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. Last Updated: 07/27/2016

Changes to Bankruptcy Law Backed

Russia may allow companies to postpone payments of tax arrears to avoid bankruptcy and may make punishment heavier for company managers for staging deliberate bankruptcies to help prevent hostile corporate raids.

The Cabinet on Thursday supported amending the bankruptcy law to let tax authorities grant companies a one-year delay for payments of back taxes as part of an out-of-court settlement. It also is considering an increase in prison terms for staging a deliberate bankruptcy to six years from three years.

"There are practically no out-of-court settlements in bankruptcy cases where a tax debt is involved," the Economic Development and Trade Ministry, which prepared the amendments, said in a statement. "The reason is deficiencies in the current legislation on bankruptcies."

Russia last amended the bankruptcy law in 2002, closing the possibility for creditors to have a company declared bankrupt because of debts totaling a few thousand dollars. While the law now lets shareholders pay their debts at any stage of a bankruptcy proceeding, tax debts are treated differently from other debts.

Russia may also amend the law to make managers found guilty of transferring assets from a company facing bankruptcy answer creditors' claims with their own assets, said Tseren Tserenov, a deputy department head at the economy ministry. Yukos, formerly the country's second-largest oil producer, is facing bankruptcy over a back taxes bill of $28 billion.