Commentary on Article 238. Deliberate Bankruptcy of the Criminal Code of the Republic of Kazakhstan
- 1. Deliberate bankruptcy, that is, actions by a founder (participant), an official, a person performing managerial functions in a commercial or other organization, as well as an individual entrepreneur, committed in their personal interests or in the interests of other persons for the purpose of evading the performance of obligations to creditors by alienating or concealing property within three years prior to the recognition of a legal entity or individual entrepreneur as bankrupt, which caused substantial damage, —
shall be punishable by a fine in an amount of up to three thousand monthly calculation indices, or corrective labour in the same amount, or community service for a period of up to eight hundred hours, or restriction of liberty for a period of up to three years, or deprivation of liberty for the same period, with deprivation of the right to hold certain positions or engage in certain activities for a period of up to three years.
2. The same acts committed 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, a member of the management body, the head, 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, which caused substantial damage to a financial organization, a banking and (or) insurance holding company, —
shall be punishable by a fine in an amount of up to three thousand monthly calculation indices, or corrective labour in the same amount, or community service for a period of up to eight hundred hours, or restriction of liberty for a period of up to three years, or deprivation of liberty for the same period, with deprivation of the right to hold certain positions or engage in certain activities for a period ranging from five years until the establishment of a prohibition on holding the position of a senior employee of a financial organization, a banking and (or) insurance holding company, and being a major participant (major shareholder) of a financial organization for life.
The social danger of this act consists in the violation of the interests of the state, the legitimate rights and interests of founders and shareholders of commercial organizations and other interested parties, creditors, undermining the reliability of business entities, as well as violating the rights and legitimate interests of employees of commercial organizations, in particular, through the unjustified reduction of jobs.
The object of the crime under consideration is public relations connected with the regulation of the procedure for satisfying the property claims of creditors.
Bankruptcy is the insolvency of a debtor recognized by a court decision, which constitutes grounds for its liquidation.
From the objective side, the crime is characterized by active actions committed in personal interests or in the interests of other persons for the purpose of evading the performance of obligations to creditors and through the alienation or concealment of property within three years prior to the recognition of a legal entity or individual entrepreneur as bankrupt, which caused substantial damage.
In accordance with subparagraph 2) of Article 1 of the Law of the Republic of Kazakhstan “On Rehabilitation and Bankruptcy”, deliberate bankruptcy means actions by a founder (participant), an official, as well as an individual entrepreneur, committed in their personal interests or in the interests of other persons for the purpose of evading the performance of obligations to creditors by alienating or concealing property within three years prior to the recognition of a legal entity or individual entrepreneur as bankrupt.
In practice, there are numerous cases where commercial organizations or individual entrepreneurs assume knowingly excessive obligations and obtain loans, most often for the purpose of failing to fulfil previously undertaken obligations, thereby intentionally creating or increasing their insolvency and ultimately declaring themselves bankrupt, which contributes to their self-liquidation.
According to Article 6 of the Law of the Republic of Kazakhstan “On Rehabilitation and Bankruptcy”, a founder (participant) and (or) an official found guilty of deliberate bankruptcy through administrative or criminal proceedings shall bear subsidiary liability to creditors with their own property in an amount determined in accordance with subparagraph 3) of Article 96 of the said Law.
Where two or more persons are found guilty of deliberate bankruptcy through administrative or criminal proceedings, such persons shall bear joint and several liability.
The bankruptcy administrator shall, within ten working days from the date on which the judicial act on bringing the founder (participant) and (or) official to criminal or administrative liability enters into legal force, be obliged to file a claim with the court against such person for holding them subsidiarily liable and recovering amounts determined in accordance with paragraph 3 of Article 96 of the Law (paragraph 2 of Article 6 of the Law).
A creditor shall also have the right to file a claim with the court in accordance with the procedure provided for in Article 6 of the Law if the founder (participant) and (or) official are found guilty of deliberate bankruptcy through administrative or criminal proceedings after the completion of the bankruptcy procedure.
According to paragraph 1 of Article 47 of the said Law, the prosecutor shall apply to the court with an application to declare the debtor bankrupt:
- when signs of deliberate bankruptcy have been identified by the prosecutor;
- in the interests of the creditor — the Republic of Kazakhstan, and state bodies.
By its legal structure, the elements of the crime are material. The crime shall be considered completed from the moment substantial damage or other grave consequences are caused. Under subparagraph 38) of Article 3 of the Criminal Code, substantial damage means damage caused to an individual in an amount exceeding two thousand monthly calculation indices, or damage caused to an organization or the state in an amount exceeding ten thousand monthly calculation indices.
