Recognition of Bankruptcy

📘 Article 53 of the Civil Code of the Republic of Kazakhstan: RECOGNITION OF BANKRUPTCY

🔹 1. GENERAL CHARACTERISTICS

Article 53 of the Civil Code of the Republic of Kazakhstan establishes two procedural ways of recognizing bankruptcy — voluntary (at the initiative of the debtor) and compulsory (at the initiative of a creditor or an authorized body).

This article substantively complements Article 52 of the Civil Code of the Republic of Kazakhstan (on the concept of bankruptcy) and serves as the starting point for the application of the Law of the Republic of Kazakhstan “On Restoration of Solvency and Bankruptcy,” which details the mechanisms, conditions, and procedures of bankruptcy.

🔹 2. ANALYSIS BY CLAUSES

✅ Clause 1: Two procedures for recognition of bankruptcy

“Recognition of bankruptcy is possible in a voluntary or compulsory procedure”

🔎 Unlike a number of jurisdictions, Kazakh legislation expressly allows self-bankruptcy of legal entities and individuals. This corresponds to international practice (USA, Germany, France, etc.).

📘 Regulatory framework:

• Law of the Republic of Kazakhstan dated December 30, 2022 No. 176-VII “On Restoration of Solvency and Bankruptcy”;
• Articles 52–54 of the Civil Code of the Republic of Kazakhstan;
• Civil Procedure Code of the Republic of Kazakhstan — Chapters 21–22.

✅ Clause 2: Voluntary bankruptcy

“…on the basis of the debtor’s application to the court”

📌 Applicable to both legal entities and individuals.

Conditions:

• Stable excess of liabilities over assets;
• Absence of rehabilitation (restructuring) potential;
• Availability of a conclusion on financial insolvency (a mandatory document under the Bankruptcy Law);
• Voluntary acknowledgment of one’s insolvency.

📘 Example:An individual with loan debts exceeding 1,600 Monthly Calculation Indices (MCI), with no property or income, files a bankruptcy application — the court accepts the case under the simplified self-bankruptcy procedure.

📌 Consequences:

• Prohibition on obtaining loans and credits for up to 5 years;
• Inability to engage in entrepreneurial activity for 5 years;
• Repeated bankruptcy — after 7 years (Article 6 of the Bankruptcy Law).

✅ Clause 3: Compulsory bankruptcy

“…on the basis of an application by a creditor, and in cases provided for — by other persons”

📌 Persons entitled to file an application:

• Creditors (banks, suppliers, lessors, etc.);
• State bodies (for example, the State Revenue Committee — in cases of tax arrears);
• Authorized organizations (for example, the Fund for Problem Loans in cases of bank bankruptcy).

Conditions:

• Confirmed indebtedness (court decision, enforcement document);
• Overdue debt exceeding 3 months;
• Signs of lack of property and solvency.

📘 Example from practice:A creditor filed an application to recognize an LLP as bankrupt after six months of payment delay under a supply contract. The court recognized insolvency, establishing the absence of assets sufficient to fulfill the obligation.

🔹 3. LEGAL CONSEQUENCES OF FILING AND CONSIDERATION OF THE APPLICATION

🔹 4. RELATED NORMS AND ACTS

🔹 5. INTERNATIONAL CONTEXT

• In most countries, including the USA (Chapter 7, Chapter 13), Germany (Insolvenzordnung), and the United Kingdom (Insolvency Act), bankruptcy procedures may be both voluntary and compulsory.
• The UNCITRAL Model Law on Cross-Border Insolvency supports both self-bankruptcy and creditor-initiated applications, subject to the principles of good faith and solvency.

🔹 6. PRACTICAL RECOMMENDATIONS

For debtors:

• Do not allow the situation to reach compulsory bankruptcy — filing a voluntary application helps retain control over the process;
• Prepare the conclusion on financial insolvency in advance;
• If prospects exist — apply for rehabilitation rather than bankruptcy.

For creditors:

• Collect evidence (court decisions, reconciliation statements, enforcement documents);
• If recovery is impossible — file for compulsory bankruptcy;
• Participate in the formation of the register of claims and the bankruptcy estate.

📎 CONCLUSION

Article 53 of the Civil Code of the Republic of Kazakhstan establishes a procedural mechanism for recognizing bankruptcy — both at the initiative of the debtor and at the initiative of interested parties. This ensures a balance between protecting the rights of debtors (including individuals) and enabling creditors to prevent debt evasion through judicial mechanisms.

This article is closely interconnected with the procedural and substantive provisions of the new Bankruptcy Law (2023) and must be considered in conjunction with it.

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