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LAW OF THE REPUBLIC OF ARMENIA

of January 22, 2007 No. ZR-51

About bankruptcy

(as amended on 30-03-2021)

Accepted by National Assembly of the Republic of Armenia on December 25, 2006

Chapter 1. General provisions

Article 1. Procedure for hearing of cases about bankruptcy

1. Business management about bankruptcy is performed according to the procedure, established by the Code of civil procedure of the Republic of Armenia and this Law.

2. If this Law establishes other rules by what those which are established by the Code of civil procedure of the Republic of Armenia then consideration of the case about bankruptcy is performed by rules, the established this Law.

3. Voided according to the Law of the Republic of Armenia of 02.07.2016 No. ZR-105

Article 2. Limits of operation of the Law

1. Any legal entity or physical person, except for can be the debtor in the production established by this Law on bankruptcy:

a) Republic of Armenia;

b) municipality;

c) Central Bank of the Republic of Armenia;

d) bank;

e) credit institution;

e) investment company;

e. 1) managing director of investment fund;

g) insurance company.

h) Fund of compensation created on the basis of the Law of the Republic of Armenia "About compensation of damage caused to life or health of the military personnel during defense of the Republic of Armenia".

The concepts used in this part "bank", "insurance company", "investment company", "managing director of investment fund"  or "credit institution" do not include bank, insurance company, investment company, the managing director of investment fund or the credit institution which got permission of the Central bank of the Republic of Armenia to self-liquidation.

2. For insurance companies, the charity, investment and pension funds, investment companies, the operator of the controlled market, the Central depositary, pawnshops, subjects of natural monopoly and subjects having dominant position in the market of public organizations by the law other rules of insolvency and production on bankruptcy with their participation as the debtor can be determined, than those which are established by this Law.

3. Provisions of this Law are applied to the relations of insolvency (bankruptcy) with participation of the foreign person or the person without citizenship as the debtor if international treaties of the Republic of Armenia do not provide other.

4. Solutions (resolution) of courts of foreign states on cases on insolvency (bankruptcy) are recognized the Republic of Armenia according to international treaties of the Republic of Armenia, and in case of their absence – by the principle of reciprocity.

5. The relations in the field of insolvency (bankruptcy) of banks, credit institutions, investment companies managing investment fund and insurance companies are regulated by the Law of the Republic of Armenia "About bankruptcy of banks, credit institutions, the investment companies managing investment fund and insurance companies".

Article 3. Bases of recognition of the debtor by the bankrupt and signs of insolvency

1. The debtor can be declared bankrupt the judgment - on own initiative (the statement for voluntary bankruptcy) or upon the demand of the creditor (the statement for involuntary insolvency) if the debtor is insolvent.

2. The judgment the debtor can be declared bankrupt:

1) based on the statement for involuntary insolvency if it allowed delay of the indisputable payment obligations exceeding the two-thousandfold size of the minimum wage established by the law for the term of 90 days and more, and the specified delay continues at the time of decision (the actual insolvency). The payment obligation is indisputable if the debtor does not object to it or if he objects to the mentioned obligation, however:

a) the payment obligation the resolution which acknowledged took legal effect or the decision is also absent possibility of its offsetting,

b) the requirement is based on the written transaction, and the debtor does not prove that it has good causes for objection against this requirement (including offsetting of the requirement),

c) the requirement follows from the obligation of the debtor on payment of the taxes established by the law, duties, other payments and the debtor does not prove that it has good causes for objection against this requirement (including offsetting of the requirement),

d) the neocoupled part of the requirement exceeds the two-thousandfold size of the minimum wage established by the law;

2) on own initiative (the statement for voluntary bankruptcy) if obligations of the debtor exceed asset cost of the debtor in two-thousandfold and more than a size of the minimum wage established by the law: in case of the legal entity – by assessment which is carried out based on accounting rules in case of physical person – by assessment, assessment (balance sheet insolvency) which is carried out based on standards. The asset cost does not join asset cost on which according to the law collection cannot be turned;

2. 1) on own initiative (the statement for voluntary bankruptcy) if the obligations of the debtor which are subject to execution on public monetary claims exceed asset cost of the debtor - in case of the legal entity – by assessment which is carried out based on accounting rules in case of physical person or the individual entrepreneur – by assessment, assessment (balance sheet insolvency) which is carried out based on standards. The asset cost does not join asset cost on which according to the law collection cannot be turned.

2.2. The creditor has the right to take a legal action in case of the predicted bankruptcy when it is obvious that there will be parts 2 of this Article of the basis for recognition by the debtor of the bankruptcy provided by Items 2 and 2.1.

