Bankruptcy trustee: rights, obligations, appealing against the actions of an arbitration trustee in bankruptcy proceedings in 2021

When discussing bankruptcy issues for commercial organizations, you can often hear the term “bankruptcy insolvency practitioner.” This person is given a significant place in this procedure, but not all participants in the bankruptcy process know what powers the bankruptcy trustee is vested with, as well as what responsibilities lie on his shoulders.

Federal Law No. 127 “On Insolvency and Bankruptcy” answers this question in more detail. In accordance with this legal act, a bankruptcy trustee is recognized as a person who has been appointed by the arbitration court. A person is appointed in a situation when it comes to making a decision to declare a debtor bankrupt. After the appointment of a manager, the stage of opening proceedings on a competitive basis begins, which is the final stage of filing the bankruptcy of the enterprise.

Bankruptcy proceedings represent the final bankruptcy procedure that was initiated against a commercial organization that was in debt. Production implies a procedure that is aimed at satisfying the requirements of borrowers and lenders. The duration of the procedure is six months; it is possible to extend this period for another six months at the request of the participants.

After this procedure is completed, the corresponding consequences occur. These include:

termination of accrual of fines, penalties, as well as other charges for failure to fulfill obligations in relation to creditors,
the deadline for fulfilling obligations comes,
enforcement proceedings are terminated,
all transactions with the debtor's real and movable property that could affect its transfer to third parties are terminated.

Appointment of a bankruptcy trustee

The procedure for appointing a bankruptcy trustee has a number of nuances that must be observed. According to general rules, a person is appointed to the position of manager by an arbitration court. This happens during bankruptcy proceedings. From the moment a manager is introduced into the business, he bears the burden of responsibility, as well as a lot of rights and obligations.

The procedure for appointing a bankruptcy trustee can be divided into several stages.

First, the debtor must officially receive bankruptcy status. This status is assigned to him by the Arbitration Court during a court hearing.
The court must find out whether the parties represented by the debtor and creditors have a person who can become a candidate for the position of administrator. The parties may submit one candidate each, or may also abstain from this opportunity.
Submitted candidates undergo a verification procedure. According to the general rules, these persons must meet all the requirements for the position of bankruptcy manager.
The person who, in the opinion of the court, inspires the most confidence becomes the manager.

There are often situations when the parties cannot propose a candidate. In this case, the court reserves the right to contact the organization of insolvency practitioners.

On behalf of the Arbitration Court, a request is submitted to provide the person sought.
The court receives from the above-mentioned organization a whole list containing information about possible candidates.
The one most suitable for this role is selected. It is worth considering that the organization of insolvency practitioners helps the court make a choice, because when forming a list, persons are presented in descending order of their professional qualities.
The debtor and creditor can also take part in selecting a bankruptcy trustee from the list. If they do not agree with the opinion of the court, then during the hearing they can file a challenge.
If there are no challenges, the court approves the candidate for the position of manager and authorizes him to begin business.

Rights of an arbitration manager in bankruptcy proceedings

The position of a bankruptcy trustee obliges a person to assume a large layer of rights and responsibilities. The rights and obligations of such a person are listed in the Federal Law “On Insolvency or Bankruptcy” No. 127.

For your information

The bankruptcy trustee does not carry out his activities for free. After the parties jointly decide to approve a person for the position of arbitration manager, the amount of remuneration for participation is determined. A determination is made about this fact, which must be executed. The court's ruling on remuneration cannot by law be appealed.

The powers of the bankruptcy trustee begin from the moment of his approval and are valid until the completion of bankruptcy proceedings. As part of the insolvency procedure for a legal entity, the manager is vested with a huge range of powers. At the same time, with the mutual desire of the parties, rights can be expanded, but their reduction is not provided for by law.

