Rights and obligations of the administrative manager in insolvency proceedings

The second stage of bankruptcy of a legal entity is financial recovery, aimed at restoring or improving the solvency of the enterprise. The interests of the creditors and the debtor at this stage are represented by the administrative arbitration manager.

A competent manager will take measures to restore solvency in the shortest possible time, which will reduce the overall costs of the procedure. GlavBankrot LLC provides the services of administrative managers - strict compliance with regulations and legal norms is the key to a successful outcome of the case.

Administrative manager approval

An administrative manager is appointed by a decision of the Arbitration Court from among the SROs indicated by creditors or directly by the debtor as recommended. His powers are valid from the date of introduction of the financial recovery stage until his removal or release by court decision.

The candidacy of the arbitration manager is approved taking into account the lack of personal interest in the outcome of the case, work experience and professional competence.

The powers of an administrative manager in case of bankruptcy of an enterprise can last no more than two years, i.e. maximum period of the financial recovery stage. He may remain in his position until the stage of external management is approved or the legal entity is declared bankrupt and bankruptcy proceedings are initiated against it.

It is possible that a debtor-legal entity, during financial recovery, will be able to pay off its obligations to creditors ahead of schedule, then the bankruptcy process of the legal entity will be terminated. Accordingly, no one else needs the manager’s further work.

An administrative manager may be removed early:

• at your own request (application filed in court);
• a petition from the SRO of which he is a member (if he was disqualified or expelled from the organization);
• in other cases.

During the course of financial recovery, the arbitration manager may also be removed from work based on a complaint received from a meeting of creditors or the debtor directly regarding his inaction or improper performance of his duties, as well as if he violated the terms of membership in the SRO.

The approval, appointment and removal of an administrative manager are within the competence of the arbitration court.

What is the difference between an administrative manager and other types of managers?

Based on the above provisions that an administrative manager can make, one can easily understand what is the difference between him and other types of managers. For example, a temporary manager, unlike an administrative manager, can submit a statement to the arbitration court in which he will ask that the debtor’s actions be declared invalid, but not based on the entire law of the Russian Federation, but only on Articles 63 and 64 of the law on the debtor’s insolvency. However, the external manager has the right to completely dispose of the debtor’s state at the time the latter is declared bankrupt, until the debtor becomes solvent. The bankruptcy trustee can completely manage the business activity of the debtor at the time of his recognition of bankruptcy, that is, manage the company, but guided by the law of the Russian Federation. All types of managers should be distinguished so that the debtor can know who to turn to in court proceedings.

Rights of an arbitration manager at the stage of financial recovery

The range of rights of the administrative manager is fixed by 127-FZ. It includes:

1. Possibility of requesting information from the head of the company about the current economic situation and relevant documentation.
2. Acceptance of direct participation in the inventory procedure, if it is carried out on the initiative of a legal entity at this stage.
3. Participate in the coordination of transactions and decisions made by the debtor, and, if necessary, transfer the necessary information to creditors.
4. Conduct negotiations with creditors on behalf of the debtor.
5. Apply for the removal of the top management of the enterprise before the court; taking additional measures to preserve assets and property (if there is reason to believe that the legal entity will try to sell/hide its property); on the cancellation of illegal and sham transactions of a legal entity recently.
6. Exercise other powers assigned to him by 127-FZ.

