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The Audit chamber proposed The Government to transfer the functions to identify the signs of international or fictitious bankruptcy of The Federal Tax Service. Comment by Elena Batura, Attorney at S&K Vertical for Pravo.ru

19 May 2017

The Audit Chamber proposed to the Government to transfer to the Federal Tax Service the functions to identify signs of intentional or fictitious bankruptcy. The state auditors believe that the bankruptcy receivers do not cope with it. The Federal Tax Service has already announced that it is ready to take up these new powers, but this will require an increase in staff and additional funding. Most of the respondents said to Pravo.ru that the initiative is superfluous: it threatens to delay the review of bankruptcies and will give the FTS an unreasonable advantage over other creditors. Experts offer their own solutions to the problem.

According to the Audit Chamber, in the year 2015 and the first half of the year 2016 law enforcement officers brought in more than a hundred criminal cases on fictitious or deliberate bankruptcy on the basis of the Federal Tax Service materials. As a result of their consideration, courts have issued 26 convictions, which is less than 5% of the total number of materials provided by tax officers. In general, the number of cases under this article of the Criminal Code is significantly higher than the number of bankruptcy recievers' reports on the existence of signs of deliberate bankruptcy.

Worst of all things are with the debtors of the first group, i.e. strategic enterprises with a share of state participation of 25%, as well as companies whose debts exceed 300 million rubles, they noted in the Audit Chamber: for every second one of such cases, tax authorities have recourse of self-regulating organizations (SROs) and arbitral tribunals with complaints against bankruptcy receivers. Only a third of the complaints are acknowledged to be justified, they are countered in the Russian Union of SROs. However, the Audit Chamber has already submitted its proposal to the Ministry of Finance, and the latter proposed to have the relevant amendments prepared by the Ministry of Economic Development, stressing that the Federal Tax Service is not against extending its powers provided that funding and staffing is extended too (see "The Audit Chamber proposed to pass inspections on fictitious bankruptcies under the control of the Federal Tax Service"). .

The number of criminal cases is not an indicator of the work of receivers

It seems to be not very correct to assess the quality of the work of bankruptcy receivers by sheer comparison of the number of criminal cases initiated and the reports of receivers as to intentional or fictitious bankruptcy, says Ilya Dedkovsky, senior attorney at KIAP Law Office. Only in 2016, more than 60,000 bankruptcy cases were instituted, he notes, adding that the initiation of cases at the orders of receivers and bringing them to the verdict of guilty is much more rare. "It is more important to work in this direction, and not to place all responsibility for what is happening on the receivers," Dedkovsky believes.- If the Federal Tax Service or another creditor believes that the receiver is performing poorly, they have the opportunity to file a relevant application with the court or Rosreestr. "

"By the way, the fact of the initiation of a greater number of cases of fictitious or deliberate bankruptcy at the applications of tax inspections does not mean that the bankruptcy receivers in this direction do not hard enough," says Elena Batura, attorney at S&K Vertical Law Firm. What attracts attention is the number of sentences on such applications of tax authorities, which is only 5%. Did anyone count the number of convictions based on the reports of bankruptcy receivers?". According to Batura, the transfer of the receivers' functions to find deliberate and fictitious bankruptcy against all debtors to the Federal Tax Service is clearly not a good idea, since bankruptcy issues in this case will increasingly go from the private to public sphere. However, as far the bankruptcy of strategic enterprises and state-controlled entities is concerned, it is possible that in that case the joint work of tax service and bankruptcy receivers is really necessary, the expert added.

The reports of receivers are often just formal come-offs

Among those surveyed by "Pravo.ru" there were also those who were generally very positive when assessing the initiative of the Audit Chamber. "Practice shows that the reports drawn up by the receiver are often a formal come-off," says Sergei Yermolenko, head of FBK Law's antitrust practice. "And the creditor may not always challenge the actions of the receiver because of a lack of full and convenient access to certain documents, banal lack of resources, qualifications. Moreover, challenging the actions of a receiver in court can lead to a rather lengthy trial."

It is not very effective to appeal to a self-regulatory organization, Yermolenko continues, since the SRO is not interested in excessive pressure on its receivers and, in addition, it will also inevitably increase its costs. "The FTS could have done such a job," the expert concludes, "but it is necessary to work out the criteria by which it will select reports for review, otherwise if the FTS starts checking all reports without exception, it will also lead to a decrease in quality and with time this procedure will become nonsense."

The Federal Tax Service will get an advantage over other creditors

However, the majority of the referred experts criticized the proposal to expand the powers of the Federal Tax Service. "In our opinion, the initiative seems to be superfluous," says Sergei Yegorov, a lawyer and managing partner of the law office EMPP, "It can only lead to an increase in the amount of technical work for bankruptcy receivers and create prerequisites for delaying the bankruptcy case." In addition, the FTS is often a creditor in bankruptcy cases and granting it the right to perform the financial analysis of the debtor to reveal signs of deliberate or fictitious bankruptcy may entail providing it with unreasonable advantages over other creditors, Yegorov said. He also notes that this initiative has a very high "corruption capacity". "The results of the financial analysis of the debtor are open to the Federal Tax Service and if it has objections, it can request explanations, challenge these results or apply for criminal proceedings," the expert concludes.

"This initiative is just one symptom of the fact that in the Russian bankruptcy procedures there are serious problems that require systemic solutions, - stressed partner of Delcredere Law Offices Maxim Stepanchuk - however, instead of the systemic solution what is proposed is work on a small parcel: Today the FTS sees the problem in a small number of conclusions on the presence of signs of intentional/fictitious bankruptcy tomorrow, the Supreme court is trying to eliminate the contradictions between the law and practice of its application, and the day after the State Duma takes one more bill amending the law on bankruptcy." Providing verification function means that this function must be implemented systematically, notes Stepanchuk while in parallel wondering: whether the Federal Tax Service has such resources (human and financial). "Right now, the Federal Tax Service as a person involved in the case, by virtue of paragraph 2 of Article 34 of the Law on bankruptcy already may at any time apply to the court to appoint expertise in order to detect signs of intentional or fictitious bankruptcy," - he concludes.

It is better to create a "black list" of bankrupcty receivers

If you completely close the function of checking large debtors for fictitious and deliberate bankruptcies on the tax authorities, then the receivers will actually lose their key responsibilities, which will inevitably reduce their role and responsibility, says Stanislav Vivchar, head of the Krasnodar branch of Khrenov and Partners. If, however, the powers of the tax authorities will be limited only to the review of the conclusions of receivers, then this right, in our opinion, also does not justify itself, the expert continues: this will lead to duplication of functions of receivers and entail additional budgetary expenses related to the expansion of the staff of tax authorities and their procurement.

"A more effective measure would be strengthening the control and accountability of bankruptcy receivers in the framework of bankruptcy law: the formation and maintenance of registries of dishonest receivers, depriving them of membership in a self-regulatory organization and the of the opportunity to join other SROs with proven facts of abuse of authority associated with the deliberate preparation of false conclusions on the absence of signs of fictitious or deliberate bankruptcy," Vivchar summed up.

By Elena Kitova

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