Settlement agreement in bankruptcy cases

Evgeniy Sokolov, lawyer and head of the “Arbitration Dispute Resolution” department, has prepared detailed material on the features of a settlement agreement in bankruptcy cases - when can it be concluded, what are the conditions and can it be terminated later?

A settlement agreement is one of the ways to end a dispute by reaching a mutually acceptable agreement for the parties (usually through mutual concessions), which is approved by the court.

A settlement agreement can be approved by the court in the vast majority of categories of cases, bankruptcy cases are no exception.

A settlement agreement in a bankruptcy case is subject to both the general rules on settlement agreements enshrined in the Arbitration Procedure Code of the Russian Federation, and has its own specifics, which are established in the bankruptcy legislation (Chapter VIII of the Federal Law “On Insolvency (Bankruptcy)”). The topic of a settlement agreement in a bankruptcy case is quite voluminous and multifaceted, and therefore in this article we will touch only on the main features.

Which agreements are concluded in a bankruptcy case and which are not?

The settlement agreement will be subject to special rules of bankruptcy law if it is concluded as part of a bankruptcy case after the introduction of the first procedure.

It follows from this that an agreement approved by the court at the stage of verifying the validity of the application to declare the debtor bankrupt (before the introduction of the procedure, as a rule, supervision) will not be considered a settlement agreement in a bankruptcy case; the general rules of the Arbitration Procedure Code of the Russian Federation will be applied to it.

At what stage is it possible to conclude a settlement agreement?

A settlement agreement can be concluded during any bankruptcy procedure (supervision, financial recovery, external management, bankruptcy proceedings, restructuring of a citizen’s debts or sale of a citizen’s property) - clause 1 of Art. 150 Federal Law “On Insolvency (Bankruptcy)” – hereinafter referred to as the “Bankruptcy Law”.

But not before the first meeting of creditors.

Which persons decide to conclude a settlement agreement?

The decision to conclude a settlement agreement is made by the debtor, bankruptcy creditors, and authorized bodies.

Participation in the settlement agreement by third parties is allowed, who assume the rights and obligations provided for by the settlement agreement (clause 3 of Article 150 of the Bankruptcy Law).

On the part of the debtor, the settlement agreement is signed by the person who, in accordance with the bankruptcy law, made the decision to conclude a settlement agreement.

On behalf of the bankruptcy creditors and authorized bodies, the settlement agreement is signed by a representative of the meeting of creditors or a person authorized by the meeting of creditors to carry out this action (clause 2 of Article 155 of the Bankruptcy Law).

The procedure for concluding a settlement agreement in a bankruptcy case

The decision to conclude a settlement agreement on the part of bankruptcy creditors and authorized bodies is made by a meeting of creditors. The decision of the meeting of creditors to conclude a settlement agreement is adopted by a majority vote of the total number of votes of bankruptcy creditors and authorized bodies in accordance with the register of creditors’ claims and is considered adopted provided that all creditors for obligations secured by a pledge of the debtor’s property vote for it (clause 2 of Art. 150 of the Bankruptcy Law).

The settlement agreement must be concluded in writing.

Contents of the settlement agreement

The settlement agreement should not contain conditions that violate bankruptcy law or create advantages in satisfying the claims of some creditors over others.

Interest is accrued on the amount of claims of creditors for monetary obligations, as well as claims to the debtor for the payment of obligatory payments, in the amount of the refinancing rate established by the Central Bank of the Russian Federation on the date of approval of the settlement agreement by the arbitration court, based on the outstanding amount of claims in accordance with the schedule for satisfying the claims of creditors under the settlement agreement.

The specified interest is subject to accrual only on the principal debt and is subject to payment before the amounts of penalties (fines, penalties) and other financial sanctions (clause 15 of the Information Letter of the Presidium of the Supreme Arbitration Court of the Russian Federation dated December 20, 2005 No. 97).

With the consent of the creditor, a settlement agreement may establish a lower interest rate, a shorter period for calculating the interest rate, or a complete exemption from interest payments.

Conditions for approval of the settlement agreement

The settlement agreement is subject to approval by the arbitration court if the following mandatory conditions are met. Firstly, by the time the agreement is concluded, all claims of the first and second stages must be repaid (clause 1 of Article 158 of the Bankruptcy Law). Such requirements include, in particular:

claims resulting from harm to the life or health of citizens;
on payment of severance pay;
on the remuneration of persons working or working under an employment contract;
on the payment of remuneration to the authors of the results of intellectual activity.

Secondly, the settlement agreement must not violate the rights of third parties.
The procedure for concluding a settlement agreement must also be observed - the terms of the settlement agreement do not contradict the bankruptcy law, other federal laws and other regulatory legal acts. It is also important that there are no other grounds for recognizing the settlement agreement as a void transaction, as well as compliance with the written form of the settlement agreement.

The procedure for approval of a settlement agreement by the court in a bankruptcy case

The issue of approval of the settlement agreement is considered by the arbitration court in a court session with mandatory notification of persons in the case.

When approving a settlement agreement, the arbitration court issues a corresponding ruling, which indicates the termination of bankruptcy proceedings (clauses 4, 5 of Article 150 of the Bankruptcy Law).

The ruling on approval of a settlement agreement in a bankruptcy case is not subject to appeal. According to Part 8 of Article 141 of the Arbitration Procedure Code of the Russian Federation, the ruling on approval of the settlement agreement is subject to immediate execution and can be appealed to the cassation court within a month from the date of the ruling, as well as in the order of supervision. This rule is applicable to settlement agreements in bankruptcy cases in accordance with Part 1 of Article 223 of the Arbitration Procedure Code of the Russian Federation, since the bankruptcy law does not provide for the specifics of appealing the said determination, but refers to the general rules of the Arbitration Procedure Code of the Russian Federation (clause 1 of Article 162 of the Law).