Rights and obligations of the arbitration manager

Rights and obligations of the temporary manager

The temporary manager has the right to: - submit to the arbitration court on his own behalf demands for the invalidation of transactions and decisions, as well as demands for the application of the consequences of the invalidity of void transactions concluded or executed by the debtor in violation of the requirements established by Articles 63 and 64 of the bankruptcy law; — raise objections to creditors’ claims in cases provided for by Federal Law; — take part in court hearings of the arbitration court to verify the validity of the debtor’s objections to the creditors’ claims; - apply to the arbitration court with a request to take additional measures to ensure the safety of the debtor’s property, including a ban on making transactions without the consent of the temporary manager that are not provided for in paragraph 2 of Article 64 of the Federal Law (related to the acquisition, alienation or possibility of alienation directly or indirectly of property a debtor whose book value is more than five percent of the book value of the debtor's assets on the date of introduction of supervision, related to the receipt and issuance of loans (credits), issuance of guarantees and guarantees, assignment); - apply to the arbitration court with a petition to remove the debtor’s manager from office, - receive any information and documents relating to the debtor’s activities, - exercise other powers established by this Federal Law, the debtor’s management bodies are obliged to provide the temporary manager, upon his request, with any information relating to the debtor’s activities , The temporary manager is obliged to: - take measures to ensure the safety of the debtor’s property, conduct an analysis of the debtor’s financial condition, identify the debtor’s creditors, - maintain a register of creditors’ claims, notify creditors of the introduction of supervision, convene and hold the first meeting of creditors, - submit a report on the its activities, information about the financial condition of the debtor and proposals on the possibility or impossibility of restoring the debtor’s solvency, minutes of the first meeting of creditors with the attachment of documents specified in paragraph 7 of Article 12 of the Federal Law (voting papers, documents confirming the powers of meeting participants, materials presented to participants meeting for review and approval, documents indicating notification of creditors and authorized bodies about the date and place of the meeting, other documents at the discretion of the insolvency administrator or meeting of creditors).

Rights and responsibilities of the administrative manager

During the course of financial recovery, the administrative manager is obliged to: maintain a register of creditors' claims, with the exception of cases provided for by the Federal Law; convene meetings of creditors in the cases established by this Federal Law; — consider reports on the progress of implementation of the financial recovery plan and debt repayment schedule provided by the debtor, and provide conclusions on the progress of implementation of the financial recovery plan and debt repayment schedule to the meeting of creditors; — provide for consideration to the meeting of creditors (creditors’ committee) information on the progress of the financial recovery plan and the debt repayment schedule, — monitor the debtor’s timely fulfillment of current creditor requirements, — monitor the progress of the financial recovery plan and the debt repayment schedule, — exercise control for the timeliness and completeness of the transfer of funds to repay creditors' claims - in case of failure by the debtor to fulfill obligations in accordance with the debt repayment schedule, demand from the persons who provided security for the debtor's fulfillment of obligations in accordance with the debt repayment schedule, to fulfill the obligations arising from the provided security - to fulfill other responsibilities provided for by Federal Law The administrative manager has the right to: - demand from the debtor’s manager information about the debtor’s current activities; — take part in the inventory if it is carried out by the debtor; - approve transactions and decisions of the debtor in cases provided for by this Federal Law, and provide information to creditors about these transactions and decisions; - apply to the arbitration court with a petition to remove the head of the debtor in cases established by Federal Law; - apply to the arbitration court with a petition to take additional measures to ensure the safety of the debtor’s property, as well as to cancel such measures; - submit to the arbitration court on one’s own behalf demands for the invalidation of transactions and decisions, as well as for the application of the consequences of the invalidity of void transactions concluded or executed by the debtor in violation of the requirements of the Federal Law - to exercise other powers provided for by the Federal Law.

Refusal of debtor's transactions in external administration

The external manager has the right to refuse to execute contracts and other transactions of the debtor within three months from the date of introduction of external management. Refusal to execute contracts and other transactions of the debtor can be declared only in relation to transactions not executed by the parties in whole or in part, if such transactions impede the restoration of the debtor's solvency or if the debtor's execution of such transactions will entail losses for the debtor in comparison with similar transactions concluded with comparable circumstances. The agreement is considered terminated from the date of receipt by all parties under such agreement of the application of the external manager to refuse to perform the agreement. A party to a contract in respect of which a refusal to perform is declared has the right to demand from the debtor compensation for losses caused by the refusal to perform the contract of the debtor. Refusal of the debtor's transactions does not apply to the debtor's agreements concluded during supervision with the consent of the temporary manager or during the course of financial rehabilitation, if such agreements were concluded in accordance with the law.