During bankruptcy proceedings, the administrator is authorized to dispose of property that legally belongs to the debtor.
Has the right to declare refusal to fulfill the terms of the agreement and transactions. However, he does not have the right to declare a refusal to execute the debtor’s transactions in a situation where there are circumstances that impede the restoration of the debtor’s solvency function.
The bankruptcy trustee is authorized to bring claims that are intended to invalidate transactions concluded on behalf of the debtor.
The bankruptcy trustee is vested with the authority to dismiss employees operating in the debtor’s organization. Also, he is subject to the dismissal of the manager.
The manager transfers documents related to the debtor for safekeeping to any person who inspires trust.
The bankruptcy trustee has the right to exercise other rights assigned to him, which in one way or another may be related to the performance of duties under the procedure.

Legal standards

A separate Chapter 7 in 127-FZ “On Financial Insolvency” is devoted to bankruptcy proceedings. In Art. 124 127-FZ establishes the terms of bankruptcy proceedings.

The consequences of the court introducing this stage are contained in Art. 126 127-FZ. The bankruptcy trustee, as a key figure in a bankruptcy case, his rights and obligations are spelled out in Art. 127, 129.

The procedure for repaying creditors' claims is regulated in Art. 134-138, the rules for completing bankruptcy proceedings are prescribed in Art. 149.

Separate provisions that regulate the procedure are contained in the Civil Code, the Code of Administrative Offences, and the Criminal Code. In particular, criminal law stipulates liability for intentional and fictitious bankruptcy.

Responsibilities of the bankruptcy trustee

In addition to rights, the manager is also assigned responsibilities. All of them are provided for by Federal Law No. 127 and are mandatory.

The bankruptcy trustee takes the debtor's property into his direct jurisdiction.
He also conducts an inventory of property.
Notifies employees working in the debtor's organization that they will soon be fired. In this case, the deadline is observed, no later than one calendar month from the date of initiation of bankruptcy proceedings.
The manager must analyze the financial condition of the bankrupt and document the analysis. The manager is obliged to raise objections that are related to the illegal demands of creditors.
A person takes various measures aimed at searching for and returning the debtor’s property, which for some reason is in the possession of other persons.
The manager involves a specialist in the procedure - an independent appraiser who carries out the procedure for assessing the property assigned to the debtor.
Obliged to take measures to ensure the safety of the person’s property.
Obliged to make demands on third parties for the return of the debt to the debtor, in a situation where there are such encumbrances.
Obliges to maintain a register in which all claims of creditors will be recorded.
Also, the bankruptcy trustee undertakes to fulfill other duties that may be established by the court in connection with the bankruptcy law.

What happens after bankruptcy is declared?

The table presents a step-by-step procedure for bankruptcy proceedings, clarifying the specific deadlines and legislative basis for each action.

