Dentons

On 13 April 2019, the new amendments to the Law of the Republic of Kazakhstan "On Rehabilitation and Bankruptcy" dated 7 March 2014 No. 176-V (the "Bankruptcy Law") came into force. The changes are aimed at strengthening the position of secured creditors in bankruptcy proceedings.

Under the amended provisions of the Bankruptcy Law, the claims of a secured creditor are now satisfied "out of turn" if that creditor agrees either to accept the pledged property in kind or to sell the pledged property independently.

In both cases, the pledged property is not included in the bankruptcy estate and is not subject to distribution amongst the remaining creditors. The claim of such a secured creditor covered by such pledged property is also excluded from the register of creditors' claims.

We note that the secured creditor may, however, refuse either to accept the pledged property in kind or to sell the pledged property at an auction. In this case, the claim of the secured creditor in the bankruptcy proceedings will be subject to satisfaction "in the second order" according to the previously established procedure.

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