Rights and obligations of an external manager

The external manager has the right: - to dispose of the debtor’s property in accordance with the external management plan with the restrictions provided for by this Federal Law; — enter into a settlement agreement on behalf of the debtor; — declare refusal to execute the debtor’s contracts in accordance with Article 102 of the law; - submit to the arbitration court on its own behalf demands for the invalidation of transactions and decisions, as well as for the application of the consequences of invalidity of void transactions concluded or executed by the debtor in violation of the requirements of the law; -carry out other actions provided for by law. The external manager is obliged to: - accept the debtor’s property for management and conduct an inventory of it; — develop an external management plan and submit it for approval to the meeting of creditors; — maintain accounting, financial, statistical records and reporting; — file objections in accordance with the established procedure regarding the claims of creditors presented to the debtor; — take measures to collect debt to the debtor; — maintain a register of creditors’ claims; — implement the measures provided for by the external management plan in the manner and under the conditions established by this Federal Law; — inform the creditors’ committee about the implementation of measures provided for in the external management plan; — submit a report to the meeting of creditors on the results of the implementation of the external management plan; — exercise other powers provided for by law.

Rights and obligations of the bankruptcy trustee

A bankruptcy trustee is an arbitration manager approved by an arbitration court to conduct bankruptcy proceedings and perform other functions and powers established by the Law; the latter refers to the powers associated with the management of the debtor legal entity and its implementation of economic activities, since at this stage (as at the stage of external management) the debtor’s management bodies are removed from the performance of their duties, which are transferred to the bankruptcy trustee. The exercise by the bankruptcy trustee of other powers (not related to the conduct of bankruptcy proceedings) is less relevant than for an external manager, since at the stage of bankruptcy proceedings, as a rule, we are talking about the termination of the economic activities of a legal entity (although the sale of a functioning business is also possible). The bankruptcy trustee is obliged to: take charge of the debtor’s property and conduct an inventory of it; engage an independent appraiser to evaluate the debtor’s property; notify the debtor's employees of the upcoming dismissal no later than one month from the date of commencement of bankruptcy proceedings; take measures to ensure the safety of the debtor’s property; analyze the financial condition of the debtor; make demands on third parties who have a debt to the debtor for its collection in the manner established by this Federal Law; submit, in accordance with the established procedure, objections to the claims of creditors presented to the debtor; maintain a register of creditors' claims; take measures aimed at searching, identifying and returning the debtor’s property held by third parties. The bankruptcy trustee has the right to: dispose of the debtor’s property in the manner and under the conditions established by this Federal Law; dismiss the debtor's employees, including the debtor's manager, in the manner and under the conditions established by federal law; declare refusal to execute contracts and other transactions. The bankruptcy trustee does not have the right to declare a refusal to fulfill the debtor’s contracts if there are circumstances that impede the restoration of the debtor’s solvency; transfer for storage the debtor's documents subject to mandatory storage in accordance with federal laws. The procedure and conditions for transferring the debtor's documents for storage are determined by federal laws and other regulatory legal acts; bring claims to invalidate transactions made by the debtor, to reclaim the debtor's property from third parties, to terminate contracts concluded by the debtor, and to take other actions provided for by federal laws and other regulatory legal acts of the Russian Federation and aimed at returning the debtor's property.

Responsibilities of the Administrative Manager

In addition to rights, the administrative manager has a number of responsibilities:

1. Maintaining a creditor register.
2. Convening creditor meetings.
3. Participation in the development of a debt repayment schedule or recovery plan; approval of the plan proposed by the legal entity.
4. Reporting to creditors on the progress of the financial recovery plan.
5. Control over the timely transfer of money to repay debts to creditors.
6. Control over the current expenditure operations of the enterprise and the process of providing financial assistance to it.
7. If the payer deviates from the schedule, require the persons who provided security to fulfill their duties as sureties or guarantors.

Responsibilities

In addition to the rights, the administrative manager is required to perform a number of duties:

• maintain a register of creditors' claims;
• convene a meeting of creditors;
• review reports on the process of fulfilling the debt repayment schedule, as well as the financial recovery plan;
• provide creditors with an opinion on the progress of fulfilling the debt repayment schedule;
• control the debtor’s timely fulfillment of current creditor requirements;
• monitor the progress of the financial recovery plan;
• monitor the timely and complete transfer of funds in terms of repayment of debts;
• demand from persons who provided security for the debtor’s fulfillment of its obligations to timely fulfill the terms of the agreement;
• perform other duties provided for by Russian legislation.

