Consequences of Initiating Bankruptcy Proceedings
📘 Article 55 of the Civil Code of the Republic of Kazakhstan: CONSEQUENCES OF INITIATING BANKRUPTCY PROCEEDINGS
🔹 1. GENERAL CHARACTERISTICS
Article 55 establishes the legal consequences of recognizing a legal entity or an individual entrepreneur as bankrupt and initiating bankruptcy proceedings by a court decision. These consequences are aimed at:
ensuring the preservation of the debtor’s assets;
suspending fragmented enforcement actions;
consolidating creditors’ claims within a single bankruptcy procedure;
transferring control over the debtor’s property to a bankruptcy administrator;
protecting the bankruptcy estate from bad-faith actions.
🔎 In essence, Article 55 serves as a legal mechanism for “freezing” all assets and liabilities of the bankrupt entity to ensure an orderly and fair satisfaction of creditors’ claims.
🔹 2. CLAUSE-BY-CLAUSE ANALYSIS
✅ Clause 1.1: Prohibition on Disposal of Property
“…alienation of property and repayment of obligations are prohibited…”
📌 All governing bodies, including participants, founders, owners, and officials, lose the right to dispose of property. All powers are transferred to the temporary/insolvency administrator appointed by the court in accordance with the Law of the Republic of Kazakhstan “On Restoration of Solvency and Bankruptcy.”
📘 Purpose — to prevent asset stripping, preferential payments to selected creditors, and document manipulation.
✅ Clause 1.2: Maturity of All Debts
“…shall be deemed due…”
📌 Even if an obligation was due in one year under a contract, it becomes immediately due for inclusion in the register of creditors’ claims.
📘 This ensures equal access of all creditors to the bankruptcy estate.
✅ Clause 1.3: Termination of Accrual of Interest and Penalties
“…accrual of penalties and remuneration shall cease…”
📌 Creditors can no longer accrue penalties, fines, or interest under contracts or law. The amount of debt is fixed at the moment bankruptcy proceedings are initiated.
📘 This protects the estate from excessive growth of debt and allows fair distribution among creditors.
✅ Clause 1.4: Termination of Court Proceedings
“…property disputes shall be terminated…”
📌 All civil cases involving the bankrupt entity are terminated (if decisions have not yet entered into force), because:
further consideration becomes meaningless;
all property claims must now be filed only within the bankruptcy procedure.
📘 Exception: non-property disputes (e.g., recognition of rights) may continue.
✅ Clause 1.5: Claims Only Within Bankruptcy Proceedings
“…except for claims under guarantees and sureties… and third-party pledges”
📌 This is the core principle of bankruptcy: a single procedure — a unified order for satisfying claims.
📘 Exceptions:
recovery from third parties under guarantees and sureties (e.g., founders);
enforcement against pledged property if the pledgor is not bankrupt.
✅ Clause 1.6: Removal of Restrictions and Seizures
“…all restrictions and encumbrances shall be lifted…”
📌 Upon the administrator’s initiative, without separate court or government decisions, the following are lifted:
arrests (seizures);
collection orders;
other blocking measures on assets.
📘 This enables the administrator to effectively manage and liquidate assets to repay debts.
✅ Clause 1.7: Prohibition on New Seizures (with Exceptions)
📌 New seizures may be imposed only in cases of:
claims for invalidation of transactions;
claims for recovery of assets withdrawn prior to bankruptcy.
📘 Thus, seizures become a tool for asset recovery, not for protecting individual creditors’ interests.
✅ Clause 1.8: Inclusion of Undelivered Assets in the Estate
“…property not transferred to the purchaser shall be included in the estate…”
📌 If a transaction has not been фактически completed, the property remains with the debtor and is subject to sale through the bankruptcy procedure. The buyer (or supplier) may file a claim in the creditors’ register but cannot demand performance of the contract.
📘 Purpose: to prevent automatic withdrawal of assets shortly before bankruptcy.
🔹 3. RELATED LEGAL PROVISIONS
| Legal Act | Article | Content |
|---|---|---|
| Civil Code of the RK | Articles 52–54 | Concept of bankruptcy, recognition, rehabilitation |
| Law “On Restoration of Solvency and Bankruptcy” | Articles 64–75 | Procedure for initiation, bankruptcy estate, administrator’s actions |
| Civil Procedure Code of the RK | Article 150 | Procedure for bankruptcy cases |
| Administrative Offenses Code of the RK | Articles 243–244 | Liability for fraudulent bankruptcy |
🔹 4. PRACTICE
📍 Example 1: Case No. 2-1942/2023 — the court declared an LLP bankrupt. Creditors attempted to recover debts through separate lawsuits. The court denied the claims, referring to Clause 1.5 of Article 55 — all claims must be considered within the bankruptcy procedure.
📍 Example 2: A bank attempted to maintain a seizure on warehouse property of the bankrupt entity. The court lifted the seizure upon the administrator’s request, referring to Clause 1.6 of Article 55 — seizures lose force automatically.
🔹 5. PRACTICAL RECOMMENDATIONS
For the debtor:
Immediately cease disposal of property;
Transfer all documents to the administrator;
Do not repay debts outside the procedure — such transactions may be challenged.
For creditors:
Do not file separate lawsuits — submit claims to the creditors’ register;
Check whether assets were transferred before bankruptcy — file claims to recover them;
Monitor the administrator’s actions — you have the right to challenge them.
📎 CONCLUSION
Article 55 of the Civil Code of the Republic of Kazakhstan is a key provision ensuring the “freezing” of the debtor’s property status, transferring management to an independent administrator, and organizing creditors’ claims. It protects both the debtor’s assets and creditors’ rights and serves as a cornerstone of the entire bankruptcy procedure.
Attention!
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