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. Last Updated: 07/27/2016

Putin Vetoes Bankruptcy Law

President Vladimir Putin has vetoed the law on bankruptcy, one of the key economic bills passed by parliament during the spring session, news agencies reported Tuesday.

Putin, following the recommendations of the Kremlin's legal department, sent the bill back to the State Duma because it contradicts the Civil Code, Prime-Tass reported.

Specifically, parliament's version only defines three categories of priority creditors, whereas the Civil Code stipulates that there must be five. Putin is also asking deputies to toughen standards used to appoint external managers and amend sections on the bankruptcy procedures for state-owned and strategic enterprises.

Viktor Pleskachevsky, head of the Duma's property committee and a member of the Unity party, which lobbied the bill, was quoted by Interfax as saying that a new version would be ready for deputies to debate by September.

"The Duma will most likely agree with the president and the amended law could come into effect in October at the earliest," he said.

Pleskachevsky last month said amending the existing law was necessary to set new mechanisms to protect the rights of private owners. The law has been used by creditors and competitors to initiate bankruptcy procedures and seize control of companies, he said.

"With the new law, the rights of owners, creditors and the government will be much better protected," he said.

Analysts predicted the veto and expect the debate to continue when the Duma reconvenes next month.

"The new bill contradicts the Civil Code, so Putin had every right to veto it," said Edward Neigebauer, head of the legal and corporate finance department at investment house Prospekt.

"The Duma was trying very hard to lobby the interests of certain industrial groups, and as a result the law was not ready to work," Neigebauer said. "It means that various political groups received more room for lobbying and it is hard to say what the final version of the law will look like."