On Banks and Banking Activity in the Republic of Kazakhstan (стр. 13 )

Article 70. Types of Forced Liquidation of Banks
 
 Forced liquidation of a bank shall be carried out by the court in connection with the following:
  а) bankruptcy of a bank;
  b) revocation of a bank's license for the performance of banking operations on the bases, established by the banking legislation;
  c) application (claim) from the authorised state bodies, legal entities and individuals on termination of a bank's activities due to any other reasons, established by the legislative acts.
Reference. Article 70 is amended by the RK Laws dated 2nd of March 2001 N 162 (see art. 2); dated 12th of January 2007 N 222 (effective upon expiry of 6 months since the date of official publication).

Article 71. Recognition of a Bank as a Bankrupt
 
  1. Insolvency and illiquidity of a bank shall be established by the report of the authorized body, submitted to the court, compiled taking into account the methodology of calculation of the prudential standards (and any other rules and limits obligatory for compliance) and amount of the bank capital.
  2. A bank may be recognised as a bankrupt only pursuant to the court decision in accordance with the established procedure. A non-judicial procedure for liquidation of an insolvent bank pursuant to the decision of its creditors and the bank itself shall not be allowed.
  3. Possibility of conclusion of a settlement agreement between the parties in the bank bankruptcy case shall be excluded.
  4. A decision on bankruptcy of a bank and its forced liquidation shall be forwarded by the court to the authorized body.
  Reference. Article 4 with amendments, inserted by the Law of the Republic of Kazakhstan dated 10th of July 2003 N 483 (effective since 1st of January 2004).

Article 72. Liquidation of Banks due to Any Other Grounds
 
  1. Forced liquidation of a bank in the cases, when the proceeding is initiated by the court pursuant to the application (claim) of the authorized state body, legal entities or individuals (at absence of the decision on revocation of the bank's licenses for the performance of banking operations) shall be carried out in accordance with this Law.
  2. A decision on forced liquidation of a bank shall be forwarded by the court to the authorized body.
  Since the date of taking a decision on forced liquidation of a bank by the court under the proceeding, initiated upon the grounds, indicated in subparagraph c) Article 70 of this Law, the bank is a subject to revocation of a license for the performance of banking operations.
Reference. Article 72 is amended by the RK Laws dated 2nd of March 2001 N 162 (see. art. 2); dated 10th of July 2003 N 483 (effective since 1st of January 2004); dated 12th of January 2007 N 222 (effective upon expiry of 6 months since the date of official publication).

