Draft amendments to the Federal Law “On Insolvency (Bankruptcy)”

The State Duma portal has published draft Federal Law No. 1034201-8 “On Amendments to the Federal Law ‘On Insolvency (Bankruptcy)’,” which was submitted for consideration on October 7, 2025.

As noted by the authors of the draft law, Russian law does not regulate the mechanism for pre-trial settlement of debts without filing for bankruptcy with an arbitration court. Federal Law No. 127-FZ “On Insolvency (Bankruptcy)” dated October 26, 2002 No. 127-FZ only states that in order to prevent the bankruptcy of organizations, the founders (participants) of the debtor and the owner of the debtor’s property must take measures to restore the debtor’s solvency before filing a petition with the arbitration court to declare the debtor bankrupt. The absence at the legislative level of a detailed mechanism for out-of-court debt settlement, including, among other things, a provision on the “protection of the debtor” from the initiation of insolvency proceedings during the out-of-court recovery procedure, is a significant obstacle to the application of such procedures in practice.

Legal regulation of measures to prevent bankruptcy of organizations is presented in Chapter II of Federal Law No. 127-FZ of October 26, 2002, “On Insolvency (Bankruptcy),” which contains only two articles: “Article 30. Measures to prevent bankruptcy of organizations“ and ”Article 31. Reorganization.”

In order to solve this problem, the draft law proposes detailed regulation of a mechanism aimed at preventing the bankruptcy of debtors and settling debts without initiating bankruptcy proceedings, out of court.

The emergence of a new rehabilitation mechanism aimed at restoring debtors’ solvency and satisfying creditors’ claims outside the framework of bankruptcy proceedings will make it possible to avoid the costs and other negative consequences associated with bankruptcy proceedings.

A rehabilitation specialist will be involved in conducting the procedure. Arbitration managers who meet the requirements established by law and are accredited by the national association of self-regulatory organizations of arbitration managers (SRO) will be able to act as rehabilitation specialists. In addition, the document proposes introducing permanent monitoring of the financial condition of strategic and systemically important enterprises. This will make it possible to prevent their bankruptcy at an early stage.

In accordance with the proposed amendments, no later than 45 days from the date of commencement of rehabilitation, the rehabilitator must develop a rehabilitation plan and submit it for review and approval to the owner of the debtor’s property. The rehabilitation plan must specify the duration of rehabilitation, measures to restore the debtor’s solvency, the terms and procedure for implementing these measures, information about the candidate for rehabilitation administrator, and the division of powers between the rehabilitation administrator and the founders (participants) of the debtor or the owner of the debtor’s property. The rehabilitation plan shall be approved by a meeting of creditors, which shall be convened by the rehabilitator no later than two months after the date of commencement of rehabilitation.

It is proposed to increase the duration of the financial rehabilitation procedure from two years to four years, with the possibility of a one-time extension of no more than two years.

The bill provides for the right to “judicially overcome” creditors’ refusal to undergo financial rehabilitation proceedings in relation to the debtor, provided that the feasibility of the financial rehabilitation plan is proven and a number of conditions are met, indicating that the creditors’ rights have not been violated in making such a decision.

The draft law also provides for the possibility of voluntary division of creditors into classes, as well as the introduction of annual indexation of the remuneration of arbitration managers.

It is proposed to improve the mechanism for the sale of the debtor’s property.

The current mechanism provides for two stages of bidding to increase the price, during which the property is usually not sold. Therefore, in 90% of cases, as indicated in the explanatory note to the bill, there is a transition to downward bidding in the form of a public offering. These stages take a long time (at least three months) and lead to unnecessary material and organizational costs for participants in the bankruptcy procedure.

In this regard, changes have been proposed to the determination of the initial sale price of property. The new bidding mechanism will be more flexible. Within a single procedure, the price may initially rise, then, in the absence of bids, it will begin to fall until the first price offer is received, after which the bidding will rise again.

As part of the bill to improve the efficiency of bankruptcy proceedings — increasing the amount of creditor claims repaid and reducing the duration of the proceedings — changes are also proposed to bankruptcy legislation, providing for the publication of all necessary information on bankruptcy proceedings in a publicly accessible electronic form — in the EFRSB – the abolition of the mandatory publication of information on bankruptcy proceedings in print in the official publication, the Kommersant newspaper and the Bank of Russia Gazette.

Link: https://sozd.duma.gov.ru/bill/1034201-8

Draft law № 1034201-8