Responsibility of the arbitration manager at the stage of financial recovery

In case of unsatisfactory performance of the administrative manager, which ultimately led to losses for creditors, he faces the following penalties:

1. Suspension from work at the request of the creditors' meeting.
2. Expulsion from the SRO for improper performance of one’s functions or violation of the organization’s set of rules.
3. Compensation for losses from actions or inaction: for example, in case of failure to use all opportunities to return receivables or cancel fictitious transactions, etc.
4. Application of other types of liability, up to administrative or criminal punishment when causing large-scale losses.

The liability of an administrative manager in the event of bankruptcy of an enterprise is subject to compulsory civil liability insurance. The amount of insurance coverage is at least 1 million rubles.

Administrative Manager Action Plan

In his work, the administrative manager is guided by such important documents as a financial recovery plan and a debt restructuring schedule. These documents contain the following information:

1. General characteristics of a bankrupt enterprise.
2. The duration of the plan, the amount of debt, the amount of subsidies from the state and bank guarantees (if any).
3. What results are planned to be achieved?
4. Review of the financial situation in the company: net worth, rate of return, payback period, reasons for temporary insolvency, etc.
5. List of measures to restore the balance of payments.
6. Assessing the need to raise borrowed funds.
7. Justification of marketing strategies and sales plan.
8. Financial plan.
9. Debt repayment schedule with specific dates and amounts broken down by creditor.

The administrative manager and the creditors' meeting must monitor the implementation of this plan and, if necessary, can petition for the removal of the management of the legal entity from managing the company.

Manager's remuneration

The administrative manager receives remuneration for his work, consisting of a fixed part and a variable part. The first part is 15,000 rubles. monthly and is paid from the profit received by the legal entity during the procedure.

The administrative manager receives remuneration based on the book value of the enterprise's assets . The level of complexity of his work during the bankruptcy process largely depends on this.

The bonus amount will be:

• 4% with the value of balance sheet assets within 250 thousand rubles;
• 9000 rubles + 1% of the amount over 250 thousand rubles. – from 250 to 1 million rubles;
• RUB 17,500+0.5% of the amount in excess of RUB million. – from 1 million to 3 million rubles;
• 27500 rub. +0.2% of the amount over 3 million rubles. – from 3 to 10 million rubles;
• 41,500 rubles +0.1% of the amount over 10 million rubles. – more than 10 million rubles up to 100 million rubles;
• 131500 +0.05% of the amount over 100 million rubles. – from 100 to 300 million rubles;
• 231,500 rubles +0.01% of the amount more than 300 million rubles. – from 300 million rubles up to 1 billion rubles;
• RUB 301,500 +0.01% of the amount over 1 billion.

The creditors' meeting has the right to establish additional remuneration for the manager, but it will be paid at the expense of the creditors, and not the debtor himself.

Expenses of an arbitration manager during the stage of financial recovery

The expenses of the administrative manager for carrying out the insolvency procedure of the enterprise must be compensated from the debtor’s funds. In particular, these may be the costs of legal fees, publication of messages about the stages of the bankruptcy procedure in the media and the Internet, and the involvement of third-party specialists to conduct an audit of financial indicators, asset valuation or inventory in bankruptcy.

If the amount of the manager’s expenses seems excessive to the debtor or creditors, leading to a worsening of the already difficult financial situation of the debtor legal entity and reducing the chances of repaying obligations to creditors, then the participants in the procedure can appeal against them. Then the arbitration manager will have to repay part of the costs incurred from his own pocket.

What expenses does the administrative manager bear in the process of financial recovery?

During the procedure, the administrative manager bears the costs necessary for its implementation.

Costs include:

• the cost of publications in the EFRSB about the beginning of financial recovery, meetings of creditors, the results of the procedure, and others;
• legal costs for filing applications and motions;
• postage;
• payment for services of attracted specialists.

All expenses are compensated from the debtor’s financial resources.

We must remember! Creditors and the debtor monitor whether the manager's expenses are justified or whether they are inappropriate. If the financial condition deteriorates due to large expenses, losses may be recovered from the manager.