Article 73. Terms and Procedure for the Performance of Forced Liquidation
 
  1. From the effective date of initiation of the proceeding on forced liquidation of a bank by the court:
  1) the founders (participants), the bodies of a bank are not entitled to dispose the bank’s property;
  2) enforcement of earlier taken decisions of the court, related to the liquidated bank, shall be suspended;
  3) claims of creditors to the bank may be presented only under the liquidation procedure, except for the claims, associated with current expenses for the bank support;
  4) it is not allowed to withdraw funds from the bank accounts upon request of the creditors, the tax bodies, including those which are subject to satisfaction on the acceptance-free basis, as well as forfeiture of the bank’s property;
   5) the bank’s officials are prohibited to dispose the bank’s shares under their ownership.
  1-1. Liquidation of banks due to the reason of bankruptcy shall be carried out in accordance with this Law, as well as with the legislation of the Republic of Kazakhstan.
  2. All expenses, associated with liquidation of a bank, shall be paid only at the expense of that bank's funds, except for the cases, indicated in paragraph 9 Article 48-1 of this Law.
  3. Valuation of the banks' property shall be carried out by the liquidation committee in accordance with current legislation.
  4. The intermediate liquidation balance sheet and the register of creditors of a liquidated bank shall be approved by the court pursuant to the proposal of the authorized body.
  4-1. Prior to approval of the intermediate liquidation balance, offset of claims due to coincidence of a creditor and a debtor in one person is allowed.
 After approval of the intermediate liquidation balance, offset of claims shall be made in the relevant order of priority.
 It is prohibited to make the offset of claims with a creditor, which claims to the liquidated bank arise from the agreement (agreements) on assignment of the right of claim.
  5. Sale of property of a liquidated bank shall be carried out by the bank's liquidation committee in accordance with the procedure, established by the legislation of the Republic of Kazakhstan.
  6. Control over the bank’s liquidation committee’s activity, including the liquidation due to bankruptcy, shall be carried out by the authorized body.
  6-1. The court, which adopted the decision on liquidation of a bank, shall have a right to request any information, connected with activities of the liquidation committee of the bank from the authorized body.
  7. The reports on liquidation and the liquidation balance sheets, compiled by the liquidation committee, shall be forwarded to the court upon coordination with the authorized body.
 The court shall approve the liquidation report and the liquidation balance sheet, and take a decision on completion of the liquidation process.
 The liquidation committee shall send a copy of the court decision to the justice body, which provides state registration of legal entities, and to the authorized body.
 Upon completion of the bank liquidation, the committee shall pass the documents to the archive for storage in a prescribed manner and notify the authorized body on this action.
Reference. Article 73 is amended by the RK Laws dated 16th of July 1999 N 436; dated 2nd of March 2001 N 162 (see art. 2); dated 10th of July 2003 N 483 (effective since 1st of January 2004); dated 23rd of December 2005 N 107 (enactment procedure, see art.2 of the Law N 107).
 

  Article 73-1. An Operation on Simultaneous Transfer of Liabilities and Property of a Bank to Another Bank (Banks)
   
  1. For the purposes of protection of the creditors’ interests of a bank, it shall be allowed upon coordination with the authorized body to carry out an operation on simultaneous transfer of the bank’s property, including the right of claims on its accounts receivable, and obligations of the bank in parts or in full under the deposits guaranteed by the organization of obligatory guaranteeing of deposits to another bank (banks).
  2. An operation, indicated in paragraph 1 of this Article, may be carried out by the temporary administration (temporary administrator), the liquidation committee at the liquidation stage upon coordination with the authorized body, after the effective date of a court decision on forced liquidation of the bank.
  After approval of the intermediate liquidation balance sheet of the forcedly liquidated bank, it shall be allowed to carry out an operation on simultaneous transfer of the bank’s obligations and property in compliance with the priority of satisfaction of the creditors’ claims, established by Article 74-2 of this Law.
  3. The temporary administration on the bank management (temporary bank manager) shall have a right to carry out the operation, indicated in paragraph 1 of this Article, at the temporary closing stage upon coordination with the authorized body.
  3-1. Upon coordination with the authorized body, a bank shall have a right to carry out an operation on simultaneous transfer of the bank’s obligations and property in parts or in full under the deposits of individuals and legal entities to another bank (banks) in accordance with the procedure and on the conditions, established by the authorized body. A decision on transfer shall be taken by the bank’s management body.
  4. The procedure and the particular features of operations, listed in paragraphs 1 and 2 herein, shall be defined by the normative legal acts of the authorized body.
  5. Transfer of obligations shall be carried out upon the depositors’ approval. For obtainment of the depositors’ approval, the temporary administration (temporary administrator), the liquidation committee of a participating bank shall announce on the forthcoming transfer of obligations on the guaranteed deposits of individuals and legal entities in parts or in full. The announcement shall be published in the periodical printed media, distributed in the territory of the Republic of Kazakhstan, in Kazakh and Russian languages. Absence of the written objection of the depositors within ten days from the publication shall be recognized as approval of the depositors for such transfer of deposits.
  Reference. Article 73-1 is stated in the wording of the RK Law dated 23.10.2008 N 72-IV (enactment procedure, see art. 2); with amendments, inserted by the RK Law dated 13.02.2009 N 135-IV (enactment procedure, see art. 3).

