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LAW OF THE REPUBLIC OF ARMENIA

of November 30, 2001 No. ZR-262

About bankruptcy of banks, credit institutions, the investment companies managing investment funds and insurance companies

(as amended on 29-10-2020)

Accepted by National Assembly of the Republic of Armenia on November 6, 2001

Chapter 1. General provisions

Article 1. Subject of regulation of the Law

1. This Law establishes concepts and signs of insolvency and bankruptcy of banks, credit institutions, the investment companies managing investment fund and the insurance companies (further – banks, if from specific case of use of the word "banks" is not necessary to understand that is only about banks) operating in the territory of the Republic of Armenia, procedure and conditions of implementation of measures for the prevention of their insolvency and bankruptcy, and also liquidation procedure of banks owing to their bankruptcy, liquidation procedure of the banks which are not removed from registration according to the procedure, stipulated in Item the 5th article 42 of this Law. Activities of liquidation commissions (managing) banks which are not removed from registration according to the procedure, stipulated in Item the 5th article 42 of this Law are brought into accord with requirements of this Law.

2. The procedure for production on insolvency matters and bankruptcy of banks is established by this Law, other laws and in the cases and procedure provided by this Law - legal acts of the Central bank of the Republic of Armenia (further - the Central bank).

Article 2. Insolvency of bank

1. The bank is considered insolvent if:

a) according to article 4.1 of this Law realized 50 percent and more its fixed capital, or

b) he is not able to meet legal requirements of the creditors, or

c) final assessment of indicators of bank is lower than the level of final assessment of indicators of the banks established by Council of the Central bank or

d) it repeatedly violates the standard rate of obligatory reservation established by the law. Frequency of violations is established by Council of the Central bank, and it shall be identical to all banks operating in the territory of the Republic of Armenia.

2. Insolvency of bank is recognized only the decision of Council of the Central bank in the presence of one of the bases, stipulated in Item 1 this Article.

3. In case of identification of one of the bases of insolvency, stipulated in Item 1 this Article, the Central bank in two weeks can:

a) appoint the head temporary administration (further – also administration) and the mortgage managing director if the bank is issuer of secured mortgage bonds according to the Law of the Republic of Armenia "About secured mortgage bonds", or

b) bring the statement for bankruptcy of bank into court.

4. In sense of this Law the obligation for the managing director of contractual investment fund which is the agreement party on management of contractual investment fund those obligations assumed by it according to the transactions connected with management of contractual investment fund which, according to provisions of the Civil code of the Republic of Armenia are subject to accomplishment at his expense are. At the same time the obligations which are subject to accomplishment at the expense of the managing director of fund provided by this part only in case of insufficiency of assets of fund in sense of this Law are obligations for such managing director only as regards missing assets of fund.

5. The decision of council of the Central bank on insolvency of bank, and also submission to court of the statement for bankruptcy of bank cannot limit implementation of the netting provided by the agreement on netting.

Article 3. Bankruptcy of bank

1. Bankruptcy of bank is the its insolvency established by court based on the statement of the Central bank. In this case the bank is subject to liquidation according to the procedure, established by this Law.

2. The bank can be declared bankrupt only based on the statement of the Central bank on one of the bases, the stipulated in Clause 24 presents of the Law.

3. The judgment about acceptance to production of the statement for recognition of bank by the bankrupt, and also the court verdict about recognition of bank by the bankrupt cannot limit implementation of the netting provided by the agreement on netting.

Article 4. The petition of the organization performing audit of bank

1. In case of identification of one of the bases of insolvency of bank established by this Law the organization performing audit of bank shall notify immediately in the procedure established by the legislation on it the Central bank with appendix of all documents.

2. Non-execution of the obligation of Item 1 of this Article is the basis for recognition of the invalid license of the organization performing audit. With the similar petition the Central bank addresses to the state competent authority licensing auditor activities.

Article 4.1. Realization of fixed capital

For the purpose of application of the subitem "an" of Item 1 of Article 2 presents of Zakona bank consider implemented 50 percent or more the fixed capital if at the time of recognition its insolvent the size of its fixed capital during the period of time established by the Central bank is less than a half of fixed capital of this bank.".

Chapter 2. Temporary administration

Article 5. Tasks of administration

1. The administration is special body of management of bank which head and members are appointed by the Central bank in the procedure established by this Law.

2. Task of activities of administration is:

a) satisfaction of requirements of investors and bank account holders by reorganization of bank, and (or)

b) sale of part of assets and liabilities of bank or them completely (except for the obligations following from the secured mortgage bonds and assets which are means of their providing) and (or)

c) recovery of financial stability of bank by collection (realization) in perhaps short time of assets of bank (except for the assets which are instrument for ensuring of secured mortgage bonds), and (or)

d) recovery of financial stability of bank by increase in the authorized capital of bank or attraction of deposits by means of loans in the procedure established by this Law, and (or)

e) recovery of financial stability of bank by transfer to other person according to the procedure, established by the legislation of the Republic of Armenia, the obligations undertaken by bank (except for the obligations following from secured mortgage bonds), and (or)

e) ceased to be valid according to the Law of the Republic of Armenia of 22.05.2004 No. ZR-64

g) implementation of other measures for financial sanitation of bank which are not forbidden by the law.

3. The administration is effective according to the plan of financial sanitation. The plan of financial sanitation, the changes made to it and additions affirm the Central bank. The administration can provide to the Central bank of the offer on introduction of amendments and changes in the plan of financial sanitation.

4. The administration is effective according to the procedure, established by this Law, other laws and regulations of the Central bank.

5. During activities of administration of power of all governing bodies of bank completely pass to the head of administration.

6. During activities of administration the satisfaction of the requirement of the participant (shareholder) of bank regarding allocation of its share (contribution) in the authorized capital in connection with its secession of founders of bank is forbidden, also allocation of share of the participant (the shareholder, the unitholder) in the authorized capital upon the demand of the creditor (creditors) of members (shareholders, unitholders) of bank for the purpose of the address of collection on this share or performing payments from means of bank (including in nature) according to its share is forbidden.

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