Administrative manager's report

Upon completion of his work, the administrative manager is obliged to submit a financial recovery plan to the creditors' meeting and the court. It must contain detailed information about the results of work to repay obligations to creditors. The report must contain the following information:

• information on the implementation of the recovery plan, compliance with the approved schedule, list of completed activities;
• creditor register indicating the amount of debt that was managed to be closed;
• information about failure to meet deadlines fixed by the debt repayment schedule;
• proposals for the future fate of the debtor: introducing the next stage of external administration or bankruptcy proceedings against him/completion of the insolvency procedure due to the removal of the problem of overdue debt obligations;
• information about the results of claims in favor of the guarantors and sureties of the debtor;
• information about all the manager’s requests to arbitration (for example, about the need to cancel transactions);
• other information.

July 25, 2004 Replacement of the arbitration manager.

One of the ways to replace an arbitration manager within the framework of an enterprise insolvency (bankruptcy) case is to voluntarily resign his powers and appoint a new manager by the court. A number of rules for such replacement are established by Art. 24, 45, 60 in the chapter “General Provisions” of the Federal Law of October 26, 2002 No. 127-FZ “On Insolvency (Bankruptcy)”1. The rules governing this issue are also contained in the chapters of the Law “Financial recovery”, “External management”, “Competition proceedings” (Articles 83, 97, 144), but the chapter “Monitoring” ignores it.

The regulation of the replacement of an arbitration manager in the Bankruptcy Law has certain gaps, which creates problems not only for the monitoring procedure, but also for other bankruptcy procedures. These problems and possible ways to resolve them will be discussed in this article.

Studying Art. 83, 97, 144 of the Law shows that for financial recovery, external management and bankruptcy proceedings the same rules are provided for the release of an arbitration manager in the event of his voluntary resignation, which boil down to the following. The arbitration manager submits an application to the court to relieve him of his duties. By its ruling, the court may satisfy the manager’s application. Such a determination is subject to immediate execution and may be appealed. An insolvency administrator released from his duties is obliged to ensure the transfer of the debtor’s accounting and other documentation, seals and stamps, material and other valuables within three days to the newly approved external administrator. Regarding the appointment of a new manager, Art. 83, 97, 144 of the Bankruptcy Law contain a reference to Art. 45 “Procedure for approval of an arbitration manager.”

Now let’s move on to the questions that arise due to the absence of rules for replacing a temporary manager in the “Observation” chapter. Let's consider the question of the very possibility of the voluntary resignation of the interim manager. The basis for doubt is the fact that in the chapter “Observation”, unlike the chapters “Financial recovery”, “External management”, “Competition proceedings”, not a word is said about this. According to Art. 24 “Rights and Obligations of an Arbitration Manager”, an arbitration manager approved by the arbitration court has the right to submit to the arbitration court an application for early termination of the performance of his duties. This article is located in the “General Provisions” chapter and, therefore, as being of a general nature, should be applied in all bankruptcy procedures. It follows from this that, in principle, the Law establishes the possibility of resignation of a temporary manager at his own request. If such a possibility exists, then in what order should the release be carried out? The absence of any guidance on this issue in the chapter “Observation” creates the need to apply general rules.

Article 60 of the Law establishes general rules for the consideration of any applications and petitions of insolvency practitioners. Therefore, the consideration of the arbitration manager’s application for voluntary resignation is subject to regulation by this article, taking into account the special norms of individual chapters of the Law, as well as the norms of the Arbitration Procedure Code of the Russian Federation, establishing the rules for conducting a court hearing (Articles 154, 155, etc.):

 consideration of the application of the arbitration manager is carried out by the judge alone;  the issue must be considered no later than one month from the date of receipt of the manager’s application;  minutes are kept at the court hearing;  Based on the results of consideration of the application of the arbitration manager, a ruling is made.

It is worth dwelling in more detail on the problems caused by the fact that the voluntary resignation of a temporary manager is regulated only by the norms of the general provisions of the Law, in contrast to the resignation of other arbitration managers. 1. In Art. 60 of the Law does not say about the moment of execution of the court ruling. But according to Art. 83, 97, 144, the ruling on the release of the administrative, external, or bankruptcy trustee, respectively, is subject to immediate execution.