№	Element of the bankruptcy process	Deadlines	Article of the law
1	An individual entrepreneur or legal entity cannot pay off its obligations; the amount of debt has increased by more than 10 thousand rubles.	More than 3 months after the expiration of the obligation	Article 65 of the Civil Code of the Russian Federation
2	The arbitration court, considering a bankruptcy case, decides to declare a bankruptcy trustee and approve a bankruptcy trustee	On the day of bankruptcy declaration	Clause 4 art. 72 of Federal Law No. 127 of October 26, 2002
3	Notification of the bankruptcy proceedings of the debtor - individual entrepreneur or legal entity, issuance of an order for the transfer of all documents, stamps and remaining property of the newly-made bankrupt to the appointed administrator.	On the same day	Clause 2 art. 126 Federal Law
4	Transfer of all of the above, activation of this procedure (it is desirable that one of the debtor’s former employees be a member of the inventory commission)	Within 3 days	Clause 2 art. 126 Federal Law
5	Notification of the Federal Tax Service in the prescribed form about the bankruptcy of an enterprise	Within 3 days after delivery of documentation	P.2. Article 23 of the Tax Code of the Russian Federation
6	Publication of a message about the introduction of the CP in the media (Kommersant) with notification of the Arbitration Court	10 days after the appointment of the CP	Art. 28, 126 Federal Law
7	Transfer by the Federal Bailiff Service of all enforcement documents to the bankruptcy trustee	10 days after the appointment of the CP	Art. 126 Federal Law
8	Collecting information about the debtor’s property: sending requests to various organizations where it can be recorded, for example, the land committee. FSS, banks, registration service, etc.	During the entire term of the CP	Art. 126 Federal Law
9	Notice of impending dismissal is given to the bankrupt’s employees (it does not matter whether the activity is ongoing or not)	Within a month after the start of the procedure	Art. 129 Federal Law
10	Selecting one bank account (main) on which all accumulated funds will be collected, closing other accounts (if any)	In continuation of KP	Article 133 Federal Law
11	Drawing up a complete inventory list with the involvement of independent experts to evaluate the property	30 days from the beginning of the CP	Art. 129-131 Federal Law
12	Identification of debts to a bankrupt enterprise. If any are discovered, debts are declared for collection, existing contracts are suspended, and transactions are declared invalid. If part of the bankrupt’s property is in the possession of third parties, it must be found and returned. All procedures should be reflected in reports.	Constantly during the CP	Art. 102, 103,129 Federal Law
13	Formation of the bankruptcy estate, approval of the terms of its implementation at the meeting of creditors. In case of disputes, the Arbitration Court will reconcile everyone	Before 6 months have passed	Art. 131, 132, 139 Federal Law
14	Open auction for the sale of property with preliminary publication in Rossiyskaya Gazeta and local publications	In accordance with the terms adopted at the meeting of creditors	Art. 139 Federal Law
15	Settlement with creditors: first, legal costs, repayment of current claims, then - according to the register. If there are not enough funds, the calculation is proportional for each queue	After the sale of the bankruptcy estate	Art. 142 Federal Law
16	After all payments, the main bank account is subject to closure, of which the tax office is notified along with an application for deregistration of the debtor	10 days after application	Clause 5 of Article 84 of the Tax Code of the Russian Federation
17	All documents of the debtor subject to storage are transferred to the archive	It is better to start preparing immediately after the introduction of the CP	Art. 129 Federal Law
18	Report on the results of the CP to the arbitration court	After settlement with creditors	Art. 147 Federal Law
19	Publication in the media of a message about the termination of a bankruptcy case (Rossiyskaya Gazeta) with notification to the Arbitration Court	After the decision of the Arbitration Court	Article 28 Federal Law
20	Exclusion of the debtor enterprise from the Unified State Register of Legal Entities	Until this moment, the bankruptcy trustee exercises his powers	Art. 149 Federal Law

Responsibility of the arbitration manager in bankruptcy proceedings

An entire article under number 20. 4 of Federal Law 127 is devoted to measures of liability of the bankruptcy trustee.

In accordance with this norm, for improper performance of the duties assigned to him by the court, a person is removed from participation in the process.
Gross violation of duties, as well as failure to comply with court requirements, entails disqualification and removal from the process.
The bankruptcy arbitration manager also bears financial responsibility. He is obliged to compensate the parties, as well as third parties, for all losses that were caused as a result of the manager’s failure to properly fulfill his duties.
An arbitration manager may be expelled from his self-regulatory organization of managers in a situation where he has repeatedly violated the requirements of the court, neglecting his duties, which entails losses on the part of the creditor and debtor.

Obligations of a bankruptcy manager

Quite often, the reason for a company's insolvency may not be difficult financial conditions at all, but simply the professional incompetence of management units. During the recognition of insolvency, especially at the stage of external control, it is customary to actively work to correct all mistakes that may have been made by the original managers. Therefore, a bankruptcy specialist appointed by an arbitration judge must be a first-class manager who knows his business.

Over the next few months, he manages the legal entity, trying to return its work to its previous stable rhythm. But often all this leads to nothing. And the auction manager, as a rule, gets down to business when nothing else can be done.

