1.1 Amicable Phase
Collection Agency Service Russia looks to maintain a professional and effective approach to every debtor in the country. Our main goal is to facilitate an amicable settlement between the debtor and the creditor, allowing funds to be repaid without pursuing extensive legal action against the debtor to achieve that end. Our in-house professionals carefully analyze every case submitted to us by our clients to determine how it can best be handled and collected to serve the needs of our clients and debtors simultaneously.
This includes sending clear and concise written correspondence to the debtor, and talking on the phone with debtors in a professional manner. We offer payment plans and follow up on any agreements reached with the debtor, and employ a hard but fair approach to less agreeable debtors we are pursuing. Our in-house legal team is able to trace and investigate debtors’ location and finances, as well as their business reputation, during this process. We are also able to influence the debtor’s standing in their business environment. With many years of experience in this industry, Collection Agency Service Russia remains one of the best options for effective, in-house debt collection procedures.
1.1.2 Local agent
Collection Agency Service Russia offers visits to debtors by using our extensive network of local field agents. Our professionals will attempt to meet with the debtor at their primary residence, or at their place of business, in order to determine the fiscal position of the debtor as well as the financial situation of any business involved in the collection process. Field agents are, in most cases, experienced lawyers who have Russian debt collection experience.
It should be noted that Russia’s size could make the use of field agents extremely challenging and costly. For this reason, the fee charged by Collection Agency Service Russia when conducting field visits is designed to include transportation and lodging costs for the field agent involved.
Regulations in Russia typically do not favor paying interest on a debt owed to a creditor, and this can make it extremely hard to charge such a fee and expect to collect it amicably. Charging interest is legally allowed, but hard to enforce, unless an agreement to pay such interest currently exists between the debtor and the creditor. Additionally, upon charging interest, an agreement would have to be drafted meet a number of stipulations as outlined in Russian law, including the following provisions:
– The interest agreement must be in addition to any standing agreement between the debtor and the creditor
– The agreement must confirm changes in the currency deal password
– An invoice must be generated by the creditor an delivered the debtor detailing the full amount of interest that is to be paid as part of the debt
– An agreement to pay interest must reconcile the payment with the debtor’s bank account
Without such an agreement, enforcing the collection of an interest rate in Russia is virtually impossible –especially as the court system does not favor enforcing such costs when awarding a judgment.
1.1.4 Debt collection costs
The costs associated with collecting a past due invoice or debt cannot be charged to the debtor unless an existing agreement has been signed that states the creditor can charge the debtor for these costs. Russian law prohibits charging these costs to the debtor unless an agreement has been struck with a provision allowing such a charge; any other methods used to charge this fee would be thrown out in court.
Russia currently employs a Statute of Limitations lasting three years from the date that an account first went delinquent. For transport claims, this period is reduced to just one year. This limitation does not stop the creditor from filing suit in the country’s court to claim payment of a debt. Consumers can have such a case dismissed based on the Statute of Limitations, however, making the effort futile in most cases.
1.1.6 Accepted and most common payment methods
Bank transfers are easily the most common form of payment when a debtor wishes to pay their outstanding obligation. Within Russia, cheques are hardly ever used to satisfy a debt. Some individuals do prefer to pay in cash, however.
1.1.7 Types of companies
There are several types of companies in Russia, and each one is subject to unique rules and regulations regarding the recovery of a debt.
OOO Obshchestvo s Ogranichennoy Otvetstvennostyu (limited liability company):
This company’s minimum level of capital is set at 10,000.00 RUB. The company’s owners shoulder the full burden of all debts up to the amount of capital held by the company. Currently, OOO is the most popular legal formation for businesses in Russia, comprising 80 percent of commercial enterprises in the country.
ZAO Zakrytoe Aktsionernoe Obshchestvo (Private joint-stock company):
Minimum capital for this type of business is 10,000.00 RUB. The company is liable for its debts, up to the amount of its capital, by its assets and properties. The company’s owners and shareholders share the risk of the company’s debts up to the amount of their own share holdings.
OAO – Otkrytoe Aktsionernoe Obshchestvo (Public Joint-Stock Company):
Capital must reach at least 100,00.00 RUB for this business to be formed. The company’s assets are liable for its debts, and shareholders themselves are liable up to the value of the shares they hold.