The absence of such an indication in the chapter “Observation” leads to the need to apply the general rule of arbitration procedural legislation. This rule is established by Art. 187 of the Arbitration Procedure Code of the Russian Federation “Execution of a determination”: a determination made by an arbitration court is executed immediately, unless otherwise established by the Arbitration Procedure Code of the Russian Federation or an arbitration court2. From this we can conclude that the court has the opportunity to delay the execution of the ruling on release from the duties of the temporary manager. This is absolutely illogical, since the meaning of releasing a manager from performing duties is to actually exclude the manager’s ability to exercise the rights and obligations assigned to him by the Law. It seems that in this matter in the monitoring procedure the regulation should be the same as in other bankruptcy procedures.

2. V. art. 83, 97, 144 of the Law establishes that a determination to relieve an administrative, external, or bankruptcy trustee from performing duties may be appealed. Such an instruction obliges the application of Part 3 of Art. 223 of the Arbitration Procedure Code of the Russian Federation, which establishes that the determinations made by the arbitration court when considering cases of insolvency (bankruptcy) and the appeal of which is provided for by the Arbitration Procedure Code of the Russian Federation and other federal laws governing issues of insolvency (bankruptcy), separately from the judicial act that ends the consideration of the case on Essentially, they can be appealed to the arbitration court of appeal within ten days from the date of their issuance.

Thus, there is the possibility of an appeal against the determination of exemption from the duties of an administrative, external, bankruptcy trustee with a special, ten-day appeal period, and then an appeal in cassation.

The absence in the chapter “Observation” of an indication of the possibility of appealing the determination of release from the duties of a temporary manager leads to the need to apply the general rule of paragraph. 4 paragraphs 1 art. 60 of the Law, which provides that a ruling made at the request of an arbitration manager may be appealed in the manner and within the time limits established by the Law.

The procedure for reviewing rulings made in a bankruptcy case is regulated in general terms by Art. 61 of the Law. This article allows only two options for appealing determinations. For determinations relating to the establishment of the size of creditors' claims, the appeal is carried out in accordance with the Arbitration Procedure Code of the Russian Federation (clause 2 of Article 61 of the Law), that is, under Art. 223 Arbitration Procedure Code of the Russian Federation. For other rulings of the arbitration court that were adopted in the framework of a bankruptcy case, but are not provided for by the Arbitration Procedure Code of the Russian Federation and in respect of which it is not established that they are subject to appeal, appeal is carried out only through the appeal procedure no later than fourteen days from the date of adoption of the ruling (clause 3, Article 61 of the Law)3.

Norm para. 4 paragraphs 1 art. 60 of the Law requires the application of the procedure established specifically by the Bankruptcy Law. However, the Law does not establish any appeal procedure in relation to the determinations under consideration. This, of course, does not allow us to conclude that the Law does not, in principle, establish the possibility of appeal: the Law refers to its other norms, which, unfortunately, are absent, which creates some uncertainty in the issue under consideration.

It seems that in relation to the determination of the release of the temporary manager from performing duties in connection with voluntary resignation, Part 3 of Art. 223 of the Arbitration Procedure Code of the Russian Federation, despite the instructions of Art. 60 of the Law on appeal in the manner prescribed by the Law itself. This conclusion is justified by the following circumstance. Only the establishment in the Law of the procedure and deadlines for appealing a determination made under Art. 60 of the Bankruptcy Law can be recognized as establishing features in the Law that would preclude the application of the rules of Part 3 of Art. 223 of the Arbitration Procedure Code of the Russian Federation, - after all, according to paragraph 1 of Art. 32 of the Bankruptcy Law, bankruptcy cases are considered by the arbitration court according to the rules provided for by the Arbitration Procedure Code of the Russian Federation, with the features established by the Law. Thus, since the features of appealing a ruling made under Art. 60, the Law has not established whether the APC of the Russian Federation is subject to application.