3. Voided according to the Law of the Republic of Armenia of 15.01.2011 No. ZR-13

4. For the managing director of fund, being the agreement party of management of the fund provided by the Civil code of the Republic of Armenia, and this fund which is not considered by the owner of means, obligations assumed by it according to the transactions connected with management of fund on sense of this Law are considered as the obligation if according to provisions of the Civil code of the Republic of Armenia they are subject to execution at his expense. At the same time for the managing obligation which are subject to execution 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 considered as the obligation only in unsatisfactory part of assets of fund.

5. The managing director of fund, being the agreement party of management of the fund provided by the Civil code of the Republic of Armenia, and considered as the owner of means of this fund, is considered insolvent also if the obligations which are not subject to execution at the expense of the assets of fund (funds) managed by it exceed asset cost of the managing director of fund, not being assets of the fund managed by it.

Article 4. Jurisdiction of cases on bankruptcy

1. Business management about bankruptcy is performed in court about bankruptcy of the Republic of Armenia (further – Court). Case on bankruptcy is processed by the judge solely.

2. In case of case referral about bankruptcy to other judge as a result of redistribution maintaining about bankruptcy continues from the moment of the termination.

3. Civil cases on the disputes which arose in connection with the property and the rights included in structure of property of the debtor declared bankrupt, subject of the secure right belonging to the third party, the agreements signed with participation of the debtor and creditor, including on measures of ensuring accomplishment of obligations, and influencing possibility of debtors to meet requirements, except for the civil cases initiated in the claims submitted by the managing director, or the claims submitted based on the Law of the Republic of Armenia "About confiscation of property of illegal origin" are considered by the judge processing case on bankruptcy as separate civil cases within the same case on bankruptcy (further – separate civil cases).

4. Separate civil cases are initiated, considered and solved according to the procedure, established by the Code of civil procedure of the Republic of Armenia.

5. The cases accepted to production by court with abuse of regulations, provided by part 3 of this Article, the court by the decision submits to Trial Court of the general jurisdiction of the Republic of Armenia (further – court of law).

6. In case of receipt of civil case from court of law the Court in seven-day time makes the decision on its acceptance to production or sending case to the chairman of Court of cassation if he does not agree with jurisdiction of case. The chairman of Court of cassation in five-day time determines jurisdiction of case. The court determined by the chairman of Court of cassation is considered competent court.

7. In case of the end of case on bankruptcy consideration of separate cases continues if there are no bases for cessation of production on these cases or leaving of the claim for these cases without consideration.

8. In the presence of the bases for rejection of the judge processing case on bankruptcy on separate civil case the separate civil case is considered by other judge of Court.

9. If after adoption of the resolution on recognition of the debtor by the bankrupt the court resolution adopted on the case of bankruptcy was cancelled, and case is sent for new trial, case (question) is considered by the same judge of Court if there are no bases for rejection.

10. In case of acceptance of court resolution about cancellation of court resolution of the court adopted on separate civil case, and sendings case for new case of consideration goes to court and is considered by other judge of court.

Article 5. The obligation of the debtor to take a legal action

1. The debtor shall take a legal action for the purpose of recognition of own bankruptcy if there are bases established by Items 2 or 2.1 of part 2 of article 3 of this Law.

2. The liquidation commission (liquidator) of the debtor legal entity shall (shall) file a lawsuit the statement for recognition of the debtor by the bankrupt if in case of liquidation it becomes clear that the property value of the debtor legal entity is insufficient for complete satisfaction of requirements of creditors.

3. In the cases provided by this Article the statement for recognition of the debtor by the bankrupt shall be filed a lawsuit not later than in two-month time after identification of the corresponding bases.

Article 6. The obligation of the creditor or other person to take a legal action

1. The relevant authorized state bodies or local government bodies in the presence of the stipulated in Clause 3 presents of the Law of the bases for recognition of the debtor by the bankrupt according to monetary commitments concerning budgets of the Republic of Armenia and municipalities (including on taxes, duties and other payments) shall take a legal action with the requirement about recognition of the debtor by the bankrupt in the following cases and in the following terms:

a) the relevant authorized state body – in case of payment delay of the taxes, duties, customs duties, other payments or penalties which arose in case of administration - within 6 months following from the moment of detection of the obligation;

b) the head of municipality – in case of payment delay of local duties or obligatory payments, and also obligation fulfillment on other monetary claims of municipality - within 6 months following from the moment of detection of the obligation.

