Plenum of the Supreme Court of the Russian Federation clarified the rules of guarantees in bankruptcy

The Plenum of the Supreme Court of the Russian Federation adopted Resolution No. 26 “On the specifics of the application by courts in insolvency (bankruptcy) cases of guarantee rules”, in which it allowed to decrease the claim of a guarantor who issued a surety during the financial problems of the debtor.

Other important provisions of the Resolution:

1. The creditor may start bankruptcy of both the debtor and the guarantor (if there are several - each of them or any one separately);

2. After the commencement of the first bankruptcy procedure in respect of the debtor, the term for the performance of the guaranteed obligation shall be deemed to have come, and the creditor shall have the right to file a claim against the guarantor;

3. In part of the fulfilled obligation, the rights of the creditor pass to the guarantor;

4. The controlling person who issued a guarantee in the event of a debtor's financial crisis assumes the risks. His claim can be lowered in the order of satisfaction by creditors.

5. If the debtor is in bankruptcy proceedings and the guarantor's performance is insufficient to fully satisfy the creditor's claim, such guarantor may not receive satisfaction of his claim until the creditor's claim from the bankruptcy estate is fully satisfied;

6. Changing the size of the main obligation without the consent of the guarantor does not entail an increase in his liability;

7. The liquidation of the debtor does not terminate the guarantee, if prior to the liquidation the creditor has filed a claim against the guarantor in court or in another manner prescribed by law.

The new Resolution partially replaces the clarifications of the Resolution of the Plenum of the Supreme Arbitration Court of the Russian Federation of 12 July 2012 No. 42 “On Certain Issues of Resolving Disputes Related to Guarantees” (paragraphs 46–57).

See: Resolution of the Plenum of the Supreme Court of the Russian Federation of June 29, 2023 No. 26 “On the peculiarities of the application by courts in cases of insolvency (bankruptcy) of the rules on guarantee” 

Nadmitov, Ivanov & Partners Law Firm advises on bankruptcy issues and how to structure collateral for transactions.