The existing uncertainty would be removed by including in the chapter “Observation” a rule similar to that contained in the chapters that regulate other bankruptcy procedures, which would establish the possibility of appealing the determination, which would automatically entail the application of Art. 223 Arbitration Procedure Code of the Russian Federation.

3. The absence in this chapter of an indication of the obligation of the released temporary manager to ensure the transfer of documentation, seals, and valuables to the newly approved manager can lead to corresponding abuses and serious adverse consequences for the bankruptcy procedure of the enterprise as a whole. Therefore, in my opinion, it is necessary to supplement the chapter “Observation” with a norm similar to those contained in Art. 83, 97, 144 of the Law.

It seems that the Bankruptcy Law does not sufficiently regulate the voluntary resignation of a manager in other bankruptcy proceedings.

 In art. 60 of the Law does not say anything about the persons who must be notified of the meeting to consider applications and petitions of the arbitration manager. There is also no other general article that would determine which persons must be notified of a court hearing in a bankruptcy case. In the absence of special norms of the Law, the norms of the Arbitration Procedure Code of the Russian Federation (Part 1 of Article 223) should be applied. The persons participating in the case are notified of any court hearing (Part 1 of Article 153). Consequently, it is necessary to notify the persons participating in the bankruptcy case about the meeting on the issue of the release of the arbitration manager. This conclusion is also indirectly confirmed by the following. The Law mentions judicial notice in only six articles - Art. 42, 48, 69, 88, 158, 165. Analysis of these articles shows that the indication of the need for judicial notification is associated, as a rule, with situations when the list of persons subject to notification includes not only those who, according to Art. 34 of the Law are persons participating in a bankruptcy case. Consequently, the Law is silent about which persons must be notified of the meeting, precisely when only the persons participating in the case must be notified (Article 34).

 It is impossible not to note the gaps in the regulation of the procedure for appointing a new arbitration manager. Articles 83, 97, 144 of the Law on this issue provide only a reference to Art. 45, establishing the general procedure for approving an arbitration manager. The chapter “Observation” does not contain such a reference, but the question of whether Art. 45 of the Law for the approval of a temporary manager should not arise, because this article is of a general nature and, accordingly, is applied in supervision. To eliminate possible questions, it is advisable to supplement the “Observation” chapter with a link to the specified article.

However, the very application of Art. 45 does not solve all the problems, since this article, like other articles of the Law, does not determine whether it is possible for a released manager to perform the duties of a released manager temporarily, before the appointment of a new arbitration manager, and there is no mention of the timing of the appointment of a new manager. If you try to answer the questions posed, the first thing you should pay attention to is the absence in the Law of the figure of a “temporary acting arbitration manager” like “temporary executive bodies”, which are provided for in Art. 69 Federal Law “On Joint Stock Companies”. From this we can conclude that there is no legal possibility of appointing an interim arbitration manager. This conclusion is confirmed by a number of articles of the Law.

So, the content of Art. 24 “Rights and obligations of the arbitration manager” and Art. 34 “Persons participating in a bankruptcy case” allows us to conclude that only an insolvency administrator legally approved by the court can conduct bankruptcy procedures. For example, according to paragraph 3 of Art. 24, an arbitration manager approved by an arbitration court has the right to: convene a meeting of creditors, a committee of creditors, etc. In addition, in accordance with clause 9 of Art. 20 of the Law, only arbitration managers approved by the arbitration court are procedural successors of previous arbitration managers. And an arbitration manager can only be approved in accordance with Art. 45 of the Law.

Only in an exhaustive list of cases does the Law directly speak about the temporary performance of duties by an arbitration manager, namely in Art. 75, 83, 123. And all these situations are associated with the transition from one bankruptcy procedure to another. For example, according to paragraph 3 of Art. 123 in the event that the arbitration court has decided to declare the debtor bankrupt and to open bankruptcy proceedings and has appointed another person as the bankruptcy trustee, or if it is impossible to approve the bankruptcy trustee simultaneously with the adoption of such a decision, the external manager performs the duties of the bankruptcy trustee until the date of approval of the bankruptcy trustee. But in relation to cases of release of insolvency practitioners from performing their duties, the Law does not provide for the possibility of temporarily assigning the performance of duties to the released insolvency administrator or to any other person. Consequently, we can conclude that the release of the arbitration manager involves simultaneously replacing him with a new manager.

