The legislation of the Republic of Kazakhstan provides that any measures in accordance with the legislation, the purpose of which is to restore the solvency of the debtor, may be applied to an insolvent debtor within the framework of the rehabilitation procedure. However, the question arises as to who is granted the rights to manage the affairs and property of the debtor upon the introduction of the rehabilitation procedure?
Can a debtor's participant retain the right to manage property and affairs during the rehabilitation period?
According to paragraph 1 of Article 69 of the Law of the Republic of Kazakhstan "On Rehabilitation and Bankruptcy , based on the decision of the meeting of creditors, the court, from the moment of approval of the rehabilitation plan, has the right to retain the right to manage the property and affairs of the debtor for the following persons:
- the founder (participant) of the legal entity-debtor, or
- the owner of the debtor's property.
The condition for the retention of the right to manage the property and affairs by the founder (participant) or owner of the debtor’s property is his/her expression of will, expressed in a written statement.
Thus, in order for the founder (participant) or owner of the property to retain the right to manage the property and affairs of the debtor, it is necessary to have:
- A written statement from the founder (participant) or owner of the debtor’s property, on retaining his right to manage the property and affairs of the debtor.
- Decisions of the meeting of creditors, which decided to retain the rights of the founder (participant) or owner of the debtor's property to manage the property and affairs of the debtor.
- A court order appointing a person who retains the right to manage the property and affairs of the debtor.
Who else can be appointed as a rehabilitation manager?
The Law of the Republic of Kazakhstan "On Rehabilitation and Bankruptcy" provides for the possibility of appointing a person registered with the authorized body (Department of State Revenues) as an administrator as a rehabilitation manager.
Thus, another person may be appointed as a rehabilitation manager if:
- The founder (participant) or owner of the property did not express his/her will to retain the right to manage the property and affairs of the debtor.
- The meeting of creditors made a decision to cancel the right of the owner of the debtor's property, founders (participants) to manage the property and affairs of the debtor.
- The owner of the debtor's property or the founder (participant) is removed from managing the property and affairs of the debtor.
In this case, in accordance with paragraph 8 of the Order of the Deputy Prime Minister of the Republic of Kazakhstan - Minister of Finance of the Republic of Kazakhstan dated April 28, 2014 No. 189 "On approval of the Rule for recording a temporary administrator, rehabilitation, temporary and bankruptcy managers, appointment and removal of rehabilitation and bankruptcy managers, as well as the Rules for improving the qualifications of a temporary administrator, rehabilitation, temporary and bankruptcy managers", the meeting of creditors submits the selected candidate for rehabilitation manager to the territorial division of the authorized body (Rehabilitation and Bankruptcy Department of the Department of State Revenue), which within 5 working days issues an order on the appointment of this person as a rehabilitation manager.
This sequence of actions is applicable when the owner of the property or the founder (participant) has not expressed a desire to retain the right to manage the property and affairs of the debtor.
Who cannot be a rehabilitation manager?
Clause 3 of Article 12 of the Law of the Republic of Kazakhstan "On Rehabilitation and Bankruptcy" defines persons who cannot be appointed as a rehabilitation manager. These include:
- Affiliated persons (individuals or legal entities that have the ability to directly and/or indirectly determine decisions and/or influence decisions made by a participant in the rehabilitation or bankruptcy procedure).
- Persons with an outstanding or unremoved criminal record.
- Persons registered with a drug addiction or mental health clinic.
- Persons recognized by the court as incompetent or with limited legal capacity.
In what cases is a participant deprived of the right to manage the property and affairs of the debtor?
Clause 5 of Article 69 of the Law of the Republic of Kazakhstan "On Rehabilitation and Bankruptcy" establishes cases in which the owner of the debtor's property, founder (participant) are deprived of the right to manage the property and affairs of the debtor. The Law classifies such cases as:
- Failure to comply with the schedule of repayment of accounts payable for a period of more than three months.
- Identification of other violations provided for by the Law of the Republic of Kazakhstan "On Rehabilitation and Bankruptcy" (such as, for example, the affiliation of persons in the rehabilitation procedure, etc.).