Bankruptcy of a construction company in Moscow

This case shows how to achieve the rejection of the main creditor's claim for 200 million rubles ($ 2,6 million), in strict accordance with Russian legislation, to sell the claims amounting to 140 million rubles ($ 1,8 million) for 60 million rubles ($ 800 000) and to avoid criminal prosecution and preserve the business.

A construction company dealing with residential building projects. It has been in the market since the 90s and owns a construction base and equipment.

During the construction of a residential complex, the owner and the investor of the developer changed. The new owner decided to replace the contractor (the current construction company) by a multitude of claims regarding the volume and quality of work, suspension of payment and further financing.

Consequences for the construction company:
  • numerous claims from subcontractors;
  • monetary debts for the accepted works, leading to enforcement proceedings for the debt recovery;
  • initiation of bankruptcy proceedings.

The situation was aggravated by the unreasonable actions of the beneficiaries of the developer and the investor:
  • attempt to control the debtor's bankruptcy procedure by including their claims in the list of creditors' claims (the LLC), totaling approximately 200 million rubles ($ 2,6 million) out of 340 million rubles ($ 4,5 million) in the LLC;
  • appointment of an affiliated bankruptcy trustee;
  • increased pressure on the debtor’s controlling persons by the initiation of criminal proceedings against them.

The main shareholder and former executive of the debtor’s company approached us willing to preserve assets while resolving issues with the creditors.
  • To achieve this goal, a protection strategy was moulded, and certain measures were taken, which resulted in:
  • forming a pool of loyal creditors to initiate actions in the interests of these creditors and the debtor (negotiations were conducted with a majority of the creditors);
  • excluding the claims of the developer and the investor from the LCC (approximately 200 million rubles / $ 2,6 million) — their claims were proved to be unfounded;
  • termination of the criminal prosecution of the debtor’s controlling individuals (evidence was gathered to prove the claims of the developer and the investor unfounded );
  • removal of the bankruptcy trustee, who was loyal to the developer and the investor, from the case (it was proven that the bankruptcy trustee acted contrary to the repayment of all creditors' claims and violated the balance of interests in favour of the developer and the investor);
  • selling the remaining claims in the amount of 140 million rubles ($ 1,8 million) for 60 million rubles ($ 800 000). Claims from neutral and moderately loyal creditors were sold at a discount based on assignment agreements.

All the claims were consolidated with one loyal creditor. The claims of the Federal Tax Service were repaid by this creditor in accordance with Article 129.1 of the Bankruptcy Law.

At the creditors' meeting, a decision was made to repay the claims of one loyal creditor by transferring all the debtor's assets to him as a settlement.
Result – The bankruptcy procedure was completed with the preservation of the business.

The company's CEO and other controlling individuals were released from criminal prosecution. The claims of the developer and the investor for 200 million rubles ($ 2,6 million) were rejected, and the claims amounting to 140 million rubles ($ 1,8 million) were sold for 60 million rubles ($ 800 000).

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