The main responsibility of this manager is to sell off the property of the bankrupt company with the greatest profit. And in this matter, he can be trusted, since only a person who has a higher economic or legal education can become an arbitration manager at any stage of bankruptcy.

An auction manager in a bankruptcy case has the following responsibilities:

Enter information about the property that constitutes the auction estate of this process into the Unified Register of Bankruptcy Information.
Protect the documentation and property of the bankrupt company by first performing a complete inventory and evaluating each lot.
Promptly inform interested parties about the progress of the insolvency process through press publications.
Inform workers about the impending dismissal a couple of months before this event and pay everyone in full on their last day of work.

The auction manager in an insolvency case has the following rights:

Closing all bank accounts of a company that has become bankrupt. In addition to the only account to which funds will be transferred to pay off all debts.
Sending an official request to any company about the presence of property of the future bankrupt unaccounted for in the auction mass.
Announcement of self-recusal from participation in the process. That is, the manager voluntarily relinquishes his authority.
Challenging any suspicious transactions concluded by the previous management of the company in the last three years before the onset of insolvency.
Sale of bankruptcy property or other profitable sale of it (for example, transfer to creditors to pay off debts).

Important point. Despite, in fact, absolute power, any action of the auction manager can be challenged in court. Both by the creditors' meeting and directly by the debtor. The final decision rests with the judge.

Action plan

When exercising his powers during the trial, the bankruptcy trustee adheres to the following plan.

After his candidacy has been approved by the court, the manager must replace all areas of management of the organization that belongs to the debtor.
The manager takes over the management of the organization, and at the same time replaces the debtor.
He can enter into relationships with counterparties and forms a bankruptcy estate, which means all the material assets and funds that remain at the disposal of the debtor. It is these assets that should be used to repay debts to creditors.
The bankruptcy trustee assumes the authority to receive funds through sale, lease, and also carries out other actions that can bring profit.
After all actions for the sale and disposal of property in order to obtain additional assets have been taken, the manager moves on to the next stage. He describes all property and initiates the inventory procedure. It includes carrying out an assessment, as well as the sale of property. At the same time, the sale can be carried out either in one mass, that is, transfer to one owner, or carried out in the form of an auction, when the property is split into several parts.
Funds are transferred to creditors' accounts in order of priority. The bankruptcy trustee himself carries out this action and maintains a register of claims.
As soon as the funds are paid, he releases claims from creditors whose debt was repaid.
The register of claims is closed only when creditors have no claims against the debtor.
After completion of all calculations, the state, represented by the Arbitration Court, receives a report on the activities that were carried out by the bankruptcy trustee. Documentation is attached to the report, which has a name and liquidation balance sheet.
Upon verification of the report and papers, the manager receives money for his actions and can assume that he has fulfilled all the necessary requirements and obligations.

Fulfillment of creditor requirements

It is especially worth emphasizing that all declared creditor claims are fulfilled not at the expense of the property that makes up the auction estate (property or property rights), but thanks to the financial resources that were raised from the sale of this property at a specially organized auction. At the same time, only one current bank account is used, which belongs to the debtor company. All other accounts must be closed.

After the sale of the debtor's property at auction, the bankruptcy trustee must pay all creditors in the order of priority, based on the list of creditors' claims. It is important to note that before this it is also necessary to pay off all so-called extraordinary debts, which include: All legal costs of the debtor, including also the costs of publishing bankruptcy information in the media. Wage debts to employees that arose after the arbitration judge accepted for consideration an application to declare a legal entity insolvent, as well as already during the auction process. Costs associated directly with the payment of rewards to the auction manager, as well as to the registrar. Utility and maintenance payments required to carry out the work activities of the debtor. Creditor claims that arose after the arbitration judge accepted the application for declaring the debtor bankrupt, but has not yet made a final decision. As well as creditor claims for monetary obligations that arose during the auction period. Other expenses related in one way or another to the bankruptcy process.

It is primarily necessary to deal with the costs of the claims of those persons to whom the debtor is liable for damage to life or health. In the same category, moral damage is taken into account. That is, these are first-priority creditors.

