One of the measures that can be introduced by decision of the meeting of creditors in relation to a potential bankrupt is external management. If creditors and the court have reason to believe that an unfavorable financial condition could have arisen as a result of incompetent actions of the firm’s managing staff, they can apply this measure. Sometimes it is advisable to appoint an independent manager to correct the situation. This procedure aims to fully restore the financial condition of a legal entity that is on the verge of bankruptcy. In this article, we consider a moratorium on satisfying creditors' claims.
Independent Manager Goals
If the process completes favorably, then there is no initiation of bankruptcy proceedings. The organization continues to exist as an independent market entity and makes payment of all its debts independently.
In order to achieve the goals, an independent manager must implement a certain set of measures, as well as follow a special plan aimed at financial rehabilitation of the organization. One of the components of such a plan may be a moratorium on satisfying creditors' requirements.
What does this mean?
This implies the suspension of all operations to fulfill the debtor's property and monetary obligations in favor of creditors. The moratorium rules also apply to tax payments. A characteristic feature of such a period involves the lack of authority of the debtor to independently decide which payments can be made and which cannot.
In addition, the moratorium also limits the claims of creditors. For this period they will have to forget about their own claims to the organization. It is believed that the introduction of a moratorium may infringe on the civil rights of creditors, but at the same time gives them the opportunity to count on a full repayment of debt by the organization. Bankruptcy proceedings do not give such a chance.
With the introduction of a moratorium on satisfying the requirements of creditors, the company has the opportunity to direct the funds that were intended to pay for obligations to other economic and organizational measures necessary to stabilize financial performance. It is assumed that such measures will contribute to a gradual and painless way out of a financially unfavorable situation.
The introduction and operation of the moratorium is regulated by the Federal Law “On Insolvency (Bankruptcy)”, in particular, by its article No. 95.
Moratorium
An independent manager can make a decision on introducing a moratorium on satisfying creditors' requirements, since during this period the entire management apparatus of the organization is removed from the exercise of its duties. But only judicial authorities can legalize an official ban on the fulfillment of existing obligations to creditors through a court order.
Expediency
The feasibility of introducing a moratorium is determined by the court, taking into account the possible positive effect that may arise as a result of the execution of executive documents being suspended.The trial on the introduction of a moratorium is initiated on the basis of the statement of claim. If the Arbitration Court makes a positive decision on the introduction of a moratorium, then immediately there is a suspension on all payments. At the same time, payments can be suspended both voluntarily and forcibly.
If the debtor himself recognizes his financial insolvency and inability to pay debts, then the moratorium is announced at the time of the announcement of bankruptcy. In the event that the initiative comes from credit organizations, a moratorium should be announced through the media.
For banking organizations, the decision to introduce a moratorium is assigned to the regulatory body, that is, the Central Bank of the Russian Federation. However, it is worth noting that the Central Bank extremely rarely uses such a procedure and resorts to more drastic measures - it immediately withdraws a license that allows for banking operations.
The period during which a moratorium
The decision on the time period for which a moratorium will be established and for which, accordingly, there will be a freezing of satisfaction of creditors' requirements rests with an independent manager. And if at the initial stages of the moratorium the target indicators are not achieved, and the financial situation at the enterprise is not corrected, then the manager is vested with the right to file an application to prolong the freezing period.
During the moratorium, an independent manager has the right not only to stop payments on accumulated debt, but also to refuse to make transactions of a dubious nature and capable of negatively affecting the financial condition of the organization. This is confirmed by section 95 of the Bankruptcy Law.
Three-month freeze on satisfying creditor claims
The law does not regulate the minimum period for which restrictions may be established. However, the maximum duration of a moratorium on satisfying creditors' claims is limited to three months. That is, freezing cannot last infinitely long. In turn, the process of implementing external management can be prolonged for a period of up to one and a half years, if this is required for the full implementation of all tasks.
How can events develop after the end of a three-month period and a moratorium with it? If the outcome turns out to be favorable, then assets will appear in the ownership of the enterprise that will be used to repay the debt that has arisen to creditors. In this case, the bankruptcy procedure will be completed.
In the event that the outcome turns out to be unfavorable and the set financial goals cannot be achieved, then at a general meeting of creditors a decision may be made to initiate bankruptcy proceedings. This procedure involves the sale of all property that is liquid in order to form a competitive money supply. This is necessary to establish the size of the claims of creditors. The funds that will be able to help out will be fully used to close debts. At the end of bankruptcy proceedings, the enterprise will be liquidated, and all liability to creditors will be removed.
