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LAW OF TURKMENISTAN

of October 1, 1993 No. 861-XII

About bankruptcy

(as amended of the Law of Turkmenistan of 26.03.2016 No. 386-V)

This Law determines conditions and procedure for the announcement of the subjects who are engaged in business and other economic activity, bankrupts and regulates their property status.

The law guarantees providing the rights and interests of creditors and the debtor, creates the legal basis for involuntary or voluntary liquidation of the companies of insolvent subjects of managing if holding actions for their sanitation by acknowledged economically inexpedient.

Section I. General provisions

Article 1. Concept and signs of bankruptcy

Bankruptcy is understood as steady inability of the debtor to satisfy in time, established by this Law, requirements of creditors and to fulfill obligations to the budget.

Sign of bankruptcy is the suspension of the current payments connected with excess of obligations of the debtor over its property (liabilities over assets).

Bankruptcy is considered taking place after the voluntary announcement of the debtor of the bankruptcy or recognitions of the fact of insolvency by its economic court.

Article 2. Poor debtors, subjects of bankruptcy, creditors

Poor debtors are physical persons and legal entities, irrespective of patterns of ownership, performing business or other activity and not providing accomplishment of the debt obligations before creditors and the budget owing to lack of means of payment.

Subjects of bankruptcy (bankrupts) are the poor debtors recognized in accordance with the established procedure as economic court or voluntarily recognized themselves as those.

Creditors are the physical persons or legal entities having property claims to the debtor.

Article 3. Assets and liabilities of the debtor

The property of the debtor consists of non-current and current assets.

Liabilities of the debtor consist of equities, long-term and short-term obligations.

Article 4. Property responsibility of the debtor

The debtor bears complete property responsibility according to the obligations to creditors and the budget.

Property responsibility of the debtor extends to the property belonging to it on the property rights or as complete economic maintaining (except for leased property).

The physical persons performing activities with creation of the legal entity, being owners bear responsibility according to the obligations all property of the company and the personal property.

In case of insufficiency of property the debtor bears responsibility on the debts according to the procedure and the sizes established by the legislation.

The property on which collection cannot be turned is determined by the legislation.

Persons working on hiring (the agreement, the contract) do not bear property responsibility according to obligations of the employer - the debtor.

Article 5. Criminal liability for the intentional actions which entailed bankruptcy

Bear criminal liability according to the current legislation for making of the intentional actions which entailed bankruptcy, perpetrators.

Article 6. Jurisdiction of cases on bankruptcy

Cases on bankruptcy are considered by economic court in the location of the debtor.

Bankruptcy proceeding is regulated by this Law, the civil and arbitral procedural legislation of Turkmenistan.

Article 7. Types of procedures in case of insolvency of the debtor

The following procedures are applied to insolvency of the debtor:

non-judicial procedures;

reorganization;

liquidating;

voluntary settlement.

Reorganization procedures consist of managerial control by property of the poor debtor or sanitation.

Liquidating procedures include voluntary liquidation of the company of the poor debtor under control of creditors and involuntary liquidation according to the decision of economic court.

Section II. Non-judicial procedures in cases on bankruptcy

Article 8. Concept of the non-judicial procedure

In case of threat of insolvency the debtor has the right, without submitting applications to economic court, to try to eliminate such threat by negotiations with creditors.

The debtor shall approve the decision on voluntary liquidation of the company with creditors.

Article 9. Results of the non-judicial procedure

Can be result of the non-judicial procedure:

the arrangement with all or part (at least two thirds) of creditors about payment deferral;

voluntary liquidation of the company under control of creditors;

voluntary settlement.

Article 10. Voluntary liquidation of the companies of the poor debtor under control

1. The decision on voluntary liquidation of the company is made with the consent of creditors at the initiative of the poor debtor if he realizes that he cannot pay according to the obligations and there is no opportunity to recover solvency.

2. The poor debtor in two weeks from the date of decision making about voluntary liquidation of the company convokes creditor meeting to which he submits the accounting report on condition of assets and liabilities. The list of creditors with indication of the amounts and claims is attached to the report.

3. In case of consent on voluntary liquidation of the company of the debtor creditor meeting appoints liquidation commission from among creditors and representatives of the debtor and accepts the resolution on voluntary liquidation of the company what in two weeks it is reported to the body performing state registration of the companies about. At the same time creditor meeting reports in seal about voluntary liquidation of debtor enterprise.

4. Liquidation commission:

makes the decision on the order ledgers and other documents of the company;

authorizes sale of property of the debtor;

drafts the agreement between creditors and owners concerning realization of property and repayment of obligations;

determines procedure for satisfaction of claims of creditors according to article 34 of this Law;

determines remuneration of the managing director;

convokes the completing creditor meeting and owners, represents the final report with appendix of the liquidation balance sheet and report on use of the means which remained after satisfaction of claims of creditors.

5. Creditors, discordant with voluntary liquidation of the debtor enterprise having the right to submit the application to economic court for its involuntary liquidation.

The copy of the final report with appendices in week time goes to the body performing state registration of the companies. The company is considered liquidating from the moment of its exception of the register of state registration. About liquidation of the company it is reported in seal.

Section III. Bankruptcy proceeding in economic courts

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