2. If in case of the address of collection on all property of the debtor during forced execution of the decision on collection of property it becomes clear that this property in two-thousandfold and more than a size of the minimum wage established by the law is not enough for ensuring complete obligation fulfillment before the creditor (claimant) or if in case of satisfaction of the requirement of the creditor (claimant) for any enforcement proceeding (any enforcement proceedings) of Service on ensuring forced execution there is impossible complete obligation fulfillment before other creditor (claimant) on this or other enforcement proceeding (these or other enforcement proceedings) owing to insufficiency of property in the amount of the thousandfold and more established by the law minimum wage, that the police officer shall suspend without delay enforcement proceeding (enforcement proceedings) and suggest the creditor and the debtor to file a lawsuit the statement for bankruptcy at the initiative of one of them not later than in 90-day time.

The decision on suspension of enforcement proceeding on the basis of insufficiency of property is published by Service on ensuring forced execution according to the procedure, established by the Law of the Republic of Armenia "About the public notification via the Internet", and on the corresponding website of the Ministry of Justice of the Republic of Armenia within 2 working days.

If after publication of the decision on suspension of enforcement proceeding new creditors or already famous creditor or the debtor come to light file to the police officer petition for non-renewal of enforcement proceeding, then the police officer suggests them to file a lawsuit the statement for bankruptcy and does not renew enforcement proceeding.

If the debtor or the creditor does not file a lawsuit the statement for bankruptcy in the time established by this part or new creditors do not come to light, then the police officer renews enforcement proceeding.

In sense of this part the property is considered insufficient if the estimative or starting price of the forthcoming realization of the arrested and the estimated property which is subject to realization on enforcement proceeding (enforcement proceedings) is less than the size of requirement (requirements). In the amount of the requirement (requirements) also the expenses connected with implementation of enforcement proceeding, and the obligation on the value added tax arising from realization of property, the excise tax, the receipts tax, ecological tax are estimated (in sense of this Law the tax liabilities arising from realization of property).

3. In case of not filing of application about bankruptcy in time, established by the state bodies specified in part one of this Article it give bodies of prosecutor's office according to the procedure, established by this Law, except as specified when there is order of the Government about abstention from filing of application about recognition of this person by the bankrupt.

4. The state bodies and officials provided by this Article can abandon the claim if owing to obligation fulfillment its size became less than the size provided by part two of article 3 of this Law.

5. The application for bankruptcy can not be submitted by the state bodies specified in part one of this Article if there is order of the Government of the Republic of Armenia (further – the Government) about abstention from filing of application about recognition of this person by the bankrupt.

Article 7. Personal property liability for non-execution of obligation on appeal to the court

1. In case of not giving by persons of the statement for recognition of the debtor by the bankrupt specified in article 5 of this Law in cases and the term which are established by the same Article persons having obligation on filing of application bear subsidiary responsibility to creditors according to the obligations of the debtor which arose after the expiration established by part three of article 5 of this Law. The same responsibility arises also for the police officer in case of non-execution of the obligation established for the last by article 6 of this Law.

2. Competent officials of the state bodies and local government bodies specified in article 6 of this Law in case of not filing of application about recognition of the debtor by the bankrupt in cases and the term which are provided by the same Article bear the personal property liability for the harm done thereof according to the Republic of Armenia and municipality.

Article 8. Deliberate bankruptcy

If the debtor is declared bankrupt because of other persons who are owning authorized (share equity, share equity) the capital of the debtor or having opportunity to instruct it obligatory for execution, or to predetermine its decisions, including because of the debtor's head (activity of the debtor direct or indirect actions and other/deliberate bankruptcy/), then founders (participants) of the debtor legal entity or these persons bear joint liability according to obligations of the debtor in case of insufficiency of property of the last.

Article 9. Affiliates of the debtor

1. As affiliates of the debtor are considered:

a) the established by the legislation of the Republic of Armenia the main, legal entity, affiliated or dependent in relation to the debtor;

b) the debtor's head, and also the board member (supervisory board), the member of collegiate executive body of the debtor, the chief accountant (accountant), and also person exempted from the specified positions within the last one year from the moment of filing of application about recognition by the bankrupt;

c) person owning 20 and more percent authorized (share equity, share share) the debtor's capital;

d) person or the member of body having opportunity to instruct the debtor obligatory for execution or to predetermine its decisions.

The affiliate of the debtor also person who is with the physical persons specified in this part in the relations established by part two of this Article, and in case of affiliation of the legal entity on the basis of the Items "in" and "g" of this part - also physical person of this person occupying the position specified in the Item of this part is considered.

2. His spouse (spouse), persons who are in family relation with them on direct of the ascending and descending line of the second degree, the brother, the sister and persons who are with them in family relation on the direct descending line, the brother, the sister of the spouse (spouse) are considered as affiliates of the debtor physical person.

3. Affiliates of the managing director and creditors are determined according to the procedure, established by parts one and the second this Article if this Law does not provide other.

