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LAW OF THE REPUBLIC OF KAZAKHSTAN

of March 7, 2014 No. 176-V ZRK

About rehabilitation and bankruptcy

(as amended on 09-06-2020)

This Law governs the public relations arising in case of inability of the debtor to meet in full requirements of creditors, establishes the bases for application of the procedure of debt restructuring, the rehabilitation procedure and recognition of the debtor by the bankrupt, liquidations of the debtor without initiation of bankruptcy proceedings, and also determines procedure and conditions of their carrying out.

Chapter 1. General provisions

Article 1. The basic concepts used in this Law

In this Law the following basic concepts are used:

1) the agricultural producer - the individual entrepreneur or the legal entity making agricultural products with use of the earth; the livestock production making agricultural products, poultry farming (including breeding with complete cycle, since cultivation of young growth), beekeepings if the income from realization of these products including processed constitutes more than fifty percent from the total amount of annual earnings;

2) deliberate bankruptcy - the actions of the founder (participant), the official, and equally individual entrepreneur made in private interests or interests of other persons for the purpose of evasion from obligation fulfillment before creditors by alienation or concealment of property within three years before recognition by the bankrupt of the legal entity or the individual entrepreneur;

3) the administrator - the temporary administrator, rehabilitation, interim and bankrupt managing directors performing powers according to this Law during consideration of the case in court and also holding rehabilitation procedure and insolvency proceeding;

4) administrative expenses - the expenses connected with initiation and holding rehabilitation procedure or insolvency proceeding;

5) the bankrupt - the debtor whose insolvency is established by the judgment which took legal effect;

6) bankruptcy - the insolvency of the debtor recognized as the judgment which is the basis for its liquidation;

7) insolvency proceeding - the procedure performed for the purpose of satisfaction of requirements of creditors at the expense of the estate of the bankrupt according to the procedure, established by the laws of the Republic of Kazakhstan;

8) the bankrupt managing director - person designated by authorized body in the field of rehabilitation and bankruptcy for implementation of insolvency proceeding;

9) the debtor - the physical person registered as the individual entrepreneur (individual entrepreneur), or the legal entity concerning whom there are bases for application or the procedures provided by this Law are applied;

10) group of homogeneous creditors - group of the creditors having identical requirements to the debtor and not having before each other advantage in receipt of their satisfaction.

Groups of homogeneous creditors can constitute:

creditors according to requirements about indemnification of life or health;

creditors on compensation and payment of compensations for employment contracts, and also debts on social contributions to the State Social Insurance Fund, on the compulsory pension contributions compulsory for professional pension contributions, on assignments and (or) fees on compulsory social medical insurance;

creditors according to the obligations provided with pledge;

creditors on taxes and customs payments;

creditors according to the requirements following from delivery agreements of goods, works and services;

creditors - financial institutions (microfinancial institutions) according to the requirements following from agreements on receipt of loan (microcredit), not secure pledge;

creditors are bondholders of the debtor;

11) single industrial complex - property, in total necessary for providing single cycle in case of production, procurement, storage, transportation, conversion or realization of agricultural products;

12) the voluntary settlement - the procedure applied at any stage of insolvency proceeding for the purpose of its termination by the agreement signature between the bankrupt and creditors approved by court;

13) the absent debtor - the debtor recognized idle according to the Code of the Republic of Kazakhstan "About taxes and other obligatory payments in the budget" (Tax code) which lack, and also his founder (participant), the official is established according to the procedure, determined by this Law;

14) regular commercial transactions - the actions relating to regular activities of the debtor, having regular character, including without limitation: implementation of payments for lease of rooms and utilities, transactions with suppliers, raw materials acquisition, maintenance of the equipment, realization of finished goods and rendering services.

Do not treat regular commercial transactions of the transaction, connected with alienation of the real estate or other assets, provision of property as a deposit, including according to obligations of the third parties;

15) the mortgage creditor - the creditor according to obligations whose requirements are provided with pledge of property of the debtor;

16) the creditor - person having to the debtor the property requirements arising from civil and (or) other obligations of the debtor including obligations on compensation, payment of award, compensations according to employment contracts, debt repayment on social contributions to the State Social Insurance Fund, the compulsory pension contributions compulsory for professional pension contributions, assignments and (or) fees on compulsory social medical insurance, to taxes, customs payments, the special, anti-dumping, compensatory duties, percent, other obligatory payments in the budget;

