Alexander Pavlovsky, partner of A.T.Legal commented on the ruling in case #A41-14035/2020, which the Supreme Court handed down on April 15, 2021, and which is of importance for law enforcement practice related to application of bankruptcy moratorium.

Source: https://www.kommersant.ru/doc/4782187

It is well known that organizations can be protected from insolvency claims against them under the moratorium only if they conduct their activities in the industries most affected by the pandemic. A formal criterion of relevance of companies to such industries was established - the OKVED code (or the Russian National Classifier of Types of Economic Activity). However, in practice, as the mentioned case showed, there were difficulties concerning the possibility of applying the moratorium on bankruptcy to debtors, whose only additional type of activity in accordance with OKVED fell under the moratorium. Some courts considered this to be sufficient to classify organizations as pandemic victims, other courts took the opposite position.

In this case, the court of the first instance considered that there were no grounds for applying the moratorium to the debtor whose main activity in accordance with the Unified State Register of Legal Entities did not fall under the moratorium and initiated bankruptcy proceedings. The courts of appellate and cassation instances disagreed with this conclusion. The dispute was settled by the Supreme Court of the Russian Federation. The highest court authority upheld the presumption that the information in the Unified State Register of Legal Entities was trustworthy and did not take into consideration the debtor's argument that its actual activities were among the most damaged industries. The Supreme Court correctly noted that it was the debtor's obligation to timely enter information in the Unified State Register of Legal Entities on the change of the main type of activity, the violation of which could lead to misleading the organization's contractors, as well as the adoption of decisions by the highest state authorities that were based on unreliable information. The court stated the possibility of applying the moratorium on bankruptcy only in relation to organizations whose main activity specified in the Unified State Register of Legal Entities is included in the list of industry codes affected by the pandemic.

It should be noted that when considering cases of application of the bankruptcy moratorium, courts should approach the circumstances of the case individually. On the one hand, it is necessary to avoid unfair use of the moratorium, but, on the other hand, to remember that this institution is aimed at supporting businesses that find themselves in difficult circumstances, and following only a formal approach is not always justified. Therefore, the approach outlined in the reviewed court decision will not always be justified, because it does not fully take into account the realities of doing business in Russia. Everywhere, the main types of activities recorded in OKVED do not correspond to the real state of affairs, and not always because of the inattention of business owners. For example, the use of certain OKVEDs may be justified for taxation purposes. Therefore, the courts should be guided by the full establishment of all the circumstances of the case and apply the moratorium on bankruptcy not only according to formal criteria, but taking into account the goal of helping the affected businesses. This means, at least, taking into account arguments of the debtor and the evidence presented by him on the nature of the main economic activity.

At present, the moratorium on bankruptcy has not been in force for several months. Therefore, those measures established to support enterprises in their affected industries, such as suspension of enforcement proceedings, etc., are not applicable. If these measures were used by an organization that was not entitled to them in accordance with the decision of the RF Supreme Court, we should hardly expect any negative consequences now, provided that the application of these measures has not been challenged in court and in such cases the court decisions have not entered into force.