Other corporate entities also exist within Russia, but are far more rare. These various types include ODO Obshchestvo s dopolnitelnoy otvetstvennostyu, PK Proizvodstvehhiy kooperativ, UP Unitarnoe predpriyatie, Polnoe tovarishchestvo, Toverishchestvo na vere. For more detailed information on these rare companies, Collection Agency Service Russia will provide a case-by-case analysis and report to our clients.
1.1.8 Sources of information
Information relating to the financial standing of any company or individual debtor can be easily obtained by accessing a credit report. This information is easy to obtain, especially because Collection Agency Service Russia maintains a large network of professionals in credit information who specialize solely in the Russian market. Our local agents are highly skilled financial staff, and are able to pull credit reports even in the most remote parts of the country. This credit report contains essential financial information, and is one of the key factors when determining how to further pursue a debtor and collect the full amount owed to our client.
A typical Russian credit report contains the following information:
– Company registration data and an extensive corporate history
– Office addresses, telephone numbers, fax numbers, email contacts, and more
– Products and services offered, registered trademarks, and other business activities
– Import and export data, including main suppliers and largest clients
– Shareholder information and administrator contact details
– Data about company affiliates and subsidiaries
– Prior year accounting information, including balance sheets, losses, and bank associations
– Negative credit information, judgments, claims, and current debt load
– Creditworthiness and credit rating for recommendation to future lenders
This information is sourced from the following areas:
– State registers
– The court system
– The Federal Statistics Board
– The Internet
– Public databases
– Media sources
– Direct company sources and reports
Due to business ethics regulations in Russia, it is possible for us to conceal the identity of the client for whom these credit reports are being pulled.
1.2. Legal Procedures
Russian laws and regulations are based on a system of civil law. In Russia, civil law governs only those relations that occur between two people or various companies in the country.
It is possible to begin legal action against a debtor without notifying them prior to the start of legal proceedings. Any communication explaining the possibility of legal proceedings should be sent to the debtor as a final reminder of their obligation and the consequences. Typically, this letter will also serve as a final request for full payment of the debt or for good faith payment arrangements. This letter can be used in court to prove the failure of the amicable collections process but, again, it is not a requirement before legal action can begin to take place. Furthermore, the letter itself does not guarantee a speedier outcome on behalf of the court of first instance where the claim is filed.
1.2.2 Legal System
The judicial system in Russia is divided into a system that contains three instances, much like many of the countries located in Eastern and Western Europe, as well as North America. Legal proceedings between debtors and creditors take place in one of the following two courts:
The Arbitrage Court, which handles disputes between corporate entities. Three levels of appeal exist within this court system, and the lowest instance can be appealed to the highest instance court in some cases.
The Commercial Court, which applies when parties have both agreed to solve and settle the matter in accordance with a pre-existing contract. This court has a single instance and its decision in any matter cannot be appealed to a second or third instance.
1.2.3 Required documents
In order to file a successful lawsuit against a debtor who has not satisfied their obligation to the creditor, Collection Agency Service Russia must obtain the following documentation beforehand:
– Original signed contract between the parties
– Copies of any unpaid invoices
– An account statement showing payments and credits toward the debt
– Transporting documents with the debtor’s signature proving that goods were received
– Correspondence between the debtor and creditor that will help to verify the debt
– Information gleaned from the register about the company’s employees, indicating that they have the right to sign documents for the company
– Original Power of Attorney, signed and presented by the lawyer representing the creditor
All documents provided must be copies unless noted otherwise above. Those that are not copies can be verified by a notary. If any original documents are not written in Russian, they must be translated into the native language and verified by a notary before being submitted to the court. Original copies of any documents must be shown to the court during the first hearing. If any documentation is missing, the client should have an explanation as to why each document cannot be presented at the first hearing.
1.2.4 Legal dunning procedure
Under current Russian law, there is no requirement for a legal dunning procedure, nor is any similar procedure mandated before a lawsuit can be filed in court against a debtor.
A lawsuit is started immediately after the amicable collection process has failed to produce the desired results for the client. It can also begin if any dispute of the debt is lodged by the debtor against the creditor. The claim made by the lawsuit is filed with the court of first instance and the court conducts research into the submitted documents in order to verify the debt. If the claim is verifiable and valid, the court announces a start date for the trial, which is also the date of the first hearing. Both the debtor and creditor must be present at this initial hearing. Courts may occasionally postpone the first hearing if necessary.