17) creditor committee - the representative body of creditors elected by creditor meeting in procedures of rehabilitation and bankruptcy and having the powers provided by this Law;

18) the register of requirements of creditors - the list of requirements of creditors to the debtor with indication of their amount, the basis and date of origin created in procedures of rehabilitation or bankruptcy according to the procedure, established by this Law;

19) the city-forming legal entity - the legal entity determined according to the rules approved by authorized body on regional development;

20) the official - the board member of joint-stock company, the head (deputy manager) of the legal entity - the debtor, and also the other person entering into collegiate executive body of the legal entity, given standing or temporary powers on management of the legal entity, the chief accountant of the legal entity - the debtor, and is equal the other person who is temporarily fulfilling its duties;

21) the estate - property of the bankrupt on which collection in insolvency proceeding, and also property of other persons in the cases provided by this Law can be turned;

22) authorized body in the field of rehabilitation and bankruptcy (further - authorized body) - the state body performing state regulation in the field of rehabilitation and bankruptcy (except for the state companies, organizations, banks, the insurance (reinsurance) organizations and the accumulation pension funds);

23) the rehabilitation managing director - person to who powers on management of the debtor for the rehabilitation procedure according to the procedure are assigned, established by this Law;

24) the plan of rehabilitation - complex of the interconnected actions directed to improvement of the debtor in case of application of the rehabilitation procedure and performed on the basis of mutual consent between the debtor and creditors for the purpose of recovery of solvency of the debtor and jobs preservation with indication of realization terms, including the schedule of satisfaction of requirements of creditors, and also the achieved results, the used resources and possible risks;

25) the rehabilitation procedure - the procedure applied judicially within which the reorganization, organizational and economic, managerial, investment, technical, financial and economic, legal and other not contradicting the legislation of the Republic of Kazakhstan measures directed to solvency recovery are applied to the debtor;

26) reverse factoring - the tripartite agreement signed between the debtor (bankrupt), his debtor and the third party where the debtor transfers to the third party the obligation to the debtor (bankrupt), and the third party fulfills obligations of debtor to the debtor (bankrupt);

27) the creditor on taxes and customs payments - person having to the debtor of the requirement, arising from obligations of the debtor on tax payment, customs payments, the special, anti-dumping, compensatory duties, percent, and also other obligatory payments in the budget;

28) sanitation - the action provided by the plan of rehabilitation during which the owner of property of the debtor (authorized by it body), by creditors or other persons to the debtor provides financial aid and also is implemented other package of measures for mobilization of reserves of the debtor and improvement of its financial and economic provision;

29) the temporary administrator - person with whom the agreement for creation of the register of requirements of creditors and the conclusion about financial stability of the debtor during consideration in court of case on rehabilitation is signed;

30) the interim manager - person with whom the agreement is signed or which is appointed by authorized body in the cases established by this Law for creation of the register of requirements of creditors and the conclusion about financial stability of the debtor during consideration in court of case on bankruptcy, and also for carrying out insolvency proceeding before appointment of the bankrupt managing director;

31) affiliates - the physical persons or legal entities (except for the state bodies performing control and supervising functions within the powers conferred to them, national managing holding, the Single operator of housing construction) having opportunity directly and (or) indirectly to determine decisions and (or) to exert impact on the procedures of rehabilitation or bankruptcy of the decision adopted by the participant, including owing to the signed agreement (the list of affiliates in the procedure of rehabilitation or bankruptcy is established by article 9 of this Law);

32) factoring - the tripartite agreement signed between the debtor (bankrupt), his debtor and the third party where the debtor (bankrupt) yields or shall yield to the third party the property requirement to the debtor, and the third party transfers or shall transfer money or other property in the order of the debtor (bankrupt) in exchange for right to claim against debtor of the debtor (bankrupt).

Article 2. Legislation of the Republic of Kazakhstan on rehabilitation and bankruptcy

1. The legislation of the Republic of Kazakhstan on rehabilitation and bankruptcy is based on the Constitution of the Republic of Kazakhstan and consists of this Law and other regulatory legal acts of the Republic of Kazakhstan.

2. If the international treaty ratified by the Republic of Kazakhstan establishes other rules, than those which are provided by this Law then are applied rules of the international treaty.

Article 3. Features of application of this Law

1. This Law is applied to cases on debt restructuring, rehabilitation and bankruptcy of individual entrepreneurs and legal entities, and also their liquidation without initiation of bankruptcy proceedings, except the state companies and organizations, the accumulation pension funds, banks, the insurance (reinsurance) organizations.

