June 28, 2019

Improving the position of secured creditors in bankruptcy proceedings in Kazakhstan

On April 13, 2019, amendments to the Law of the Republic of Kazakhstan “On Rehabilitation and Bankruptcy” dated March 7, 2014 No. 176-V (hereinafter referred to as the Bankruptcy Law) came into force. These changes are aimed at strengthening the position of mortgage lenders in bankruptcy proceedings.

For the first time, in accordance with the amended provisions of the Bankruptcy Law, the claims of the secured creditor are to be satisfied “out of turn” with the consent of such creditor, either to accept the mortgaged property in kind, or to sell it independently.

In both cases, the relevant collateral is not subject to inclusion in the bankrupt property mass and is not subject to distribution among the remaining creditors. The claims of the secured creditor in the part covered by such secured assets are excluded from the register of the claims of creditors.

It should be noted, that the mortgage lender has the right to refuse to accept the mortgaged property in kind or from its independent sale. In such a case, the claims of the secured creditor against bankruptcy are subject to satisfaction “in the second stage”, according to the previously existing procedure.