The second stage of calculations is the payment of severance pay and wages to persons who worked or are working under an employment contract. This is also a payment of reward under the copyright agreement, if one has been concluded.

And finally, the third priority is all other creditors.

Remuneration of the bankruptcy trustee

The issue of remuneration for the bankruptcy manager is also covered in Federal Law on Bankruptcy No. 127. To do this, you must refer to Article 20. 6. The manager has the right to receive remuneration, and also, in a situation where a person has incurred expenses during the procedure, has the right to receive them replenishment The funds that make up the amount of remuneration are paid not from the funds of the state, but from the funds of the debtor, in the situation, if any.

Information

The reward is only a fixed amount, which is agreed upon in advance in court. However, the law contains a mention of the approximate amount of payment per month. For the production manager, a remuneration of 30,000 rubles is provided for one calendar month. If for some reason a person is removed from carrying out his activities right in the middle of the process, then the remuneration is paid until the date that was the last before the release or removal.

Creditors can also participate in the appointment of additional remuneration for the bankruptcy trustee. At the same time, the amount of additional remuneration is formed at the expense of creditors.

It is worth paying attention to such a point as the amount of interest for the remuneration of such a person. 3% of the amount of payments to creditors is received by a person in a situation where he has satisfied less than 25% of the claims.

4.5% is received in a situation where the amount is approximately 25%.
6% of the total amount of payments in a situation where more than 50% of the claims are satisfied.
7% in a situation where we are talking about an amount of more than 70%.

In order to accurately calculate the amount of interest, it is necessary to use financial statements based on the state of the debtor’s assets.

Grounds for bankruptcy of a commercial company

If an enterprise is unable to fully and timely pay its creditors and counterparties, the legal entity may be declared bankrupt. The extreme stage of bankruptcy of commercial organizations is the liquidation process.

Experts identify internal and external reasons for the financial insolvency of enterprises.

Internal bases include:

making irrational decisions by the company's management;
low competitiveness and profitability of the company;
non-issuance of loans to the enterprise;
loss of bank confidence;
ill-conceived business expansion;
low level of current assets of the enterprise;
etc.

External reasons are determined by production and economic factors. The crisis state of the country's economy negatively affects the functioning of the market, which leads to the closure of weak companies.

In addition, enterprises that use high technologies in their activities hinder the development of companies that refuse to introduce the results of scientific and technological progress into their own production.

We recommend you the material : How to find out the debt for major repairs?

Expenses

In the course of carrying out actions aimed at participating in the bankruptcy procedure, the manager may incur expenses. They may be associated with a procedure that is necessary to identify the situation with the debtor’s assets. Also, expenses can be incurred to pay for the work of such specialists as an appraiser, operator, registrar, auditor, accountant, and so on.

Sometimes funds are used to pay for the services of third parties who assist in fulfilling the duties of the manager. All possible situations that are associated with costs are listed in Article 20 of Federal Law No. 127. It is worth noting that in a situation, even if the manager makes payments out of his own pocket, all expenses are reimbursed to him from the funds of the appraiser. This norm is provided for in Article 20. 7.

Report of the arbitration manager in bankruptcy proceedings

Upon completion of his work, the bankruptcy trustee must submit a report to the arbitration station. The report must be submitted electronically and in printed form.

The document is drawn up on an A4 sheet in computer font. The date and place of its compilation are indicated.
Information about the arbitration manager must be indicated in the header.
The second paragraph specifies information about persons who may be involved by the manager for mediation.
The third paragraph indicates information about existing complaints about the manager’s actions.
An important point is to indicate information about the manager’s exercise of his rights and obligations.
The most important thing is to list information about the bankruptcy estate, which is expressed in property and financial assets.
If possible, the measures taken by the manager to preserve the property are indicated.
All the time, the manager kept a register of creditors' claims, and it is this that he must include.
Information about the amount of claims that apply to the debtor is indicated.
Information about the debtor's employees is indicated.
If the manager incurred any expenses, they must also be indicated.
If third parties were involved in the activity, this must also be written about.
The report is accompanied by a register of claims, documents that in one way or another confirm the expenses incurred, as well as additional papers that occur in a particular case.
The name of the manager, signature, and seal of the organization are indicated.