In case of adoption by court of the decision on recognition of bank, the insurance (reinsurance) organization, the accumulation pension fund by the bankrupt their liquidation is performed according to the bank law of the Republic of Kazakhstan, the legislation of the Republic of Kazakhstan on insurance and insurance activity, and also provision of pensions.

Features of application of insolvency proceedings or rehabilitation concerning the cotton-processing organizations, the hlebopriyemny companies, and also subjects of natural monopoly can be established by the legislation of the Republic of Kazakhstan.

2. Cases on debt restructuring, rehabilitation, bankruptcy of individual entrepreneurs and legal entities, and also their liquidations without initiation of bankruptcy proceedings are considered by court on general civil procedure rules with the features established by this Law.

3. In case of bankruptcy of the organizations and individual entrepreneurs who are subjects of natural monopoly or having important strategic importance for economy of the Republic of Kazakhstan capable to exert impact on life, health of citizens, homeland security or the environment, including the organizations, blocks of shares (shares in the authorized capital) which are carried to strategic objects according to the legislation of the Republic of Kazakhstan, and also declared bankrupt at the initiative of the state, the Government of the Republic of Kazakhstan for the purpose of protection of interests of citizens and the state has the right to establish special conditions and procedure for realization of the estate and additional requirements to buyers of objects of the estate, and also to make the decision on acquisition by the national managing director of holding of the estate in case of bankruptcy of the organizations, blocks of shares (shares in the authorized capital) which are carried to strategic objects according to the legislation of the Republic of Kazakhstan, or the organizations having important strategic importance for economy of the Republic of Kazakhstan.

4. In case of bankruptcy of the legal entities performing ecologically dangerous types of economic and other activity statutory environmental audit of their activities according to the Ecological code of the Republic of Kazakhstan is booked.

Article 4. Composition in bankruptcy

1. Bankruptcy is established voluntarily based on the statement of the debtor in court.

2. Bankruptcy is established compulsorily based on the lawsuit to the court of creditors or other representatives by this Law of persons.

3. In the cases established by this Law, the debtor shall take a legal action with the statement for recognition by his bankrupt.

4. If the property value of the legal entity concerning whom according to the procedure, stipulated in Item 1 Article 49 of the Civil code of the Republic of Kazakhstan, the decision on liquidation is made is insufficient for satisfaction of requirements of creditors, the liquidation commission shall take a legal action about recognition of such legal entity by the bankrupt for carrying out insolvency proceeding by rules, the established this Law.

5. The basis for the announcement of the debtor the bankrupt judicially is its insolvency.

Insolvency of the debtor is established by court taking into account the conclusion about financial stability constituted according to article 49 of this Law.

Article 5. The bases for appeal to the court about recognition of the debtor by the bankrupt and his liquidation with initiation of bankruptcy proceedings

1. The basis for the address of the debtor with the petition about recognition by his bankrupt and liquidation with initiation of bankruptcy proceedings is its steady insolvency.

Insolvency is steady if obligations of the debtor exceed the cost of its property for date of filing of application in court and for the beginning of year at which the application, and also for the beginning of the year preceding year of filing of application is submitted if the application is submitted by the debtor in the first quarter calendar year.

2. The basis for the address of the creditor with the petition about recognition of the debtor by the bankrupt and his liquidation with initiation of bankruptcy proceedings is the unexecuted monetary commitment of the debtor before the creditor based on the court resolution which took legal effect or the executive document on collection from the debtor of money or recognition of debt by the debtor if other is not established by this Item.

The basis for the address of the creditor on taxes and customs payments with the petition about recognition of the debtor by the bankrupt and his liquidation with initiation of bankruptcy proceedings is the default the debtor of the amount of tax debt, and also debt on customs payments, special, anti-dumping, compensatory duties, to percent after acceptance of all measures of recovery by enforcement according to the procedure, determined by the tax and customs legislation of the Republic of Kazakhstan.

Article 5-1. The bases for appeal to the court about application of the rehabilitation procedure and procedure of debt restructuring

1. The basis for the address of the debtor or the creditor with the petition about application of the rehabilitation procedure is temporary insolvency of the debtor.

