Insolvency Resolution and Subsidiary Liability

Since March of this year, the Law of the Republic of Belarus “On the Insolvency Resolution“ No. 227-Z dd. 13.12.2022 (hereinafter - the ‘Law’) has been in force.

The key amendments concern the grounds and procedure for imposing subsidiary liability on third parties for the debtor’s obligations¹.

The Law has been amended to include Article 9-1, which establishes the procedure for imposing subsidiary liability on a debtor for the following obligations: claims arising from harm to life or health, including compensation for the corresponding non-pecuniary damage; payment of wages and/or other payments in accordance with labour legislation; remuneration under civil law contracts.

It should be noted that:

• pursuant to cl. 1 art. 9 of the Law, the owner of the assets of a unitary enterprise declared bankrupt, the founders (participants) of a legal entity declared bankrupt, its director, as well as other persons authorised to issue binding instructions to such a legal entity or otherwise determine its actions, shall be jointly and severally liable on a subsidiary basis for its obligations where its assets are insufficient, but only if its bankruptcy was caused by culpable (wilful) acts on the part of such persons;
• pursuant to cls. 2 and 3 art. 9 of the Law, if the debtor’s assets are insufficient to satisfy creditors’ claims, an application to hold such persons jointly and severally liable shall be filed with the court after the commencement of the liquidation proceedings and shall be considered by the court prior to the issuance of a ruling on the conclusion of those proceedings.

Article 9-1 of the Law recognises as grounds for holding a person liable on a subsidiary basis the existence of outstanding payments owed by the debtor arising from harm caused to life or health, wages or other payments in accordance with labour legislation, or remuneration under civil law contracts, regardless of whether the bankruptcy was caused by culpable (intentional) actions of the owner of the unitary enterprise’s assets or the debtor’s founders (shareholders).

A corresponding application on the above grounds may be lodged within 3 years of the date on which the registering authority entered a record in the Unified State Register of Legal Entities and Individual Entrepreneurs (USR) regarding the removal of the legal entity from the USR². The application must be lodged with the economic court.

A claim on behalf of an employee (other citizen) may be filed by the State Labour Inspectorate Department of the Ministry of Labour and Social Protection (or its regional offices) or by the employee (other citizen) themselves.

¹ Art. 9 of Law of the RB ‘On the Settlement of Insolvency’ No. 227-Z dd. 13.12.2022

² Cls. 2, 3 art. 9-1 of Law of the RB ‘On the Settlement of Insolvency’ No. 227-Z dd. 13.12.2022