Russia seeks to tweak bankruptcy laws in its favour

Russia's government on Thursday approved amendments to bankruptcy laws which, if enacted, lawyers said would tilt the playing field in favour of the state by pushing it higher in the pecking order of creditors. The changes would also give the government more flexibility in restructuring of tax debts of bankrupt companies at a time when a rash of back tax claims have been striking terror at the hearts of companies and markets in Russia.
After the government approved the package of six draft bills, its website said that "the state should have equal status as a creditor with other competitive commercial creditors."
The proposed changes appear significant in the context of the state's legal assault on oil major YUKOS which the government has crushed with back tax claims of $27.5 billion.
Had YUKOS filed for bankruptcy in Russia, secured creditors and even YUKOS's owner Menatep Group - controlled by Mikhail Khodorkovsky, who is on trial for fraud and tax evasion charges - would have had precedence over the government.
YUKOS' attempt in December to hold a shareholders' meeting to consider bankruptcy was blocked by owners of Kremlin-friendly oil firm Sibneft, led by billionaire English soccer club owner Roman Abramovich, with a court restraining order.
YUKOS, which lost its core asset Yugansk in a messy renationalisation in December, has already filed for US bankruptcy protection.
The timing of the latest amendments comes against the backdrop of growing Kremlin control over strategic sectors of the economy, sold in the chaotic privatisation deals of the mid-1990s to so-called oligarchs.
"It looks as if the government is seeking equal rights and to improve its position vis-à-vis secured creditors," said Brian Zimbler, a partner at the Moscow office of international law firm Leboeuf, Lamb, Greene and Macrae.
"If enacted into law, the changes would give the government greater ability to manage its role in bankruptcies and give it more discretion in dealing with bankruptcies," he told Reuters.
The bills propose changes to the tax law so the government can restructure tax obligations of a company in bankruptcy.