Article 239. Causing Insolvency — Commentary on the Article of the Criminal Code of the Republic of Kazakhstan
1. Concealment of property or property obligations, information about property, its value, location, or other information about property; transfer of property into the possession of another person; alienation or destruction of property; as well as concealment, destruction, or falsification of accounting and (or) bookkeeping documentation or other documents reflecting economic activities, if these actions (inaction) are committed by a founder (participant), an official, a person performing managerial functions in a commercial or other organization, the bodies of a legal entity, or an individual entrepreneur, and result in insolvency causing major damage, —
shall be punishable by a fine of up to two hundred monthly calculation indices, or corrective labor in the same amount, or community service for a period of up to one hundred and twenty hours, or arrest for a period of up to forty days, with deprivation of the right to hold certain positions or engage in certain activities for a period of up to three years.
2. An intentional action (inaction) by a senior employee of a financial organization, a banking and (or) insurance holding company, a major participant (major shareholder) who is an individual, the head or a member of the management body, the head or a member of the executive body, or the chief accountant of a major participant (major shareholder) that is a legal entity of a financial organization, as well as persons temporarily or under special authorization performing the functions of the management body or executive body of a financial organization, which results in insolvency leading to the compulsory liquidation of a financial organization or to the classification of a bank as an insolvent bank, —
shall be punishable by restriction of liberty for a period of three to seven years or deprivation of liberty for the same period, with confiscation of property, with deprivation of the right to hold certain positions or engage in certain activities for a period of five years, and with a lifetime prohibition on holding the position of a senior employee of a financial organization or a banking and (or) insurance holding company, and on being a major participant (major shareholder) of a financial organization.
3. Excluded pursuant to Law of the Republic of Kazakhstan No. 292-VI dated 27 December 2019.
Public Danger
The public danger of the criminal offence (Part 1 — a criminal misdemeanour; Part 2 — a crime) consists in the violation of the interests of the state, the lawful rights and interests of shareholders of commercial organizations and other interested persons, creditors, as well as the violation of the rights and legitimate interests of employees of commercial organizations, in particular, through unjustified reductions in jobs. The object is the property interests of creditors.
The subject matter of the criminal offence is property, property obligations, information about property, its value, location, other information about property, accounting and other bookkeeping documents reflecting the economic activities of an individual entrepreneur — debtor or an organization — debtor.
The subject matter of the criminal offence under consideration, as well as the definitions of the concepts of creditor, information about property, accounting and other documents, are identical to the corresponding concepts contained in Article 237 of the Criminal Code of the Republic of Kazakhstan (see the commentary to Article 237 of the Criminal Code).
The objective element of the criminal offence provided for in Part 1 of Article 239 of the Criminal Code is characterized by the act, the consequence, and the time of commission of the criminal offence.
The act is expressed alternatively in any of the following actions (inaction):
- concealment of property or property obligations, information about property, its value, location, or other information about property;
- transfer of property into the possession of another person;
- alienation or destruction of property; or
- concealment, destruction, or falsification of accounting and (or) bookkeeping documentation or other documents reflecting economic activities.
The above-mentioned types of actions (inaction) were examined in the analysis of the crime provided for in Article 237 of the Criminal Code (see the commentary to Article 237 of the Criminal Code of the Republic of Kazakhstan).
The consequence, as a mandatory element of the objective side of the criminal offence under consideration, is causing insolvency that results in major damage. Consequently, the structure of the criminal offence is material. This damage may take the form of damage caused to one creditor or may consist of aggregate damage caused to several or numerous creditors. Under subparagraph 38) of Article 3 of the Criminal Code, major damage means damage caused to an individual in an amount exceeding the monthly calculation index by two thousand times, or damage caused to an organization or the state in an amount exceeding the monthly calculation index by ten thousand times.
The object of the crime provided for in Part 2 of Article 239 of the Criminal Code is public relations associated with ensuring the normal functioning of an insurance (reinsurance) organization, an accumulative pension fund, or a bank.
From the objective standpoint, the crime is characterized by intentional actions (inaction) of a senior employee of a financial organization, a banking and (or) insurance holding company, a major participant (major shareholder) who is an individual, the head or a member of the management body, the head or a member of the executive body, or the chief accountant of a major participant (major shareholder) that is a legal entity of a financial organization, as well as persons temporarily or under special authorization performing the functions of the management body or executive body of a financial organization, which result in insolvency leading to the compulsory liquidation of a financial organization or to the classification of a bank as an insolvent bank.
The structure of the crime is material. A mandatory condition for criminal liability under the article under consideration is the occurrence of consequences in the form of insolvency resulting in the compulsory liquidation of a financial organization or the classification of a bank as an insolvent bank.
