LAW OF THE KYRGYZ REPUBLIC

of October 15, 1997 No. 74

About bankruptcy (insolvency)

Accepted by General Court of Jogorku Kenesh of the Kyrgyz Republic on September 22, 1997

Chapter 1. General provisions

Article 1. The relations regulated by this Law

1. This Law establishes the bases of recognition (announcement) of the debtor by the bankrupt (insolvent), regulates procedure and conditions of measures for the prevention of insolvency (bankruptcy), procedure and the conditions of carrying out insolvency proceedings and other relations arising in case of inability of the debtor to meet in full requirements of creditors and (or) to fulfill duty on payment of obligatory payments.

2. This Law is applied in the relation:

1) legal entities of any pattern of ownership, being the commercial organizations (except for the state and municipal companies founded on the right of operational management), including the foreign legal entities and legal entities with foreign participation registered in the Kyrgyz Republic in the procedure established by the legislation and also the financial credit institutions which are not attracting deposits;

2) legal entities of any pattern of ownership, being non-profit organizations, in the cases which are directly provided by this Law or other regulatory legal acts of the Kyrgyz Republic regulating questions of creation and form of business of the specified non-profit organizations;

3) individual entrepreneurs.

3. This Law is not applied in the relation:

1) public and other institutions;

2) liquidations of solvent legal entities on the bases, stipulated in Item 2 Articles 96 of the Civil code of the Kyrgyz Republic, with observance of requirements, stipulated in Clause 16 these Laws;

3) objects of natural monopoly;

4) banks and other financial credit institutions if other is directly not established by the Law of the Kyrgyz Republic "About National Bank of the Kyrgyz Republic, banks and banking activity".

4. The rules necessary for explanation and execution of this Law, are established by other regulatory legal acts published by the Government of the Kyrgyz Republic according to this Law.

5. Concerning legal entities in whose authorized capital the state and/or municipal share constitutes over 50 percent the special procedure for carrying out bankruptcy can be provided by the Government of the Kyrgyz Republic.

6. Ceased to be valid according to the Law of the Kyrgyz Republic of 20.04.2015 No. 87

7. Decisions of the courts of foreign states on cases on bankruptcy (insolvency) are recognized in the territory of the Kyrgyz Republic according to international treaties of the Kyrgyz Republic.

8. In the absence of international treaties of the Kyrgyz Republic of decision of the courts of foreign states on cases on bankruptcy (insolvency) are recognized in the territory of the Kyrgyz Republic if they do not contradict the legislation of the Kyrgyz Republic.

Article 2. The concepts used in this Law

For the purpose of this Law the following concepts are applied:

The administrator - person designated according to the procedure, established by this Law which can act as the temporary administrator the special administrator, the external managing director also is responsible for carrying out process of bankruptcy of the debtor.

Assets - property which part fixed assets, other long-term attachments (including intangible assets), current assets, financial assets and receivables are.

The affiliate of physical person or legal entity - any physical person or legal entity (except for the state bodies exercising control of its activities within the powers conferred to them) which has the right directly or indirectly to determine decisions or to exert impact on the decisions made by this person, including owing to the agreement (including the verbal agreement) or other transaction, and also any physical person or legal entity concerning which this affiliate has such right.

The affiliate of the legal entity his executive officials, the shareholder (participant) or any company owning ten and more percent of its voting shares (deposits, shares) are also recognized (for open joint stock companies with five and more percent).

Bankruptcy of the individual entrepreneur - method of the procedure of special administration which is carried out only judicially and provides withdrawal and alienation of the assets of the debtor individual entrepreneur included in liquidating weight for the purpose of satisfaction of requirements of creditors.

The external managing director - the administrator appointed according to the procedure, established by this Law, and responsible for holding procedure of rehabilitation of the debtor, according to the approved plan of rehabilitation.

Arousing of process (procedure) bankruptcy - taking measures, provided by this Law (for example, filing of application in court about recognition of the debtor by the bankrupt) which can lead to the beginning of process (procedure) of bankruptcy of the debtor.

The interim manager - the skilled person designated by National Bank of the Kyrgyz Republic for the purpose of preserving assets and documents in case of response or temporary suspension of action of license for banking operations before decision making by court or shareholders about liquidation or reorganization. The interim manager has the powers established by this Law for the temporary administrator.

Disqualification - deprivation by court of heads of the debtor, the members of liquidation commission who allowed violation of requirements of this Law, the right to hold executive positions and/or to perform business activity on management of legal entities for term and according to the procedure, established by the legislation.

The debtor - the legal entity or the individual entrepreneur who are considered or recognized insolvent.

The accessorial liability - the principle applied to members of the debtor legal entity according to whom participants answer for obligations the debtor in the multiple size, identical to all participants, to the cost of the contributions made by them determined by constituent documents of the debtor legal entity.

