, payment of compensation under employment contracts, payment of arrears in social contributions to the State Social Insurance Fund, mandatory pension contributions and mandatory professional pension contributions, deductions and (or) contributions for compulsory social health insurance, as well as remuneration to authors for an employee’s invention, utility model, industrial design were not executed within three months from the date of their due date;

2) obligations to other creditors have not been fulfilled within four months from the date of their due date.

The debtor has the right to decide on the restructuring of his debt in the event of temporary insolvency, provided there are no court-initiated cases of rehabilitation or bankruptcy.

From the date of the court decision on the application of the debt restructuring procedure to the debtor, the following consequences occur:

1) the accrual of penalties (penalties, fines) for all types of debts of the debtor stops;

2) the creditor (creditors) are prohibited from filing an application with the court for declaring the debtor bankrupt during the period of the conclusion of an agreement on debt restructuring;

3) the debtor is prohibited from making any transactions for the alienation of property.

Within two months from the date of entry into force of the court decision on the application of the debt restructuring procedure, the debtor is obliged to conclude an agreement on debt restructuring with all creditors.

An agreement on debt restructuring must contain provisions on the terms of the agreement, the procedure, methods and timing of the debtor’s obligations to the creditor (creditors). The debt restructuring agreement is concluded for a period not exceeding three years.

If the creditor disagrees with the terms of the agreement, such an agreement cannot be concluded. If an agreement is not concluded, the debt restructuring procedure is considered completed and the consequences cease.

Rehabilitation and bankruptcy procedure

Rehabilitation procedure is a procedure applied in court, within the framework of which reorganization, organizational and economic, managerial, investment, technical, financial and economic, legal and other measures that do not contradict the legislation of the Republic of Kazakhstan aimed at restoring solvency are applied to the debtor. The rehabilitation procedure can be useful in a situation where the debtor is not able to agree on the settlement of the debt with each creditor, but if creditors are ready to support such a decision, to whom the debtors have a large part of the debt.

Rehabilitation proceedings are initiated in court on the basis of an application by the debtor or creditor (creditors). The debtor also has the right, within a period not exceeding seven working days from the date of receipt of a copy of the court’s ruling to initiate a bankruptcy case, to send an application to the court for the application of the rehabilitation procedure.

The creditor (creditors) have the right to apply to the court with an application to terminate the rehabilitation procedure if: a) there are grounds confirming that the implementation of the debtor’s rehabilitation plan is detrimental to his property interests; b) there are grounds confirming that the actions (inaction) of the rehabilitation manager are detrimental to his property interests; c) improper notification of the meeting of creditors.

Bankruptcy is a debtor’s insolvency recognized by a court decision, which is the basis for its liquidation.

Bankruptcy procedure – a procedure carried out in order to satisfy the claims of creditors at the expense of the property mass of the bankrupt in the manner prescribed by the laws of the Republic of Kazakhstan.

The basis for the debtor’s application to the court for declaring him bankrupt and liquidating with the initiation of bankruptcy proceedings is his stable insolvency.

Bankruptcy is established voluntarily on the basis of the debtor’s application to the court.

Bankruptcy is established compulsorily on the basis of an application to the court of creditors or other persons authorized by this Law.

Insolvency is persistent if the debtor’s obligations exceed the value of his property as of the date of filing an application with the court and at the beginning of the year in which the application was filed, as well as at the beginning of the year preceding the year of filing the application, if the application was filed by the debtor in the first quarter of the calendar year.

The basis for the creditor’s application to the court for declaring the debtor bankrupt and liquidating it with the initiation of bankruptcy proceedings is the unfulfilled monetary obligation of the debtor to the creditor on the basis of a judicial act or executive document that has entered into legal force on the collection of money from the debtor or recognition of the debt by the debtor.

The term for conducting bankruptcy proceedings is nine months and can be extended by the meeting of creditors up to two years if there are grounds.

Before filing an application to the court for the application of bankruptcy or rehabilitation procedures, the debtor or the creditor must conclude an agreement on the exercise of the powers of the interim manager with the person whose notification is included in the register of notifications of persons entitled to carry out the activities of the administrator.

Creditors’ claims against the debtor must be declared by them no later than one month from the date of publication of the announcement on the procedure for filing claims by creditors. A creditor’s claim filed later than this period is included in the register of creditors ‘claims without the right to vote at a meeting of creditors until the creditors’ claims declared within a month are fully satisfied.

Creditors have the right to combine their claims against the debtor and go to court with one statement. Such a statement is signed by the creditors who have combined their claims.

Based on the results of the collection of information on the financial condition of the debtor, the temporary administrator, during the period of consideration in the court of the bankruptcy case, draws up an opinion on the financial stability of the debtor.

At the request of the creditor, prosecutor or other person participating in the case, the court shall have the right to take the following measures to secure the claims of creditors:

1) to seize property (part of property) belonging to the debtor, including money;

2) prohibit the debtor from taking actions that may result in the reduction of his property or in any other way infringe on the interests of creditors;

3) to suspend the collection according to the executive or other documents, according to which the collection is carried out in an indisputable (non-acceptance) manner;

4) other actions aimed at the preservation of the debtor’s property for the period of consideration of the bankruptcy case.

The decision to declare the debtor bankrupt and liquidate it with the initiation of bankruptcy proceedings is taken by the court, taking into account the opinion of the temporary administrator on the financial stability of the debtor.