At the same time, a ruling refusing to approve a settlement agreement can be appealed to the appellate court.

Features of the settlement agreement in the monitoring procedure

The settlement agreement is not subject to conclusion and approval by the court before the first meeting of creditors (clause 3 of the Information Letter of the Presidium of the Supreme Arbitration Court of the Russian Federation dated December 20, 2005 No. 97).
The settlement agreement is not subject to approval by the temporary manager (clause 3 of Article 151 of the Bankruptcy Law).
When concluding a settlement agreement during observation, the settlement agreement applies to the claims of bankruptcy creditors and authorized bodies included in the register of creditors' claims (RTC) on the date of the meeting of creditors that decided to conclude a settlement agreement (clause 6 of Article 151 of the Bankruptcy Law).
From the date of approval of the settlement agreement by the arbitration court, the powers of the temporary manager are terminated (clause 4 of Article 159 of the Bankruptcy Law).

Features of a settlement agreement in bankruptcy proceedings

The decision to conclude a settlement agreement on the part of the debtor is made by the bankruptcy trustee (clause 1 of Article 154 of the Bankruptcy Law).
When concluding a settlement agreement during bankruptcy proceedings, the settlement agreement applies to all claims of bankruptcy creditors and authorized bodies included in the register of creditors' claims on the date of the meeting of creditors that decided to conclude a settlement agreement (clause 4 of Article 154 of the Bankruptcy Law).
From the date of approval of the settlement agreement by the arbitration court, the powers of the bankruptcy trustee are terminated (clause 4 of Article 159 of the Bankruptcy Law).

Termination of the settlement agreement

One of the main features of the regulation of a settlement agreement approved in a bankruptcy case is the possibility of terminating such an agreement at the request of the bankruptcy creditor(s) - Art. Art. 164-165 of the Bankruptcy Law.

The issue of termination of the settlement agreement is considered by the arbitration court that considered the bankruptcy case.

The settlement agreement can only be terminated with respect to all creditors. In this case, the right to file an application for termination of the agreement belongs to the bankruptcy creditor(s), who have in total no less than one-fourth of the claims of bankruptcy creditors and authorized bodies against the debtor included in the RTK (clause 54 of the Resolution of the Plenum of the Supreme Arbitration Court of the Russian Federation dated 15.12. 2004 No. 29).

The settlement agreement is subject to termination in the event of non-fulfillment or significant violation by the debtor of the terms of the settlement agreement.

In the event of termination of the settlement agreement, the proceedings in the case are resumed at the stage (procedure) within which the settlement agreement was previously approved, except in cases where the procedures applied in a new bankruptcy case have been introduced in relation to the debtor.

Termination of the settlement agreement in relation to all bankruptcy proceedings does not entail the obligation of bankruptcy creditors and authorized bodies, whose claims were satisfied during the execution of the settlement agreement, to return to the debtor everything they received during the execution of the settlement agreement.

Bankruptcy creditors are obliged to return everything they received during the execution of the settlement agreement if they knew or should have known that the satisfaction of their claims was carried out in violation of the rights and legitimate interests of other bankruptcy creditors and authorized bodies, while these claims are restored in the register of creditors' claims .

Participants

Participation in the settlement agreement by third parties is allowed, for example, participants of the debtor who assume the rights and obligations provided for in the settlement agreement. Third parties may participate in the settlement agreement if their participation does not violate the rights and legitimate interests of creditors. Third parties have the right to provide security for the debtor’s execution of the settlement agreement.

As stated

In Part 4 of Art. 150 states that approval of a settlement agreement in a bankruptcy case is within the competence of the arbitration court. With one ruling, he approves the agreement reached and terminates the bankruptcy proceedings. If the participants in a bankruptcy case go to amicable settlement at the stage of bankruptcy proceedings, then the court determines the debtor bankrupt and indicates that the bankruptcy proceedings are not carried out.

The court does not change the content of the settlement agreement, which was adopted at the meeting and submitted to the court for approval. This is enshrined in information letter No. 97 of the Presidium of the Supreme Arbitration Court dated December 20, 2005

In Art. 158 127-FZ specifies the conditions under which the court approves an agreement. It becomes valid only after the debt has been repaid according to the claims of the first and second priority creditors.

Consequences of approval for individuals

A settlement agreement in the case of bankruptcy of individuals, in addition to the termination of the bankruptcy case, entails the following consequences:

the citizen’s debt restructuring plan is not in effect;
the ban on satisfying creditors' claims is lifted;
the financial manager leaves because his powers have ceased;
the citizen begins to repay debts to creditors within the terms of the document.

You can go to the world peace only once, and it is mandatory. If a citizen stops complying with the agreement, the court will resume proceedings and automatically declare the individual bankrupt, introducing a procedure for selling his property to pay off debts.

IMPORTANT!

It is impossible to conclude peace a second time.

Statement

Sample settlement agreement in a bankruptcy case

Settlement agreement for bankruptcy of individuals

Content and form

A settlement agreement as a bankruptcy procedure is concluded in writing. On the part of the debtor, the settlement agreement is signed by the director or arbitration manager; on behalf of the creditors, the settlement agreement is signed by a representative of the meeting of creditors. From third parties, in case of participation, the settlement agreement is signed by these persons or their representatives.

A settlement agreement in case of bankruptcy of a legal entity contains the procedure and terms for fulfilling the debtor’s obligations in monetary form. Please note that the settlement agreement cannot by default specify the transfer of property to creditors to pay off the debt. This occurs because the sale of the debtor's property occurs in accordance with special procedures and cannot be transferred to creditors. Compensation to creditors may be provided with the consent of the individual creditor to whom it is provided, if this does not violate the rights of others included in the register of creditors.

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