A mandatory element of the crime is the causal relationship between the action (inaction) of the perpetrator and the occurrence of the consequence in the form of insolvency of an insurance (reinsurance) organization, an accumulative pension fund, or a bank.
Compulsory liquidation of a debtor means the termination of the activities of an insolvent debtor, carried out pursuant to a court decision based on applications submitted by creditors or the prosecutor. Insolvency means a court-established inability of a debtor to fully satisfy creditors' claims under monetary obligations, settle payments for remuneration with persons working under employment contracts, ensure the payment of taxes and other mandatory payments to the budget, social contributions to the State Social Insurance Fund, as well as mandatory pension contributions and mandatory occupational pension contributions.
According to paragraph 5 of clause 11 of the Regulatory Resolution of the Supreme Court of the Republic of Kazakhstan "On the Practice of Applying Legislation on Rehabilitation and Bankruptcy", the criterion for determining the insolvency of a debtor — a legal entity — is its inability to pay.
Pursuant to Article 71 of the Law of the Republic of Kazakhstan "On Banks and Banking Activities in the Republic of Kazakhstan", recognition of second-tier banks as bankrupt requires the existence of an indicator of insolvency. At the same time, the solvency of a debtor bank is determined exclusively by the National Bank of the Republic of Kazakhstan, taking into account the methodology for calculating prudential standards and other mandatory standards and limits, as well as the amount of the bank's capital; that is, the comprehensive assessment is carried out by a person authorized by law.
The insolvency of agricultural producers means the debtor's inability, during the next seasonal cycle, to satisfy creditors' claims under monetary obligations using the property belonging to the debtor. When establishing the insolvency of agricultural producers, obligations whose due date occurred no earlier than the year preceding the previous year are taken into account.
According to paragraph 1 of Article 5 of the Law "On Rehabilitation and Bankruptcy", the basis for a debtor to apply to the court for recognition as bankrupt and liquidation through the initiation of bankruptcy proceedings is its sustained insolvency. Insolvency is considered sustained if the debtor's liabilities exceed the value of its property as of the date of filing the application with the court and as of the beginning of the year in which the application is filed, as well as at the beginning of the year preceding the year in which the application is filed, if the application is filed during the first quarter of the calendar year.
In accordance with paragraph 2 of Article 5 of the said Law, the basis for a creditor to apply to the court for recognition of a debtor as bankrupt and its liquidation through the initiation of bankruptcy proceedings is an outstanding monetary obligation of the debtor to the creditor based on a court act that has entered into legal force or an enforcement document for the recovery of money from the debtor, or the debtor's acknowledgment of the debt, unless otherwise established by this paragraph.
The basis for a creditor in respect of taxes and customs payments to apply to the court for recognition of a debtor as bankrupt and its liquidation through the initiation of bankruptcy proceedings is the debtor's failure to repay tax arrears, as well as arrears in customs payments, special, anti-dumping and countervailing duties, and interest, after all compulsory collection measures have been taken in accordance with the procedure established by the tax and customs legislation of the Republic of Kazakhstan.
The subject of the crime is a sane individual who has reached the age of sixteen. In addition, the subject may be the first head of a major participant that is a legal entity of an insurance (reinsurance) organization, an accumulative pension fund, or a bank, or a person who permanently, temporarily, or under special authorization performs the functions of the management body or executive body of an insurance (reinsurance) organization, an accumulative pension fund, a bank, or an organization engaged in the investment management of pension assets (for the subject of the crime, see the commentary to Part 2 of Article 238 of the Criminal Code).
From the subjective standpoint, the crime is committed intentionally. The perpetrator realizes that they are intentionally committing actions (inaction) that have led to the insolvency of an insurance (reinsurance) organization, an accumulative pension fund, or a bank; foresees the possibility or inevitability of the compulsory liquidation of the said organizations and desires their occurrence or, although not desiring them, consciously allows them to occur or treats them with indifference.
The act provided for in Part 1 of Article 239 of the Criminal Code constitutes a criminal misdemeanour.
The act provided for in Part 2 of Article 239 of the Criminal Code constitutes a serious crime.
Commentary to the Criminal Code of the Republic of Kazakhstan, 2021, by Isidor Shamilovich Borchashvili, Honored Figure of Kazakhstan, Doctor of Law, Professor, Academician of the Kazakhstan National Academy of Natural Sciences, member of the Scientific Advisory Councils under the Constitutional Council of the Republic of Kazakhstan and the Supreme Court of the Republic of Kazakhstan, member of the working group on reform of the law enforcement system under the Security Council of the Republic of Kazakhstan, Honored Employee of the Ministry of Internal Affairs of the Republic of Kazakhstan.
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