(a) Are there civil or penal/criminal sanctions in the legal system of this economy in relation to the incurring and non-payment of debts by corporate debtors (for example, some type of sanction - such as the concept of 'insolvent trading' - to which the directors of the corporate debtor may be subject)?

 

According to Article 154 of the Insolvency Law, the following acts by corporate debtor, which is made for the purpose of jeopardizing the creditors and which take place one year before the insolvency adjudication or during the insolvency proceedings, will constitute a crime of fraudulent insolvency:

(i)Concealing, destroying or otherwise disposing of its property resulting in the prejudice to the creditors;

(ii)Forging debts or accepting debts which are not genuine;

(ii)Destroying or forging account books or other accounting documents resulting in inaccurate status of its assets.

(b) What are these sanctions?

 

The directors of the corporate debtor will therefore be sanctioned by imprisonment for no more than five years.

(c) Do any of these sanctions have the effect of encouraging the directors of a corporate debtor to seek protection for the corporate borrower under the insolvency law regime?

 

Nil.

(d) Does the presence of the possible application of any of these sanctions create a problem if a corporate debtor which is in financial difficulty or insolvent seeks to negotiate an informal work out with creditors?

 

An informal work out, without prejudice to one or part of the creditors and with no intention to prejudice one or part of the creditors, will not constitute a crime of fraudulent insolvency. We do not think it will be an obstacle to the negotiation between the debtor and all its creditors which is to work out a solution to solve its financial difficulty.