Insolvency is temporary if for date of filing of application there are one or several circumstances:

1) the obligation to creditors according to requirements about indemnification caused to life and health, collection of the alimony, obligations on compensation, payment of compensations for employment contracts, debt repayment for social contributions to the State Social Insurance Fund, compulsory pension contributions and compulsory professional pension contributions, assignments and (or) fees on compulsory social medical insurance and also on remunerations to authors for the office invention, useful model, industrial design are not performed within three months from the date of approach of term of their execution;

2) obligations to other creditors are not fulfilled within four months from the date of approach of term of their execution.

2. The basis for the address of the debtor with the petition about application of the procedure of debt restructuring is its temporary insolvency.

Article 6. Responsibility for deliberate bankruptcy

1. The founder (participant) and (or) the official found guilty of deliberate bankruptcy according to the procedure of administrative or criminal trial bear before creditors subsidiary responsibility the property belonging to them in the amount of, determined according to Item 3 of article 96 of this Law.

In case of recognition guilty of deliberate bankruptcy according to the procedure of administrative or criminal trial of two and more persons such persons bear responsibility solidary.

2. The bankrupt managing director within ten working days from the date of the introduction in legal force of court resolution about involvement of the founder (participant) and (or) official to the criminal or administrative responsibility shall take a legal action with the claim to such person for attraction it to subsidiary responsibility and the collection of the amounts in the amount of determined according to Item 3 of article 96 of this Law.

The creditor also has the right to take a legal action with the claim according to the procedure, provided by this Article if the founder (participant) and (or) the official are found guilty of deliberate bankruptcy according to the procedure of administrative or criminal trial after bankruptcy completion of the procedure.

Article 7. Recognition of transactions of the debtor invalid and return of property

1. Transactions are recognized invalid if they are made by the debtor or person authorized by him within three years before initiation of proceedings about rehabilitation and (or) bankruptcy if other is not provided by this Law, in the presence of the bases provided by the civil legislation of the Republic of Kazakhstan and this Law.

If insolvency proceeding is applied to the debtor as a result of the termination of the rehabilitation procedure, the term provided by part one of this Item is estimated from the date of the introduction in legal force of the judgment about application of the rehabilitation procedure.

2. The bases of invalidity of transactions, except provided by the Civil code of the Republic of Kazakhstan, are:

1) the price of the committed transaction and (or) other conditions significantly in the worst party for the debtor differ from the price and (or) other conditions under which in comparable circumstances similar transactions are made;

2) the transaction does not correspond to the activities of the debtor limited to the laws of the Republic of Kazakhstan, constituent documents or is made with violation of the competence determined by the charter;

3) the property is transferred (including in temporary use) is non-paid or at the price significantly differing in the worst party for the debtor from the price of identical or homogeneous goods under comparable economic conditions or without availability of the bases for transfer to damage to interests of creditors;

4) if the transaction made within six months before initiation of proceedings about rehabilitation and (or) bankruptcy entailed preferable satisfaction of requirements of one creditors before others;

5) gift agreements of property of the debtor if such transaction significantly differs from the bargains concluded one year prior to initiation of proceedings about rehabilitation or bankruptcy;

6) the transaction made without intention to create the corresponding consequence in law according to such transaction, to the detriment of interests of creditors.

3. In case of detection of the transactions made under the circumstances specified in Items 1 and 2 of this Article, the administrator shall, including according to the petition of the creditor who revealed the transaction within ten working days from the date of identification to take a legal action with the statement for recognition of such transactions invalid.

4. In case of recognition of the transaction invalid the defendant shall return everything received according to the transaction, in case of impossibility of return in nature - to compensate the cost of the property which is subject to return, cost of use of property, the performed works or the rendered services in money if other effects of invalidity of the transaction are not provided by the Civil code of the Republic of Kazakhstan.

At the same time the defendant acquires the right to claim against the debtor which is subject to satisfaction according to Item 5 of article 100 of this Law.

5. In case of impossibility of return of property in the cases provided by this Article or in case of voluntary conveyance of property in connection with its loss, spoil or subsequent its fair acquisition by the third parties initial acquirers of claimed property bear responsibility to the debtor on compensation of the arisen with respect thereto losses within the cost of the property lost, spoiled or honesty acquired by the third parties.

6. In case of impossibility of cost recovery of property by the initial acquirer person who made the decision on property acquisition of the debtor shall be brought to subsidiary responsibility judicially.