Interested persons concerning the debtor are:

the legal entity who according to the legislation of the Kyrgyz Republic is the main or affiliated in relation to the debtor; the head of the debtor, and also persons entering into Board of Directors (supervisory board) of the debtor, collegiate executive body of the debtor, the chief accountant (accountant) including the bankruptcies exempted from execution of the obligations within one year until initiation of process.

Interested persons concerning the debtor are also persons which are with the physical persons stated above, in the related relations on property and relationship (the spouses/spouse, relatives on straight line to the ascending and descending lines, sisters, brothers and their relatives on the descending line, on the descending line of the sister and the spouse/spouse's brothers).

In the cases provided by this Law interested persons concerning the administrator, creditors, are determined according to the procedure, provided above.

The applicant - person having rights of appeal to the court with statements (claims) provided by this Law.

Bankruptcy process costs - the necessary costs connected with carrying out process of bankruptcy, including expenses on publication of notifications on insolvency proceeding, court costs, expenses of the administrator, remuneration of the administrator, remuneration of the auditor, and also possible expenses of the debtor for that period during which the administrator considered it necessary to continue economic activity of the debtor, and other expenses.

The statement for recognition of the debtor by the bankrupt (insolvent) the address about initiation of process of bankruptcy judicially concerning the debtor including the statement of the creditor (creditors), the debtor and other persons specified in this Law which is filed a lawsuit in the procedure established by this Law.

The individual entrepreneur - person performing business activity without formation of legal entity according to the civil legislation of the Kyrgyz Republic which can be acknowledged insolvent according to this Law also is subjected to bankruptcy process.

Creditor committee - the authorized body of creditor meeting performing the activities according to requirements of this Law.

The creditor - person, including Kyrgyz and foreign legal entities and physical persons, and also the Kyrgyz Republic on behalf of authorized bodies which has the right to demand from the debtor of execution of its obligation: transfer property, perform work, pay money, etc.

Liquidation - method of the procedure of special administration which provides withdrawal and alienation of all assets of the debtor legal entity included in liquidating weight for the purpose of satisfaction of requirements of creditors according to their priority.

Liquidating weight - the debtor's assets intended for realization on providing satisfaction of requirements of creditors, except for the property provided in article 86 of this Law.

The voluntary settlement - the procedure applied in the course of bankruptcy, providing the agreement between the debtor and creditors on obligation fulfillment of the debtor which is obligatory for execution by other creditors after approval by court.

The beginning of process of bankruptcy - the moment of decision making by court, creditor meeting about recognition (announcement) of the debtor by the bankrupt and holding procedure of special administration with appointment of the special administrator.

Insufficiency of assets - the financial condition of the debtor which is characterized by lack of enough assets (less the assets which are pledge subject) for covering of legal costs, renumeration expenses to the special administrator, and also other costs connected with process of bankruptcy, provided by this Law.

Obligatory payments - taxes, charges and other compulsory contributions in the budget of appropriate level and in off-budget funds according to the procedure and on the conditions determined by the legislation of the Kyrgyz Republic.

Limited liability - the principle applied to members of the debtor legal entity according to whom members of the debtor do not answer for its obligations and bear risk of the losses connected with activities of the debtor within the cost of deposits (shares).

Liabilities - the obligations (except for subventions, grants, own means and other sources) consisting of the loan and raised funds including accounts payable.

Complete responsibility - the principle applied to members of the debtor legal entity according to whom members of the debtor based on constituent documents of the debtor or according to the legislation of the Kyrgyz Republic bear joint liability according to obligations of the debtor all property belonging to them.

Bankruptcy process suspension - the termination sine die court of process of bankruptcy concerning the debtor.

The company - property complex according to the concept provided in Article 33 of the Civil code of the Kyrgyz Republic.

Bankruptcy process - the process applied to the debtor in the form of the procedures provided by this Law.

Rehabilitation - the procedure applied in the course of bankruptcy for the purpose of recovery of solvency of the debtor. Rehabilitation is carried out in judicial or extrajudicial procedure concerning the debtor legal entity and only judicially - concerning the debtor individual entrepreneur.

Restructuring - method of the procedure of special administration which provides creation of one new or several new legal entities based on the debtor's assets for the subsequent sale for the benefit of creditors and liquidation of the debtor legal entity.

The head - person designated in accordance with the established procedure for management of the legal entity (the director, the board member, manager, the managing director, etc., including deputies and persons, the acting as the head).

Sanitation - the procedure applied in the course of bankruptcy, providing economic improvement of the debtor using measures of financial, economic or organizational nature. Provides satisfaction of requirements of all creditors during the term established by this Law.

