‘A company has to undergo bankruptcy proceedings after it has been found insolvent in order to pay off its debts to creditors. All the actions a trustee in bankruptcy takes are targeted at satisfying the creditors’ claims, possibly through putting the company’s assets up to auction,’ Irina Kaleeva of Jus-Cogens Ltd. said to UrBC relating to HydroSpetsStroy Ltd. (general contractor of Noviy Grad, the local developer).

‘People who invested their money in the would-be buildings now need to apply for the contract annulment, claim their money back, and demand that they be included in the list of creditors, which gives them the right to take part in the bankruptcy proceedings. In addition, if they signed their agreement with the developer after the federal law 111 came into effect on July 18, 2006, their claims must be considered asset-secured,’ Ms Kaleeva notes.

This law states that in order for the developer/mortgagor to meet their liabilities, as soon as the agreement between the developer and the investors/mortgagees has been registered, the land allotments to be used for the future dwellings or the renting right are believed to secure the agreement.

‘The creditor’s demands that are asset-secured must be met through selling this asset, and such creditors are given preference compared to other creditors, except for those whose agreements were signed prior to the security agreement. If a company has already been declared insolvent, one should bear in mind that the list of creditors must be finalized within two months of the event. If a creditor files their claim after the list closure, their demands will be met only after all the preferential creditors have had their claims satisfied,’ Ms Kaleeva warned.

Following the decision of Sverdlovsk Region Court of Arbitration, HydroSpetsStroy Ltd. will have to undergo bankruptcy proceedings; the company owes its creditors over 55 million RUR.