Article 74. Liquidation Committee of a Forcedly Liquidated Bank
 
  1. After taking a decision to liquidate a bank, including on the basis of its bankruptcy, the court shall initiate the liquidation process and assign the authorized body to appoint the bank liquidation committee with consideration of its branches and representative offices.
 The bank’s liquidation committee shall take measures for winding up of the bank's business and ensuring its settlement with creditors.
 The procedure for appointment and dismissal of the liquidation committees, requirements to the chairman and members of the liquidation committees, as well as the requirements to the activity of the liquidation committees shall be defined by the normative legal acts of the authorized body.
 Monthly remuneration, paid to the chairman, members of the liquidation committee of the bank and other employees shall not exceed tenfold amount of minimum salary, established by the republican budget law for the respective financial year.
  2. (excluded by the Law N 162 dated 2.03.01)
  3. (Paragraph is excluded in accordance with the Law of the Republic of Kazakhstan dated 10th of July 2003 N 483 (effective since 1st of January 2004).
  Reference. Article 74 is amended by the RK Law dated 2nd of March 2001 N 162 (see art. 2); the Law of the Republic of Kazakhstan dated 10th of July 2003 N 483 (effective since 1st of January 2004); dated 23rd of December 2005 N 107 (enactment procedure, see. art.2 of the Law N 107).

Article 74-1. Special Considerations for Establishment of the Liquidation, Bankruptcy Estate at Liquidation of Banks
 
  1. The liquidation, bankruptcy estate of a bank shall be formed in accordance with the procedure, defined by current legislation, subject to the special considerations established by this Law.
  1-1. The liquidation bankruptcy estate of a bank shall not include the allocated assets, which are security for the bonds, issued in accordance with the legislation of the Republic of Kazakhstan on securitization, and pledged property, which is security for the mortgage bonds: claims under the mortgage loan agreements (including mortgage certificates), as well as the state securities of the Republic of Kazakhstan in the cases, when right of property to these bonds was held by or transferred to the holders under the transactions or on any other bases, established by the legislation of the Republic of Kazakhstan. The mentioned property and allocated assets, which are security for the bonds, issued in accordance with the legislation of the Republic of Kazakhstan on securitization, shall be transferred by the liquidation committee to a holder of the mortgage bonds or the bonds, issued in accordance with the legislation of the Republic of Kazakhstan on securitization, for settlement with the creditors, being holders of these bonds in accordance legislation of the Republic of Kazakhstan on the securities market.
  2. Upon formation of the liquidation bankruptcy estate, it does not include the securities belonging to third persons and trusted to a custodian bank for storage and accounting, as well as pension assets of the accumulative pension funds, assets of the investment funds, allocated assets of the special financial companies, trusted to the custodian bank for accounting and storage. Pension assets, assets of the investment funds, allocated assets of the special financial companies shall be transferred to another bank upon application of the accumulative pension fund, the special financial company and the management company of the mutual investment fund.
  3. The liquidation bankruptcy estate of an Islamic bank shall not include property, purchased from the funds, raised under the agreement on investment deposit of the Islamic bank. The mentioned property, as well as obligations on the investment deposits, is subject to transfer by the liquidation committee to another Islamic bank.
  The procedure for selection of an Islamic bank and transfer of property, purchased from the funds, raised under the agreement on investment deposit, and obligations on the investment deposits of the liquidated Islamic bank shall be established by the normative legal act of the authorized body.
  Reference. Article 74-1 with amendments, inserted by the RK Law dated 29.06.1998 N 236; dated 03.06.2003 N 427; dated 07.07.2004 N 577; dated 20.02.2006 N 127 (enactment procedure, see art. 2); dated 20.11.2008 N 88-IV (enactment procedure, see art. 2); dated 12.02.2009 N 133-IV (enactment procedure, see art. 2).