In accordance with Article 147 of the Federal Bankruptcy Law, all of the above requirements are legal. The report is sent to the court, of which the bankruptcy trustee must notify the parties represented by the creditor and the debtor.

Appealing actions

If for any reason the parties believe that the actions of the bankruptcy trustee are illegal and violate their rights, then they can try to appeal these actions. There are several ways to do this.

First of all, you can draw up a petition, which will look like a statement or complaint, and send it to the arbitration court. Upon consideration of your petition, the judge, if there are legal grounds, will issue a warning to the manager.
The second way to appeal the action is to file an application with law enforcement agencies. You can contact the prosecutor's office with a statement that your rights are being violated.
You can also file a complaint with other government agencies, for example, the Federal Tax Service of Russia.
If you want to directly influence the manager, then the complaint must be submitted to the self-regulatory organization of managers where the person who violated your rights operates.

In order for a complaint to be considered and satisfied, there must be compelling reasons. Therefore, before making such requests, seek legal assistance, because only a specialist with in-depth knowledge will help you understand which actions could violate your rights and legitimate interests and which did not. If you nevertheless brought the case to court, then please provide specific arguments that will confirm the wording of your complaint.

For your information

Upon review, the court may satisfy your claims either in full or in part. In a situation where your arguments turn out to be implausible, the court will reject your claims and recognize the actions of the bankruptcy trustee as legal.

Pros and cons of simplified bankruptcy

In some cases, the arbitration judge may decide to immediately, “without further ado,” declare a legal entity insolvent and set the stage of auction proceedings, so as not to waste unnecessary time on external control or reorganization.

Advantages of the process

It must be admitted that the simplified version has its own advantages. For example:

Debts for which there were insufficient funds can be completely legally written off.
The bankruptcy process is reduced in time (the entire procedure can be completed in a period of four months to a year).
Significant savings for the debtor, because this way you will have to pay less to the insolvency administrator. After all, he will work for a shorter period.

Flaws

However, a simplified recognition of insolvency, in addition to its advantages, also has some disadvantages:

The company is closing.
The company may well be sold to competitors under certain conditions.
Managers can no longer control all processes because they are removed from their positions.

Change of bankruptcy trustee

Changing a bankruptcy trustee is a fairly private practice. You can resort to it in a situation if for some reason this person does not suit you, if he was expelled from the organization where he carried out activities, and also, he was removed by the plaintiff or defendant in the case, as well as in a situation if the manager neglected his duties, was dishonest about the responsibilities that might be assigned to him.

The parties must present their demands to the court in the form of a petition. The court is obliged to consider this appeal and make a decision. As a rule, if there is reason to believe that the manager committed a violation in his activities, the court will satisfy the demands of the parties. In exchange, the parties may nominate their candidates for the position of managers. If there are none, then a list of possible candidates from the relevant organization is provided to the court. By joint selection, the defendant, plaintiff and judge are determined on a candidate.

Frequent violations of the bankruptcy trustee

In practice, violations in the activities of bankruptcy trustees are often encountered. This is due to a lack of attentiveness, meticulousness, and also, in some way, due to a lack of experience.

Example

The bankruptcy trustee is not attentive to the claims of creditors, forgetting to enter them into the register. When carrying out the inventory procedure of the debtor's property, the bankruptcy trustee often makes errors in the assessment, neglecting the services of appraisers. The report is often sent back to correct deficiencies. But I would like to believe that if you are facing a procedure with the participation of a bankruptcy trustee, you will not encounter arbitrariness and mistakes on his part. The outcome of your case depends on the clarity and accuracy of this specialist’s work.