From the subjective side, deliberate bankruptcy is committed with either direct or indirect intent. The head or owner of a commercial organization, or an individual entrepreneur, realizes that they are intentionally creating or increasing insolvency, foresees the possibility or inevitability of causing substantial damage or other grave consequences, and desires their occurrence or, although not desiring them, consciously allows them or treats them with indifference.
An obligatory feature of the subjective side of the crime under commentary is its purpose. For the elements of deliberate bankruptcy to be established, it is necessary that it be committed for the purpose of evading the performance of obligations to creditors by alienating or concealing property within three years prior to the recognition of a legal entity or individual entrepreneur as bankrupt.
The subject of the crime is special: a founder (participant), an official, a person performing managerial functions in a commercial or other organization, as well as an individual entrepreneur (for the definitions of these concepts, see the commentary to Article 237 of the Criminal Code).
Part 2 of the article under analysis refers to the same acts committed 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, a member of the management body, the head, 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, which caused substantial damage to a financial organization, a banking and (or) insurance holding company.
According to subparagraph 4) of Article 2 of the Law of the Republic of Kazakhstan dated August 31, 1995, “On Banks and Banking Activities in the Republic of Kazakhstan”, a banking holding company is a legal entity (except in cases where such owner is the state or a national management holding, an organization specializing in improving the quality of loan portfolios of second-tier banks, subsidiaries of the National Bank of the Republic of Kazakhstan, as well as cases provided for by this Law) which, in accordance with the written consent of the authorized body, may directly or indirectly own twenty-five or more percent of the issued shares of a bank (excluding preferred shares and shares repurchased by the bank), or have the ability to:
- directly or indirectly vote twenty-five or more percent of the voting shares of a bank;
- determine decisions made by a bank by virtue of an agreement or otherwise, or exercise control.
An insurance holding company is a legal entity (except in cases where such owner is the state or a national management holding, as well as cases provided for by the said Law) which, in accordance with the written consent of the authorized body, may directly or indirectly own twenty-five or more percent of the issued shares of an insurance (reinsurance) organization (excluding preferred shares and shares repurchased by the insurance (reinsurance) organization), or have the ability to:
- directly or indirectly vote twenty-five or more percent of the voting shares of an insurance (reinsurance) organization;
- determine decisions made by an insurance (reinsurance) organization by virtue of an agreement or otherwise, or exercise control (Article 3 of the Law of the Republic of Kazakhstan “On Insurance Activities”).
A major shareholder is a shareholder or several shareholders acting on the basis of an agreement concluded between them, who collectively own ten or more percent of the voting shares of a joint-stock company (Article 1 of the Law of the Republic of Kazakhstan “On Joint-Stock Companies”).
A major participant of a legal entity is an individual or legal entity that directly or indirectly owns ten or more percent of the participation interests in the authorized capital or voting shares (excluding preferred shares) of a legal entity (except in cases where such owner is the state or a national management holding); a major participant of an insurance (reinsurance) organization is an individual or legal entity (except in cases where such owner is the state or a national management holding, as well as cases provided for by this Law) which, in accordance with the written consent of the authorized body, may directly or indirectly own ten or more percent of the issued shares of an insurance (reinsurance) organization (excluding preferred shares and shares repurchased by the insurance (reinsurance) organization), or have the ability to:
directly or indirectly vote ten or more percent of the voting shares (excluding preferred shares) of an insurance (reinsurance) organization; influence decisions made by an insurance (reinsurance) organization by virtue of an agreement or otherwise, in accordance with the procedure determined by regulatory legal acts of the authorized body (Article 3 of the Law of the Republic of Kazakhstan “On Insurance Activities”).
The concept of a major participant of a bank is provided in subparagraph 6) of Article 2 of the said Law.
A major participant of a legal entity is an individual or legal entity (except in cases where such owner is the state or a national management holding) that directly or indirectly owns ten or more percent of the participation interests in the authorized capital or voting shares of a legal entity (subparagraph 11) of Article 2 of the Law of the Republic of Kazakhstan “On Banks and Banking Activities”).
The acts provided for in Parts 1 and 2 of Article 238 of the Criminal Code of the Republic of Kazakhstan are classified as medium-gravity crimes.
Commentary of 2021 to the Criminal Code of the Republic of Kazakhstan, by Isidor Shamilovich Borchashvili, Honored Figure of Kazakhstan, Doctor of Law, Professor, Academician of the National Academy of Natural Sciences of Kazakhstan, 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 Worker of the Ministry of Internal Affairs of the Republic of Kazakhstan.
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