Article 74-2. Sequence of Satisfaction of the Creditors’ Claims of a Liquidated Bank

  1. The creditors’ claims of a liquidated bank, including in connection with its bankruptcy, shall be satisfied in accordance with the procedure, established by this Article.
  2. Expenses, associated with the liquidation proceedings, including those related to support of activities of the bank’s liquidation committee shall be made on a priority basis.
  3. Claims of the creditors, recognized in accordance with the established procedure, shall be satisfied in accordance with the following sequence:
  1) in the first turn there shall be satisfied the claims of individuals, to which a liquidated bank is liable for causing damage to life or health, through capitalization of the respective instalments;
  2) in the second turn there shall be made settlements on payment of salaries and compensations to the persons, worked under the employment agreements, the debts on social contributions to the State Fund of Social Insurance, payment of alimonies kept from salaries and mandatory pension contributions, as well as payment of fees under the copyright agreements;
  3) in the third turn there shall be satisfied the claims of the organisation for obligatory guaranteeing of deposits in the amount of paid (payable) interest on the guaranteed deposits in accordance with the calculation, presented by a forcedly liquidated bank;
  4) in the forth turn there shall be satisfied the claims of individuals on the deposits, including interest-free deposits on a short notice, kept at the liquidated Islamic bank, and funds transfers, as well as the requirements on the deposits, made at the expense of accumulative pension assets, deposits of insurance companies, made at the expense of funds, raised under the life insurance industry;
  5) in the fifth turn there shall be made settlements with non-commercial organisations, engaged exclusively in charity activities, as well as with the organisations of veterans of the Great Patriotic War and similar organisations, the Voluntary Society of Disabled People of the Republic of Kazakhstan, the Kazakhstan Blind Association, the Kazakhstan Deaf Association and industrial organisations, which are the property of such legal entities and established at the expense of their funds, any other organisations of disabled people, with regard to their funds in the bank accounts and deposits on the funds, kept in the bank accounts and deposits;
  6) in the sixth turn there shall be satisfied the creditors’ claims, secured by pledge of the liquidated banks’ property;
  7) in the seventh turn there shall be paid the debts on taxes, levies and any other obligatory payments to the budget, as well as the loans, granted from the republican budget;
  8) in the eighth turn there shall be satisfied the claims of other creditors in accordance with legislative acts of the Republic of Kazakhstan.
  4. The claims of each turn shall be satisfied after complete satisfaction of the claims of the preceding turn.
 A claim of a creditor upon his consent may be satisfied through the methods, compliant with the legislation of the Republic of Kazakhstan, including in money terms and (or) through a transfer of property in kind.
 At satisfaction of the creditors’ claims of one turn, funds and (or) any other property of a liquidated bank shall be distributed between the creditors of this line in proportion to the amounts of claims to be satisfied.
Reference. Article 74-2 is stated in the wording of the RK Law dated 23.12.2005 N 107 (enactment procedure, see art. 2 of the Law N 107); with amendments, inserted by the RK Law dated 12.02.2009 N 133-IV (enactment procedure, see art. 2).

