On 24th April, 2020 the Belarusian Government finally adopted the long-awaited first set of anti-crisis measures to support the economy. Whereas in light of the Covid-19 coronavirus pandemic the vast majority of European countries are implementing measures concerning insolvency proceedings, restructurings and rights of creditors generally, the economic response in Belarus does not yet include amendments to bankruptcy law. It is reported that a bankruptcy proceedings standstill is being considered by the Belarusian Government and Supreme Court.
As an attempt to support business and, probably, avoid large-scale insolvencies, anti-crisis measures so far include “tax holidays” – the right of local authorities to permit deferral of tax payments with later payments by instalments without additional charge. However these measures, firstly, were issued after the deadline for payment of income tax, and secondly, do not guarantee that the local authority will exercise this “right”.
The only measure directly addressing insolvency relations allows shareholders and officials of an insolvent debtor to initiate revision of court decisions holding them liable for company debts (decisions on subsidiary liability). Decisions issued before 25 February 2018 can be reconsidered in the light of new circumstances.
Publicly open records show that the rise in business bankruptcies has already begun. For instance, the number of companies that entered into voluntary liquidation in March – April 2020 has doubled compared to the same period last year. Many business owners that decided to liquidate admit they are on brink of insolvency. The number of bankruptcy proceedings opened in March – April 2020 increased by 12% compared to the same period last year.
Despite the fact that no official lockdown has been introduced in Belarus, the most impacted sectors are retail, HoReCa and entertainment, textile manufacturers, transport and logistics, real estate, leasing activities, educational, tourism, sports, and the medical sphere. Today up to 80% of reservations in the tourism sector have been cancelled, while the revenue of catering owners has decreased by 70% over recent weeks (many venues have suspended their activities).
Even if current efforts by the Government to counteract the economic shutdown are effective, an enormous wave of bankruptcies may still come. Belarus needs to rip up its insolvency law to stem the tide of companies set to collapse over the Covid-19 pandemic without further ado, otherwise for many businesses it may be too little too late. From this perspective the steps taken by Belarus’ closest neighbours can serve as an example to be referred to when deciding on further anti-crisis measures.