This conclusion is also confirmed by the following.

Firstly, in accordance with Art. 83, 97, 144 of the Law, the ruling on the release of the arbitration manager is subject to immediate execution. It would be strange, given the existence of such a requirement, to recognize as based on law the possibility for an arbitration manager, relieved of his duties, to continue working at the debtor enterprise as an arbitration manager. In the financial recovery procedure, this would also contradict paragraph 2 of Art. 83 of the Law, according to which the administrative manager acts from the date of his approval by the arbitration court until the termination of financial recovery or until his removal or release by the arbitration court4.

Secondly, according to the requirements of Art. 83, 97, 144 of the Law, the released arbitration manager is obliged to ensure the transfer of the debtor’s accounting and other documentation, seals and stamps, material and other valuables within three days to the newly approved external manager5.

If, when an arbitration manager is released, a new one is not appointed, the question arises: to whom should the released manager transfer the documentation?

The following conclusion seems logical: at the meeting it is necessary to consider two issues simultaneously: the release of the arbitration manager, and the appointment of a new one. In this case, it should be assumed that after accepting the application of the arbitration manager for early termination of the performance of his duties, the court should send a request to the self-regulatory organization of arbitration managers to provide a list of candidate managers. Then you need to schedule a meeting to consider the release of the current one and the appointment of a new arbitration manager. When determining the date of the hearing, the court must take into account that, in accordance with paragraph 3 of Art. 45 of the Law, a self-regulatory organization is given a five-day period to respond to the court’s request. It will also take a reasonable time for the debtor and the representative of the meeting of creditors to receive the list of this organization and for both the debtor and the representative of the meeting of creditors to exercise their right to challenge one of the candidates indicated in the list.

If at the date of the meeting it is not possible to consider both issues, the meeting, I believe, should be postponed. Indirect confirmation of this conclusion can also be found in the Law. In accordance with paragraph 3 of Art. 49, if, when making a ruling on the introduction of supervision, it is impossible to determine the candidacy of a temporary manager, the arbitration court issues a ruling to postpone the consideration of the issue of approving a temporary manager for a period of no more than fifteen days from the date of the ruling on the introduction of supervision. This article of the Law regulates the introduction of surveillance. The reasonableness of the cited rule is beyond doubt: it is clear that in the absence of a person responsible for the introduced procedure, the procedure cannot be introduced for the simple reason that there is no one to manage it.

Similar logic, I believe, can be applied to the issue of replacing a manager. As already noted, the Law excludes the possibility of continuing the work of an arbitration manager relieved of his duties. Consequently, if at the time the relevant determination is made there is no candidate for appointment, there is no person who would begin management at the debtor enterprise. It seems that this situation is similar to the one described. That is why, in the absence of a candidate for the position of a new arbitration manager, the meeting to consider the issue of releasing the current manager should be postponed6.

The stated conclusion is based solely on an analysis of the norms of the current Bankruptcy Law and only means that it is unlawful to appoint a “temporary arbitration manager” in the event of release from the duties of the manager due to his voluntary resignation. In my opinion, depending on the specific circumstances of the case, it could be considered reasonable to temporarily assign the duties of an arbitration manager to a manager released by a court ruling (as opposed to the case with the removal of an arbitration manager). However, this requires appropriate amendments to the Law.

The absence in the Law of an article establishing the procedure for exemption from duties and the appointment of a new temporary manager, as well as articles of a general nature that comprehensively regulate the procedure for replacing an arbitration manager in all bankruptcy procedures, should be recognized as an omission of the legislator. It seems that this gap must be filled as soon as possible in order to avoid difficulties in practice.

Appeal against the actions of the administrative manager

The ineffective work of the administrative manager and his abuse of his position may force participants in the financial recovery process to appeal his actions in court. Based on the results of its consideration, the manager may be held accountable, suspended from work or disqualified.

In addition to the court, the complaint can be transferred to the prosecutor's office (if there are signs of a criminal offense), to the SRO or Rosreestr, as well as to the Tax Inspectorate.