Article 74-3. Forced Reorganisation of a Bank. The Rehabilitation Procedures
 
  1. Forced reorganisation of a bank shall be carried out pursuant to the court decision in accordance with current legislation, subject to the special considerations provided by this Law.
 The rehabilitation procedure in relation to a bank shall be implemented under a decision of the court within the frames of measures on forced reorganization of the bank for the purpose of restoration of its credibility and (or) possibility to perform the conditions and the requirements, established by the legislation of the Republic of Kazakhstan.
  2. The court shall have a right to take a decision on forced reorganisation of a bank, or to carry out the rehabilitation procedures only on the basis of the appropriate reports from the authorized body.
 Return of all deposits by the bank to all interested entities within one year from the date of taking a decision on forced reorganisation shall be an obligatory condition for forced reorganisation of the bank.
 Failure to comply with this provision shall lead to forced liquidation of the bank.
  2-1. In the case of a possibility to restore its credibility and (or) eliminate the discovered drawbacks, a bank shall have a right to apply to the court for the rehabilitation procedure imposed on this bank in connection with consideration of the issue on its forced reorganization. The application of the bank shall be attached with the rehabilitation plan.
 One copy of the bank’s application with attached documents shall be submitted to the authorized body.
  2-2. The rehabilitation plan of a bank is subject to approval by the authorized body within ten days after its submission. Changes in such plan are allowed upon approval of the authorized body according to the court decision.
  2-3. Duration of the rehabilitation procedure in relation to a bank shall not exceed six months. The commencement and the completion dates shall be defined by the court. A plan, approved by the court, refers to a document, obligatory for execution by a bank and its officials.
  2-4. The rehabilitation procedure shall be conducted by a bank under control of the authorized body. Activity of the bank under the rehabilitation procedure shall be carried out in an ordinary manner with consideration of the requirements of this Article.
  3. In the case of taking a decision by the court on forced reorganization of a bank (irrespective of the bases, on which the proceedings were initiated), its implementation shall be entrusted to a special manager (authorized manager) of the bank, approved by the court, except for the cases, indicated in 2-1 – 2-4 of this Article.
 A special manager (authorized manager) of the bank shall be obliged to inform the court and creditors of the banks on his/her activities on a monthly basis.
  4. A third party participating in the reorganisation of a bank due to merger of the bank with any other commercial organization or acquisition, shall be obliged to submit the appropriate documents (information), validating its financial solvency and expediency of the bank reorganization, to the special manager (authorized manager).
  5. Forced reorganization of a bank shall be carried out in accordance with the procedure, defined by the court and in accordance with the schedule and timetable of measures, approved by the court.
  6. The reports of a special manager (authorized manager) of banks on completion of the forced reorganization of the bank shall be approved by the court.
  7. Within 5 days after entering into force of the official document, which confirms completion of the bank reorganisation within the framework of the mentioned judicial proceedings, an organization, being a legal successor of the bank, shall be obliged to provide publication of the appropriate information in two republican newspapers.
  8. Expenses, associated with the performance of forced reorganization of a bank, shall be paid at the expense of its funds.
  9. Any others issues on forced reorganization of a bank and the rehabilitation procedures in relation to this bank shall be established by the normative legal acts of the authorized body.
Reference. Article 74-3 with amendments, inserted by the Law of the Republic of Kazakhstan dated 10th of July 2003 N 483 (effective since 1st of January 2004).

Article 74-4. Supervisory Powers of the National Bank In the Process of Bank Liquidation

1. To supervise the activities of the liquidation committees of banks, liquidated through the voluntary and forced procedure, including for the reason of bankruptcy, the authorized body shall have a right:
  1) to obtain reports on the performed work and, if necessary, additional information from the liquidation committees;
  2) to define the form, dates and periods for the submission of reports and additional information by the liquidation committee;
  3) to inspect the liquidation committees in a manner, prescribed by the laws of the Republic of Kazakhstan;
  4) to provide the written prescriptions for fulfilment by the liquidation committees for elimination of violations and define the timeline for fulfilment of the prescriptions, in the case of discovery of a violation of the requirements of the legislation of the Republic of Kazakhstan, rights and interests of creditors by the liquidation committee;
  5) in case if the liquidation committee fails to fulfil the written prescription within the prescribed period, to apply to the court and the prosecution bodies for protection of rights and interests of creditors secured by the law;
  6) to define the peculiarities and the procedure for compilation and approval of the liquidation expenses estimate;
  7) to define the requirements to fulfilment by the liquidation committee of the rules of storage of cash in the cash boxes, cash movements operations, maintenance of the cash flow documents, expenditure of cash and limited balances of cash, as well as the timeline for delivery of cash into the current account of the liquidation committee.
  2. The authorized body shall have a right to obtain appropriate information from a bank, with regard to which the proceedings on forced termination of activities are examined by the court.
  3. In the case of violation of the laws of the Republic of Kazakhstan by the liquidation committee, the responsibility under the laws of the Republic of Kazakhstan shall be borne by the chairman of this liquidation committee.
Reference. Article 74-4 is amended by the RK Law dated 2nd of March 2001 N 162 (see art. 2); the new edition of the Law of the Republic of Kazakhstan dated 10th of July 2003 N 483 (effective since 1st of January 2004); dated 23rd of December 2005 N 107 (enactment procedure, see art.2 of the Law N 107); the Law of the Republic of Kazakhstan dated 31st of January 2006 N 125.

