Russia's new draft law offers struggling firms a lifeline from liquidation

Bill Introduced to Save Struggling Businesses from Liquidation, but Experts Warn of Limited Impact

A draft law aimed at rescuing troubled companies facing liquidation has been submitted to the State Duma. However, experts caution that the bankruptcy reform will have limited effect—and may even make it easier for unscrupulous business owners to delay settlements with creditors.

Who Will the Law Save?

On March 26, amendments to Russia's federal bankruptcy law were introduced in the State Duma, designed to rehabilitate distressed businesses and restore debtors' solvency rather than liquidate them. The proposed changes include new mechanisms, such as pre-bankruptcy rehabilitation—a process in which a debtor and creditors negotiate an agreement to prevent default. If a majority of creditors approve the deal, it becomes binding on dissenting minority creditors as well.

Another key innovation allows debtors or creditors to petition an arbitration court for debt restructuring rather than bankruptcy proceedings. The amendments also shorten liquidation timelines and reform the selection process for insolvency practitioners to ensure their independence.

As Sergei Gavrilov, chairman of the State Duma Committee on Property, Land, and Asset Relations and one of the bill's authors, explained to Expert, the changes are particularly relevant now, as many companies face financial distress and have suspended loan payments. "This bill sends a strong signal to the market that the state is ready to explore new ways to preserve businesses, support enterprise development, and overcome temporary difficulties," Gavrilov said. "Unfortunately, our current bankruptcy system is ineffective—fewer than 1% of debtors undergo financial recovery. We hope this procedure will soon become more widely used and acceptable."

The draft law is most likely to benefit companies with fundamentally viable business models but temporary cash-flow shortages, high short-term debt burdens, or mismatches between financial obligations and revenue streams, Boris Fedorisimo, vice president of the OPORA Russia business association and chairman of the Moscow Arbitration and Tax Lawyers' Collegium "Ludi Dela," told Expert. "The most realistic candidates for rescue are businesses with ongoing operations, intact management structures, and creditors willing to negotiate repayment schedules," he noted.

Potential beneficiaries include manufacturing firms, construction contractors, logistics companies, distributors, regional retail chains, and other businesses with active sales markets, contract portfolios, and operating profits before debt servicing.

The draft law could prove most beneficial to small businesses facing heightened financial strain but with a viable economic plan to recover from the crisis, argues Arthur Sarkisyan, an attorney and expert in litigation, arbitration, and restructuring: "The emergence of successful rehabilitation procedures in bankruptcy cases will help preserve the economy and set the stage for growth. Startups will have less to fear from potential losses and liability when launching, while established businesses will be able to maintain existing operations, expand into new areas, and break free from stagnation."

Experts surveyed by Expert magazine agree that the bill will not assist all debtors—its real impact will be limited and selective. However, given that insolvency recovery procedures are currently rarely used (just 59 cases in 2025), the reform could statistically multiply the number of saved companies several times over, notes Boris Fedosimov: "If applied effectively—and if banks and major creditors are willing to enter into restructuring agreements—we may only avert a small fraction of liquidation bankruptcies, likely just a few percent of the annual corporate caseload. But in the small and medium-sized business (SMB) segment, where companies have a functional business model, the effect could be more pronounced than the system-wide average."

"The economic outcome will depend on how quickly restructuring agreements can be negotiated and executed, how willing creditors are to accept debt restructuring, and whether incentives are created for new financing of distressed borrowers," Fedosimov adds.