Law No. 239-Z of the Republic of Belarus “On Placement in Temporary External Administration” adopted on 3 January 2023 permits placing legal entities in temporary external administration. The Law will enter into force on 17 January 2023.
Entities affected by the Law
It will be possible to place in temporary external administration only business entities with foreign participation (whose asset owners (members (shareholders)) are legal entities or individuals from foreign states).
Not all legal entities with foreign participation may be placed in such administration. This is possible only in the following cases:
The Council of Ministers has not yet defined “other cases.” The wordings “have actually ceased to manage” and “perform economically unjustified actions” have not been clarified either by the Law or by any other regulations and are judgmental in nature. Thus, it is currently difficult to predict which specific cases will fall under these definitions.
However, if the company’s management bodies actually manage the company (the executive body concludes contracts and hires employees, and the general shareholders’ meeting is held and makes decisions in cases stipulated by law and the charter) and the company does not close its retail outlets and runs at a profit, the risk of temporary external administration is minimal.
How temporary external administration is introduced
The actual decision to introduce temporary external administration is made by a regional or Minsk city executive committee. The procedure for making such decisions is to be determined by a separate decree of the Council of Ministers to be adopted within a month after the date when the Law enters into force.
Period of temporary external administration
According to the Law, temporary external administration is introduced for a period of up to 18 months from the date when it is decided to introduce such administration. The Law sets no procedure for canceling temporary external administration; we believe that it will be possible not only to wait until the end of the period of temporary external administration but also to cancel it before its expiry if the stated goals of its introduction are achieved.
Who will handle temporary external administration
The Law sets only basic requirements for a temporary administrator. This may be an individual who has a university degree, preferably in economics or law, and required experience in business (entrepreneurial) activities.
The Council of Ministers is also due to set additional requirements for a temporary administrator within a month.
A temporary administrator may also be a legal entity led by an individual who meets the requirements set for a temporary administrator.
An administrator may also be an individual who has the right to act as a temporary (anti-crisis) manager.
From the introduction of temporary external administration and throughout its entire period, the powers of management bodies specified in the respective decision are suspended and the members of the bodies are barred from work (unless otherwise stipulated by the decision on temporary external administration).
What the powers of the temporary administrator will be
The administrator will in any case receive the powers of the legal entity’s executive body (a sole or collegial body: management board, executive board).
The decision on temporary external administration may also delegate to the administrator the powers of other management bodies, which include, according to legislation, the general shareholders’ meeting and the Board of Directors (Supervisory Board), if such exists.
According to the Law, the external administrator may receive any powers of the suspended bodies, except for powers to decide on the reorganization or liquidation of a business entity. It is separately stated that the external administrator may make some decisions (on major transactions, on transactions in which affiliates have an interest and on the issue (provision) of securities) only with the prior written consent of a regional or Minsk city executive committee).