Section III. Final Provisions

Chapter 9-1. Liability for Violations Associated with Banking Activities

  Reference. Chapter 9-1 is introduced by the RK Law dated 29th of June 1998 N 236; Chapter is excluded by the Law of the Republic of Kazakhstan dated 10th of July 2003 N 483 (effective since 1st of January 2004).

Chapter 10. Final and Transitional Provisions

Reference. The title of Chapter 10 is stated in the wording of the RK Law dated 19th of February 2007 N 230 (enactment procedure, see art.2).

Article 75. Sphere of Application of this Law
 
  1. The provisions of this Law shall apply to all banks, which carry out their activities in accordance with the legislation of the Republic of Kazakhstan, including those established in a special-purpose procedure, i. e. on the basis of separate legislative and normative acts, which regulate the initial stage of their organisation, as well as on the entities which are direct and indirect participants in the banks.
  2. The legal status, the procedure for establishment, licensing, regulation and termination of activities of organisations, which carry out certain types of bank operations, including the list of types of bank operations, allowed for each of them, the grounds for issue of licences for the performance of bank operations and potential restrictions of activities shall be established by the legislative acts of the Republic of Kazakhstan and the normative legal acts of the authorized body and (or) the National Bank within their authorities.
 The organisations, which are subdivisions of the state bodies, shall have a right to perform bank operations exclusively with regard and at the expense of funds from the state budget, without the right to delegate their authorities to third parties in accordance with the normative legal acts of the Government of the Republic of Kazakhstan, which define the procedure for establishment, activities, regulation and termination of activities of the above mentioned organisations.
  3. The provisions of this Law shall apply to the National Bank only in the cases, specifically stipulated by this Law.
  Reference. Article 75 is amended by the RK Law dated 11th of July 1997 N 154; dated 2nd of March 2001 N 162 (see art. 2); dated 10th of July 2003 N 483 (effective since 1st of January 2004).

  Article 76. (Article 76 is excluded by the RK Law dated 29th of June 1998 N 236)

  Article 76-1. Transitional Provisions

 The requirements of third part of paragraph 1-1 Article 57 herein shall not apply to the performance of audit of the participants of a bank conglomerate upon the results of 2005 and 2006.
  Reference. Chapter 10 is added with Article 76-1 by the RK Law dated 19th of February 2007 N 230 (enactment procedure, see art.2).

Article 77. Appeal against the Actions of the Authorized Body and the National Bank
 
 The actions of the authorized body and the National Bank of the Republic of Kazakhstan in sphere of regulation of banking activities may be appealed in a judicial procedure.
Reference. Article 77 with amendments, inserted by the Law of the Republic of Kazakhstan dated 10th of July 2003 N 483 (effective since 1st of January 2004); dated 23.10.2008 N 72-IV (enactment procedure, see art.2).

  Article 78. Entering of This Law into Force

  1. This Law shall enter into force since the date of its publication.
  2. Since the date of entering of this Law into force, in the event of disclosure of violations of the procedure for formation of the charter capital of banks, committed during the period of validity of the Law of the Republic of Kazakhstan dated 14th of April 1993 “Concerning Banks in the Republic of Kazakhstan’, the banks shall be subject to application of sanctions, established by this Law.
Reference. Article 78 is amended by the RK Law dated 11th of July 1997 N 154.

President
of the Republic of Kazakhstan