If the case moves to a Commercial Court, each side involved in the trial can select a judge for the case.
Appeals are not permitted in the Commercial Court of Russia. If a case has been heard outside the Commercial Court, however, it is possible to appeal a judge’s decision to the court of second or third instance. In the court of second instance, objections to the decision and judgment can be lodged in an attempt to reverse the lower court’s decision. In the court of third instance, the appeal must be based on legal errors and misused statutes employed by the judge when the ruling was delivered. No new information is considered during this part of the appeal process. The appellation petition must be submitted to the court according to the bylaws of the court of first instance.
Costs associated with civil law proceedings are determined according to the Russian Civil Code and are not able to be negotiated. The costs depend on the amount of money owed to the creditor by the debtor, making it hard to predict the exact amount of any costs incurred by the creditor. Collection Agency Service Russia will provide an estimation of the costs on a case-by-case basis when requested.
1.2.8 Expected timeframe
The typical lawsuit takes up to six months in Russia’s court system, though this duration can be extended in cases where the suit is extremely complex or the judge is not available for long periods of time.
1.2.9 Interests and costs in the legal phase
Interest fees and late payment penalty costs can be claimed as part of the outstanding balance during a lawsuit, but the granting of these costs is entirely up to the judge’s discretion. The court will typically not award any interest payment greater than 10 percent of the debt’s outstanding balance; even for lesser amounts, there is no guarantee that any amount of interest will be awarded by the judge. Furthermore, requesting the payment of interest fees will increase the court costs associated with filing and defending the lawsuit.
The debtor must bear the cost of any legal proceedings in Russia if they are found to owe a debt to the creditor who has sued them. This is in accordance with the country’s Civil Process Law. The judge can decide to assign the full costs, or a portion of them, when making his decision.
1.3 Insolvency Proceedings
Russia has two types of insolvency proceedings:
This is Russia’s way of restructuring company debt and reorganizing the entity so that it has a better chance of meeting its financial obligations. A court-appointed administrator oversees the process. If the company adheres to its restructuring plan, it continues to exist and operate as per usual.
The court appoints an administrator who is responsible for preparing a list of owed creditors and receiving all documents relevant to the company’s obligations. The company is liquidated after this process completes, and creditors receive an appropriate and equal dividend of the liquidation amount.
In bankruptcy, a claim must be submitted within one month after the court has decided to begin the insolvency proceedings against a corporate entity.
If the claim is not submitted within this period of time, there are two potential avenues for the creditor:
1. The creditor’s claim will not be rejected if rehabilitation has started. Instead, the judge will wait until the next round — typically the third round — and give the creditor lower priority when receiving payment from the company under their restructuring plan. The claim can also be submitted if and when the company successfully rehabilitates its financial position.
2. The court will decide whether a creditor’s claim is valid or not after bankruptcy has started. The creditor will be included in the third or fourth line of creditors who may receive a dividend as part of the proceeding.
Those lines of creditors are aligned as follows:
First line: Insured creditors
Second line: Company obligations, like salaries and taxes
Third line: Uninsured creditors
Fourth line: Miscellaneous creditors
1.3.3 Required documents
Outstanding invoices and contracts are required to lodge a claim against the creditor.
1.3.4 Expected timeframe and outcome
Claims must be lodged against an insolvent debtor within one month after the information about the court’s decision is published in official sources of record. Insolvency itself takes at least six months, and has no time limit. Rehabilitation can take a very long time, and bankruptcy is known to be a slow process in Russia.
1.3.5 Limited companies
In the event that a company’s restructuring effort succeeds, the appointed administrator is removed and the business resumes its normal activities. If this effort is unsuccessful, the bankruptcy procedure commences and liquidation of assets is pursued.
1.3.6 Unlimited companies/individuals
The same procedure applies for these companies as it does to limited companies.
1.3.7 Pool of creditors
Russia does not use a pool of creditors.
The appointed administrator can dispute payments made by the debtor during the insolvency proceedings. This is rare, however, as payments made during insolvency need to first be confirmed by the administrator before being sent. Otherwise, banks will not permit those payments to be processed by the creditor.