Pros and cons

Rehabilitation procedure.

  1. Obtaining a grace period;
  2. The terms of the procedure for payment of debt are established by the rehabilitation plan;
  3. Creditors may oppose the introduction of a rehabilitation procedure in relation to the debtor, motivating it as an unfair attempt by the debtor to evade the fulfillment of obligations, stop the accrual of penalties, fines, withdraw assets with the help of affiliated companies;
  4. Bad faith of the debtor, expressed in collusion with affiliated companies, an increase in accounts payable.

Bankruptcy proceedings

  1. The bankruptcy procedure provides an opportunity to liquidate a company that is not profitable and has more accounts payable than assets on the balance sheet;
  2. The law allows for the possibility, within the framework of the consideration of the bankruptcy case, to move to the plane of the rehabilitation procedure, if a real plan for restoring solvency is presented;
  3. The advantage of bankruptcy proceedings for creditors is the ability to challenge transactions concluded within the last three years before the debtor was declared bankrupt;
  4. The debtor can artificially increase his debts so that the court declares the company bankrupt and, in the absence of any property, can write off debts to real creditors.

4. Intentional, false bankruptcy. Subsidiary liability for deliberate and false bankruptcy

Intentional bankruptcy is a deliberate creation or increase in insolvency, committed as a result of actions (inaction) of the founder (participant), official, bodies of a legal entity, as well as an individual entrepreneur in personal interests or in the interests of other persons. Intentional bankruptcy, depending on the severity of the consequences, is an administrative offense (article 182 of the Code of the Republic of Kazakhstan on Administrative Offenses) or a criminal offense (article 238 of the Criminal Code of the Republic of Kazakhstan).

A false bankruptcy is a deliberately false announcement of insolvency in order to mislead creditors in order to obtain a deferral or installment plan of payments due to creditors or a discount on debts, as well as for non-payment of debts. Such an announcement is made as a result of actions and (or) decisions taken by the founder (participant), official, bodies of a legal entity, as well as an individual entrepreneur. False bankruptcy, depending on the severity of the consequences, is an administrative offense (article 182 of the Code of the Republic of Kazakhstan on Administrative Offenses) or a criminal offense (article 238 of the Criminal Code of the Republic of Kazakhstan).

Subsidiary liability for deliberate and false bankruptcy.

Clause 3 of Article 44 of the Civil Code stipulates that founders (participants) and (or) officials bear subsidiary liability to creditors if the deliberate bankruptcy or false bankruptcy of a legal entity is caused by the actions (inaction) of its founder (participant) and (or) an official.

To bring the persons specified in the law to subsidiary liability, it is necessary to have appropriate decisions of the criminal prosecution body or the court in the case of an administrative offense. That is, these persons must first be brought to administrative or criminal liability, respectively. After that, you can raise the question of the onset of civil liability – subsidiary liability for bankruptcy debts. The claim for bringing to subsidiary liability can be filed by the bankruptcy manager or creditors only within one month. If the deadline is missed, this is the basis for refusal to satisfy the claim for bringing the founder and officials to subsidiary liability.

Who is subsidiary liable for bankruptcy debts?

According to the general rules established by Article 44 of the Civil Code, the founder (participant) of a legal entity or the owner of its property is not responsible for its obligations. However, there are exceptions to this rule: the Law “On Rehabilitation and Bankruptcy” provides for subsidiary liability of the founder (participant) and officials of the insolvent debtor.

The founder is a legal entity or natural person who created an organization – a legal entity. And the participant is the founders and other persons who have obligations in relation to this organization (in business partnerships, joint-stock companies and cooperatives).

An official is a member of the board of directors of a joint-stock company, the head (deputy head) of a legal entity – an insolvent debtor, as well as another person who is a member of the collegial executive body of a legal entity, endowed with permanent or temporary powers to manage the legal entity, the chief accountant of a legal entity (deputy chief accountant) – an insolvent debtor, as well as another person temporarily performing his duties.

Subsidiary liability in case of non-fulfillment of obligations stipulated by law

According to paragraph 2 of Article 14 of the Law on Rehabilitation and Bankruptcy, the debtor is obliged:

1) apply to the court to declare him bankrupt in the case when the owner of his property (the body authorized by him), the body of the legal entity authorized by the constituent documents, made a decision to liquidate it, and the value of the property is not enough to satisfy the claims of creditors in full;

2) provide the court and the administrator, within three working days from the date of appointment of the administrator, information on financial and economic activities, including information on the debtor’s property, including property encumbered with a pledge, which is in property lease (lease) and (or ) in leasing, about money in bank accounts, account numbers and location of banks, organizations carrying out certain types of banking operations, about the amount of accounts receivable;

7) transfer the constituent documents, seals (if any), stamps to the temporary administrator within three working days from the date of the court decision on declaring the debtor bankrupt, within ten working days – accounting documents, documents of title to the bankrupt’s property, within twenty working days days – material and other values ​​belonging to the bankrupt;

8) provide the temporary administrator with access to the accounting documentation for study by viewing;

For violation of the above points, if the debtor’s property is insufficient to satisfy the creditors’ claims in full, the official whose duties include the fulfillment of these requirements shall bear subsidiary liability in accordance with the laws of the Republic of Kazakhstan in the amount of bankruptcy obligations to creditors that remained unfulfilled as a result of bankruptcy proceedings.