7. Requirements of this Article do not extend to transactions:

1) project financing, securitization;

2) concluded in trade system of stock exchange by method of open tenderings;

3) made by the debtor within regular commercial transactions which conditions significantly do not differ from conditions of the similar bargains concluded by the debtor in the course of implementation of business activity by it within three years before initiation of proceedings about rehabilitation and (or) bankruptcy.

Article 8. Legal regime of agreements

1. Initiation of proceedings about bankruptcy is not the basis for unilateral refusal of the agreement performance concluded by the debtor before initiation of proceedings about bankruptcy at the initiative of the partner of the debtor and does not attract cancellation of this agreement. The agreement of the parties on refusal of agreement performance and on cancellation of this agreement signed before initiation of proceedings about bankruptcy because of initiation of proceedings about bankruptcy is invalid.

2. The rehabilitation managing director has the right to refuse execution of the agreements signed by the debtor before initiation of proceedings about rehabilitation which are not performed by both parties fully or partially in the presence of one of the following circumstances:

1) the agreement is signed with the affiliate;

2) the agreement contains burdensome conditions for the debtor in comparison with earlier signed similar agreements;

3) the agreement is long-term (more than one year) or is expected receipt of results by the debtor only for long-term outlook;

4) other reasons to believe are had that agreement performance by the debtor will entail adverse effects for other creditors.

3. The bankrupt managing director shall change, terminate, refuse execution or dispute validity of the agreement signed before initiation of proceedings about bankruptcy, demand return of the property given by the debtor based on the decision of creditor committee.

4. From the date of removal of determination of court about initiation of proceedings about rehabilitation or bankruptcy and to the introduction in legal force of determination of court about diversion about rehabilitation or bankruptcy or the judgments about application to the debtor of the rehabilitation procedure or recognition of the debtor by the bankrupt offsetting of mutual requirements between the debtor and his creditors is not allowed.

The rehabilitation or bankrupt managing director shall declare to the creditor offsetting of requirements if offsetting does not violate requirements priority of satisfaction of requirements of creditors, is direct, mutual, without involvement of other persons. Offsetting is allowed only according to requirements about payment of money.

5. The supplier of electrical and heat energy, services in water management and sewer systems, communications, and also on protection of property of the debtor has no right to refuse the agreement signed with the debtor because of recognition of the debtor by the bankrupt. The expenses connected with execution of these agreements after initiation of proceedings on rehabilitation or bankruptcy belong to administrative expenses.

Article 9. Affiliates

This Law affiliates are recognized:

1) shareholder, founder (participant) of the debtor or creditor;

2) close relatives, the spouse (spouse), close relatives of the spouse (spouse) of the individual entrepreneur - the debtor, and also the physical person specified in subitems 1), 3) and 4) of this Article;

3) the face tied with the participant of procedures of rehabilitation and bankruptcy the agreement according to which it has the right to determine the decisions made by the debtor;

4) officials of the participant of procedures of rehabilitation and the bankruptcy or the legal entity specified in subitems 1), 3), 5), 6) and 7) of this Article;

5) the legal entity in relation to whom the participant of procedures of rehabilitation and bankruptcy is shareholder the participant or has the right to respective share in property;

6) the legal entity who together with the participant of procedures of rehabilitation and bankruptcy is under control of the third party;

7) the other person who is the affiliate of the participant of procedures of rehabilitation and bankruptcy according to legal acts of the Republic of Kazakhstan or recognized affiliated by a court decision.

Article 10. Confidentiality

1. The authorized body and the administrator has the right to request and receive data on financial and economic activities of the debtor, including the period before recognition by his bankrupt, without receipt of consent of the individual entrepreneur, the owner of the property (authorized by it body), founders (participants) of the bankrupt.

2. Disclosure of data on financial and economic activities by the administrator or the official of authorized body to which they are entrusted or known on service or work and equally in loss of the documents containing such data attract the responsibility established by the laws of the Republic of Kazakhstan. Operation of this article extends also to persons involved by the administrator.

3. Transfer by authorized body or the administrator of information provided to them to state bodies in the cases provided by the laws of the Republic of Kazakhstan is not disclosure of confidential information.

4. When holding the procedures provided by this Law the following information is not confidential:

1) about person performing activities of the administrator;

2) about structure of creditor committee and decisions made by it;

3) about the amount of requirements included in the register of requirements of creditors and about the size of their satisfaction by queues;

4) about terms of holding procedures;

5) about execution of the schedule of satisfaction of requirements of creditors;

6) about availability of claims to actions (failure to act) of the administrator and results of their consideration;

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