.png)
Rehabilitation Procedures in Relation to an Individual Entrepreneur
🔷 I. GENERAL CONCEPT
Article 21-1 of the Civil Code of the Republic of Kazakhstan introduces the possibility of applying rehabilitation procedures to an individual entrepreneur (IE), aimed at preserving their business and restoring solvency before declaring bankruptcy.
🔹 These measures are implemented within the framework of:📚 The Law of the Republic of Kazakhstan “On Rehabilitation and Bankruptcy” dated March 7, 2014, No. 176-V (Section 3 — “Rehabilitation Procedure”).
🔹 II. PURPOSE OF REHABILITATION
“...with the aim of preventing the termination of entrepreneurial activity.”
🔸 The main task is to preserve the operating business of the IE and ensure debt repayment without recognition of bankruptcy.
🔸 This is especially relevant for:· small businesses;· IEs affected by crisis but retaining recovery potential.
🔷 III. CONTENT AND MECHANISMS OF REHABILITATION
📌 Rehabilitation procedure — a judicial procedure involving:· the debtor IE;· interim manager;· creditors’ meeting;· the court.
🔹 Possible measures:· installment or deferment of obligations;· debt restructuring;· sale of part of the property;· change in forms of settlements;· attracting investors;· conclusion of a settlement agreement.
📚 Grounds, procedure and features:· Articles 51, 64–85 of the Law “On Rehabilitation and Bankruptcy”;· the procedure is carried out by court decision;· support of the majority of creditors is mandatory.
🔹 IV. CONDITIONS FOR INTRODUCING THE PROCEDURE
🔸 The IE must:· be insolvent or foresee insolvency (see Art. 3 of the Law on Bankruptcy);· file an application for rehabilitation with the court;· provide a solvency recovery plan (term — up to 3 years);· have the consent of at least 2/3 of the creditors’ votes.
🔷 V. FEATURES OF THE PROCEDURE
| Element | Features |
|---|---|
| ⚖ Court | District or city court at the place of residence of the IE |
| 📅 Term | Up to 3 years with the possibility of extension |
| 🤝 Control | Interim manager + creditors |
| 📈 Plan | Subject to court approval |
| ⚠ Bankruptcy | If rehabilitation fails — bankruptcy is possible |
🔹 VI. PRACTICAL EXAMPLE
🔹 Example 1: An IE engaged in passenger transportation accumulated debts to a bank and landlord during the pandemic. He applied to the court for rehabilitation. After agreement with creditors and court approval, he obtained a 1.5-year deferment of payments, sold part of his buses, and repaid the debt without bankruptcy.
🔷 VII. RELATED NORMS
| Norm | Content |
|---|---|
| Civil Code of the RK, Art. 20 | Property liability of citizens |
| Civil Code of the RK, Art. 21 | Bankruptcy of an IE |
| Law “On Rehabilitation and Bankruptcy”, Arts. 64–85 | Rehabilitation procedure |
| Tax Code of the RK, Art. 37 | IE liability for obligations |
| Civil Procedure Code of the RK, Ch. 27 | Proceedings on bankruptcy and rehabilitation cases |
🔷 VIII. COMPARISON: REHABILITATION vs BANKRUPTCY
| Indicator | Rehabilitation | Bankruptcy |
|---|---|---|
| Purpose | Restore solvency | Terminate activity and sell assets |
| Result | Preservation of the IE | Liquidation of the IE |
| Judicial procedure | Yes | Yes |
| Creditors participate | Yes | Yes |
| Initiative | IE | IE or creditors |
| Consequences | No restrictions after completion | Restrictions on IE, debtor registry |
🔷 IX. INTERNATIONAL STANDARDS
| Act | Content |
|---|---|
| UNCITRAL Legislative Guide on Insolvency Law (2005) | Recommends priority of restructuring over liquidation |
| OECD SME Recovery Framework (2021) | Support for rehabilitation of small businesses |
| World Bank Doing Business | Indicators of the effectiveness of rehabilitation procedures |
🔷 X. CONCLUSION
Article 21-1 of the Civil Code of the RK:· emphasizes the preference for rehabilitation over bankruptcy for IEs;· aims at preserving jobs, business reputation, and economic recovery;· is harmonized with the Law “On Rehabilitation and Bankruptcy.”
Attention!
Law and Law Law Law draws your attention to the fact that this document is basic and does not always meet the requirements of a particular situation. Our lawyers are ready to assist you in legal advice, drawing up any legal document suitable for your situation.
For more information, please contact a Lawyer / Attorney by phone: +7 (708) 971-78-58; +7 (700) 978 5755, +7 (700) 978 5085.
Attorney at Law Almaty Lawyer Legal Services Legal Advice Civil Criminal Administrative Cases Disputes Protection Arbitration Law Firm Kazakhstan Law Office Court Cases