Special administration - the procedure of process of bankruptcy applied concerning the debtor. Special administration concerning the debtor legal entity can be carried out in judicial or extrajudicial procedure, concerning the debtor individual entrepreneur - only judicially. Methods of special administration are liquidation or restructuring of the legal entity and bankruptcy of the individual entrepreneur. Provides appointment of the special administrator, sale (alienation) of the assets of the debtor included in liquidating weight, to the third parties for the benefit of creditors and the termination of the legal entity or business activity of the individual entrepreneur.

The special administrator (liquidator) - the administrator appointed according to the procedure, established by this Law, and responsible for carrying out special administration of the debtor.

The participant - physical person or legal entity (including the Kyrgyz Republic on behalf of state body on management of state-owned property concerning the state companies and legal entities having the state share; founders, shareholders, members, etc.), the having liability law concerning the debtor, either the property right, or other corporeal right to its property.

The legal entity - the organization having the signs provided in Article 83 of the Civil code of the Kyrgyz Republic which can be acknowledged (is announced) by insolvent and subjected to bankruptcy process.

Article 3. Bankruptcy (insolvency)

Bankruptcy (insolvency) is understood as its insolvency, i.e. inability recognized as court or announced by creditor meeting with the consent of the debtor of the legal entity in full in the terms established by the law or the agreement to meet reasonable requests of the creditors according to monetary commitments, including inability to provide obligatory payments in the budget and off-budget funds, owing to excess of the undertaken obligations over its quick assets.

Article 4. Bankruptcy process

1. Process of bankruptcy is understood as the activities of the state regulated by this Law on behalf of authorized bodies, courts which are specially appointed in the procedure for administrators (temporary administrators, special administrators, conservatives, external managing directors) established by the law, the creditors aiming at satisfaction of requirements of creditors of the debtor, and also recovery of solvency of the debtor or the termination of its activities.

2. Process of bankruptcy is means of satisfaction of requirements of creditors of the insolvent debtor.

3. After the beginning of process of bankruptcy or in the course of bankruptcy of the debtor the procedure of special administration which is carried out by method of liquidation or restructuring of the debtor legal entity or method of bankruptcy of the individual entrepreneur can be applied.

4. After initiation of process of bankruptcy or in the course of bankruptcy of the debtor the following procedures can be applied:

1) sanitation;

2) rehabilitation;

3) voluntary settlement;

4) Ceased to be valid the Law KR of July 24, 2009 No. 247

5) special administration.

Article 5. Basic provisions of the procedure of special administration

1. Liquidation:

1) it is applied to the legal entity;

2) is provided by withdrawal, alienation, and also subsequent distribution of the assets of the debtor entering liquidating weight for benefit of his creditors;

3) after completion of the procedure of liquidation entry in the state register of legal entities is cancelled and activities of the debtor stop.

2. Bankruptcy of the individual entrepreneur:

1) it is applied to the physical person registered as the individual entrepreneur;

2) it is carried out only judicially;

3) is provided by withdrawal and alienation, and also subsequent distribution of the assets entering liquidating weight for benefit of his creditors;

4) the court can disqualify the individual entrepreneur, i.e. prohibit it occupation business activity during the term determined by this Law.

3. Restructuring:

1) it is applied to the legal entity;

2) provides change of the participant (participants) and organization of one new or several new legal entities;

3) new or several new legal entities, and also the remained assets of the debtor are on sale (are alienated) for the purpose of satisfaction of requirements of creditors;

4) after completion of the procedure of restructuring the termination of activities of the debtor is made.

Article 6. Basic provisions of the procedure of sanitation

Sanitation:

1) it is applied to the legal entity;

2) is provided by availability of specific guarantees for protection of interests of creditors and complete payment of their requirements during the term established by this Law;

If sanitation takes place 3) successfully and the debtor will recover solvency, then he can continue the economic activity;

4) does not provide change of owners if other is not provided by the agreement of the parties.

Article 7. Basic provisions of the procedure of rehabilitation

Rehabilitation:

1) it is applied in the relation of both the legal entity, and the individual entrepreneur;

2) concerning the individual entrepreneur it is carried out only judicially;

3) is provided by submission of the rehabilitation plan by the debtor and his approval by creditors according to requirements of this Law;

4) the rehabilitation plan allows to continue economic activity of the debtor for complete or partial satisfaction of requirements of creditors;

Can pass 5) into the procedure of special administration of the debtor according to requirements of this Law;

6) does not provide change of the participant (participants) if other is not provided by the agreement of the parties.

Article 7-1. Basic provisions of the procedure of the voluntary settlement

Voluntary settlement:

1) it is applied in the course of bankruptcy judicially as to the legal entity, and the individual entrepreneur;

2) is provided by the agreement between the debtor and creditors in which creditors agree with satisfaction all or part of requirements in contractual procedure without appointment of the administrator as court;

3) does not provide change of the participant (participants) if other is not provided by the agreement of the parties.