Cases with Banks
If we consider cases with banks, in relation to which the Central Bank decided to impose a moratorium on satisfying the requirements of creditors, then two possible events are possible. First: a license will be revoked from the bank, and the financial institution will cease to operate. Second: a decision will be made on rehabilitation (saving the bank). In the second scenario, the bank will be able to continue its activities as usual. The decision to start reorganization, as a rule, is made only in relation to large, systemically important banks whose revocation of the license may have a negative impact on the banking system as a whole.
Who can it apply to?
The temporary freezing of satisfaction of creditors' claims relates to certain payments, the obligations of which arose before the decision was made to introduce external management. These payments include:
• Payments for executive documentation.
• Payments on foreclosure of a property nature (these also include collateral items for mortgage lending).
• Other types of documents that require enforcement.
• Decisions to collect accumulated debt on wages or copyright agreements.
• Decisions on compensation for non-pecuniary damage.
• Claiming property that is in someone else's possession.
For the period of the moratorium, several features are characteristic. Various types of penalties or interest cannot be accrued on debt, the inflation index is also not applied. All interest on the requirements of authorized bodies and creditors will be charged at the rate of the key rate. They are accrued from the date when the external management was started, and are valid until the decision is made on the beginning of payments to creditors or until bankruptcy proceedings are opened.
If the manager manages to come to an agreement with the creditors, they can reduce the accrued rate or reduce the period during which interest will be charged. It should be borne in mind that accrued interest does not participate in the process of determining the votes at meetings of creditors.
The moratorium may also act on creditors' claims for compensation for losses incurred in connection with the refusal of an independent manager to fulfill certain obligations of the contract. But the manager does not have the right to abandon those obligations that arose in the framework of transactions approved and concluded by him at the stage of external management.
While the moratorium is in effect, the statute of limitations for all cases will be suspended.
Such concessions positively affect the financial condition of the company. She can concentrate on achieving the goal of overcoming the crisis.
It should be noted that during the moratorium there is no possibility of concluding a settlement agreement.
Who can not be covered by a moratorium?
There is no legislative provision for a moratorium in the event of bankruptcy under a simplified scheme. In this case, the process of liquidation of the enterprise should be immediately opened, since external management and the introduction of procedures for financial recovery are unacceptable.
The moratorium on satisfaction of creditors' claims does not apply to:
• Payments on wages.
• Obligations of employees to pay child support.
• Copyright fees.
• Any compensation for harm to life or health.
• Claims for current payments.
That is, a moratorium on satisfying creditors' claims extends to those obligations that were formed before the start of the insolvency (bankruptcy) procedure. The remaining debts that arose while external management was carried out, that is, current requirements, must be paid off.
Moratorium on meeting the requirements of bank creditors
Not only with respect to legal entities a moratorium can be introduced. It can also be applied to banks. Not all citizens who have open deposits in banks know that it is possible to receive insurance under the DIA system when a moratorium is introduced, and not only after the license has been revoked from the bank. Such a rule is enshrined in the relevant legislation relating to deposit insurance. Insurance will be paid in the amount of not more than one million four hundred thousand rubles. That is, its size is standard.
The Central Bank of the Russian Federation very rarely enjoys the right to introduce a moratorium. This is because, as a rule, he has every reason for terminating the activities of the bank, that is, revoking his license.Basically, such grounds are participation in transactions of dubious nature, loss of liquidity. But there are several precedents for introducing a moratorium on banking organizations. The Central Bank applied freezing in relation to Nota Bank, Vnesheconombank and Tatfondbank. The reason for the initiation of the moratorium procedure was the precarious financial situation of these banking organizations.
The moratorium on satisfying the claims of creditors of a credit institution provides for a delay of 3 months for reimbursement of obligations.
Conditions for freezing
Several conditions must be met, based on which the Central Bank can begin the freezing procedure:
• Executive bodies in the bank suspended their work.
• Obligations to creditors are not fulfilled for at least a week.
Simultaneously with the initiation of a moratorium, a temporary administration will be introduced in the bank.
The fact that a moratorium has been introduced in the bank means that during its operation the bank will not be able to fulfill its own obligations. For example, it will not be possible to withdraw your contribution. Also, the bank does not make payments and operations, with the exception of current ones. While the moratorium is in effect, the interim administration assesses the available assets, and then must decide: revoke the license or proceed with reorganization.
During the moratorium, banks still accrue interest on accounts. However, the rate is 2/3 of the key rate.
The most important question is how should investors behave during a moratorium? Bank customers are fully entitled to receive insurance payments two weeks after the start of the moratorium. At the same time, they will receive the full amount of their contribution and interest, which were accrued at the key rate. By the way, applying for insurance in the DIA is a citizen's right, and not his duty. This is confirmed by the Law on Insolvency (Bankruptcy).