14.01.09

The Supreme Arbitration Court (SAC) drafted a bill that will make it more difficult for a bank to foreclose on property offered as security on a loan prior to company’s bankruptcy.

A survey of judicial practice on challenging transactions conducted prior to a company’s bankruptcy will be reviewed by the SAC Presidium on January 29, 2009. The draft has been published on SAC website.

The proposed document would allow contesting property-secured loans that were formalized six months prior to the beginning of bankruptcy procedures. If a court recognizes the transaction as invalid, the security deposit is added to bankrupt party's assets, and the bank will only be able to lay claim for a portion after other creditors have already laid claims. Currently, the bank can receive the full proceeds from the sale of the property.

According to Igor Dergunov, chairman of the board at Maritime Bank, the proposed document will hurt creditors, but will also have a negative effect on debtors. The probability of bankruptcies is increasing, and banks will be forced to be more careful in accepting security deposits which, in turn, will increase cost of loans and make receiving loans more difficult. The SAC review will be used in disputes on credit issued by private and state-owned banks, including distribution of government assistance, for example, by Vnesheconombank (VEB). VEB issues credit for one-year term with option to renew. According to a VEB representative, they expect absolute loan repayment, all applications are carefully screened, and possibility of a debtor’s fast bankruptcy is practically zero.

The SAC presidium will also review a draft on bankruptcy procedures allowing contesting any bankrupt party's payments for six months after the beginning of bankruptcy procedure. It expected to simplify return of funds removed from company.

Source: “Vedomosti”