Article 8. Administrator

1. Carries out procedures of process of bankruptcy - the administrator. The administrator can act in quality:

1) temporary administrator;

2) special administrator;

3) external managing director;

4) Ceased to be valid the Law KR of July 24, 2009 No. 247.

2. The employee of state body on cases on bankruptcy, the legal entity registered in the Kyrgyz Republic or the citizen of the Kyrgyz Republic performing the activities as the individual entrepreneur can be the administrator.

In cases when the administrator of the debtor designates the legal entity or the individual entrepreneur, the last shall conform to the requirements established by body for cases on bankruptcy regarding their solvency and ensuring responsibility of the administrator to the debtor's creditors, and also his founders, participants and shareholders for harm which can be caused to these persons as a result of violation by the administrator of this Law and rules of carrying out insolvency proceedings of the debtor.

3. The administrator who is the individual entrepreneur or the head of the legal entity shall have the license for the activities implementation right, except cases when administrator is the staff of state body on cases on bankruptcy.

The administrator cannot be appointed:

1) the creditor, the debtor, the party according to the transaction, the participant, the head of the insolvent debtor;

2) person who was participant or the debtor's head within year prior to bankruptcy process;

3) the close relative of persons stated above;

4) person working in state body (except for the employee of state body on cases on bankruptcy), local government body;

5) person concerning whom there is restriction for implementation of activities for administration and (or) property of other persons;

6) person having unspent conviction;

7) person which stopped activities as the individual entrepreneur for the bankruptcy bases before the expiration of five years from the moment of bankruptcy;

8) person who was the head of business entity before the expiration of five years from the moment of the termination of activities of business entity in connection with bankruptcy.

4. The administrator (the special administrator, the external managing director) is appointed, discharged, exempted by state body on cases on bankruptcy (if process of bankruptcy is carried out judicially) or creditor meeting (extrajudicially) according to the procedure and on the conditions established by this Law.

The administrator appointed by creditor meeting (extrajudicially) can be also discharged of execution of the obligations by state body on cases on the bankruptcy in the cases provided by this Law, and also according to the procedure, established by the legislation of the Kyrgyz Republic.

The procedure for appointment of the administrator state body (when carrying out process of bankruptcy judicially) is determined by cases on bankruptcy by the provision approved by the Government of the Kyrgyz Republic.

Appointment, discharge, release of the temporary administrator (irrespective of procedure for carrying out process of bankruptcy) are performed by court according to the procedure, provided by this Law.

The administrator can be appointed for carrying out insolvency proceeding at the same time:

1) no more than on two managing subjects debtors provided with aktina;

2) no more than on five managing subjects debtors provided that the debtor is acknowledged as the court which is absent and also if the property of the debtor obviously does not allow to cover legal costs on the case of bankruptcy of the debtor or within the last twelve months operations on its accounts were not performed.

5. The administrator is in process of the activities under protection of the law, is guided by the legislation of the Kyrgyz Republic, has the rights and performs the duties established by the legislation of the Kyrgyz Republic or the agreement.

6. In case of appointment of the special administrator extrajudicially person from among creditors authorized by creditor meeting on behalf of creditor meeting shall sign the civil agreement with the appointed administrator. If other is not established by creditors, procedure for the conclusion and term of the contract are determined by the authorized person in coordination with creditor meeting.

7. The creditor (creditors), the debtor, state body on cases on bankruptcy with observance of requirements imposed by this Law to administrators has the right to propose the candidacy of the administrator. In the presence of several candidates appointment of the administrator is made on competitive basis. Conditions, terms and procedure for carrying out tender are determined by the bodies specified in item 4 of this Article.

8. The administrator can be exempted from execution of the obligations by state body on cases on bankruptcy, creditor meeting, court (in case of release of the temporary administrator) in the following cases:

1) response or suspension of action in accordance with the established procedure licenses of the administrator during implementation by the administrator of its powers;

2) violations by the administrator of requirements of the legislation of the Kyrgyz Republic when holding procedures of process of bankruptcy;

3) introductions in legal force of the court verdict on criminal case concerning the administrator;

4) submissions by the administrator of the statement for release it from fulfillment of duties of the administrator;

5) identifications or emergence of the circumstances interfering fulfillment of duties (appointment) of the administrator;

6) the termination (completion) in accordance with the established procedure procedure to which holding the administrator was appointed;

7) according to the decision of creditor meeting made according to requirements of article 15 of this Law as a result of expression of mistrust to the administrator meeting (committee) of creditors;

8) bankruptcy process suspensions.

8-1. The administrator can be detached (is temporarily exempted) from execution of the obligations in the following cases:

1) initiations of legal proceedings concerning the administrator;

2) detection of the facts of non-compliance with the legislation of the Kyrgyz Republic in case of bankruptcy process implementation;

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