Chapter 2. The statement for bankruptcy and its acceptance to production

Article 10. Giving and withdrawal of the statement

1. The application for involuntary insolvency can be submitted:

a) one or several creditors jointly;

b) ceased to be valid according to the Law of the Republic of Armenia of 15.01.2011 No. ZR-13

2. And its response have the right to filing of application about voluntary bankruptcy:

a) on behalf of legal entities - their bodies or representatives acting within allocated for them by the law or the charter of powers (further – the creditor's head);

b) on behalf of physical person – this physical person or his representative.

3. The application submitted jointly more than one creditor, can be withdrawn only from written consent of all addressed creditors.

The application for voluntary partnership can be withdrawn in three-day time after registration of a statement in court. The application for forced bankruptcy can be withdrawn in ч5-day time after registration of a statement in court, and in case of implementation of consideration of the application on judicial session it can be withdrawn that the beginnings of judicial session.

4. In case of withdrawal of the statement the proceeedings about bankruptcy accepted to judicial proceedings based on this statement stop.

Article 11. Statement form and content

1. The petition is submitted on form and content which are provided by the Code of civil procedure.

2. Shall be specified in the statement also:

a) the size of monetary claim of the creditor, the sizes of debt, losses, penalties (penalty, penalty fee) by the corresponding calculations;

b) completion date of the obligation or its part (parts);

c) offer on the candidate for the interim manager or consent to leaving of its choice at the discretion of the court.

3. Are also enclosed to the application:

a) data on state registration by prescription no more than 30 days preceding day of filing of application about recognition of the debtor legal entity or debtor individual entrepreneur by the bankrupt;

b) the last tax calculation, provided by the debtor legal entity or the debtor individual entrepreneur, - in case of filing of application by tax authorities;

c) in case of representation in the statement of the offer of the candidate for the interim manager – written consent of this candidate to act as the candidate for interim managers.

4. The documents enclosed to the application are submitted in the original or in the form of properly verified copy.

The impossibility of submission of the documents enclosed to the application in the original or in the form of properly verified copy shall be proved by the applicant.

5. The statement of the creditor can be based on the requirements combined according to different obligations.

6. Creditors can combine the requirements to the debtor and file a lawsuit one statement. Such application is signed by all creditors who combined the requirements.

7. In case of filing of application about forced bankruptcy the copy of the application and copies of the documents enclosed to the application according to number of debtors are enclosed to the application. Before filing of application about forced bankruptcy the applicant does not send to the debtor the statement and the enclosed documents.

8. In case of filing of application about forced bankruptcy the creditor can petition to court for that later recognitions of the debtor by the bankrupt to consider the application also as the requirement if the statement conforms also to the requirements established by part 2 of article 46 of this Law. In case of the petition of such requirement two more copies of the application and the enclosed documents are submitted, and in case of non-compliance with this requirement the petition is not considered what person who submitted the application is informed no later than the next day on. Submission of the petition does not limit the applicant's right to submission of the requirement according to the procedure, the stipulated in Clause 46 these Laws.

Article 12. The documents submitted by the debtor

1. In case of submission of the statement by the debtor for the purpose of recognition of own bankruptcy or threats of bankruptcy in appendix to the statement are posed (and in cases, stipulated in Item "e" 19, the debtor shall submit Article parts one) the following documents:

a) the list of the property belonging to the debtor on the property right by results of the last inventory count (in case of its availability), including capital and financial investments, the main and current assets, and also the intangible assets and other means which are not relating to the specified structure;

b) the list of creditors and debtor's debtors (including citizens before whom the debtor bears responsibility for damnification of their life and to health), their names (names), the residence (stays), nature and the size of separate liabilities, including off-balance obligations. The specified data shall join also obligations which term did not expire, and also the guarantees provided by the debtor, and other obligations assumed by it;

c) financial statements of the debtor for the last accounting period;

d) if the debtor is economic partnership, then names (names), the residence (stays) and data on state registration of his participants (complete companions);

e) the announcement of the debtor of intention to perform financial sanitation;

e) data on other property rights (proof of other property rights);

g) proofs about departure to all debtors of copies of the statement for threat of bankruptcy or voluntary bankruptcy and other documents brought into court;

h) in case of the statement for bankruptcy threat, the program of financial improvement constituted according to requirements of this Law.

2. If the debtor intends to undergo to financial sanitation, then he can provide the plan of financial sanitation which is also enclosed to the application constituted according to requirements of this Law.

3. In case of impossibility of submission of the documents provided by this Article the debtor shall bring motivated reasons for it into court. All risks connected with non-presentation or incomplete submission of the documents provided by this Article are born by the debtor.

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