Corporate Restructuring and Bankruptcy in Kazakhstan — A Practical Guide for Creditors and Investors

Kazakhstan’s corporate insolvency framework has undergone significant reform over the past decade, but it remains one of the least well-understood areas of Kazakhstani law among foreign creditors and investors. When a Kazakhstani counterparty becomes financially distressed, the decisions made in the first weeks — whether to negotiate a restructuring, file a bankruptcy petition, or pursue enforcement action — often shape the outcome for creditors, and a wrong decision is costly and hard to reverse.

I have practised in this area for over twenty years, advising creditors, shareholders, and distressed businesses through Kazakhstan’s insolvency procedures. This note covers the framework as it operates in practice.

The Legal Framework

Corporate insolvency in Kazakhstan is primarily governed by the Law of the Republic of Kazakhstan on Rehabilitation and Bankruptcy No. 176-V of 7 March 2014 (the “Rehabilitation and Bankruptcy Law”). The law establishes two principal procedures:

• Rehabilitation — a court-supervised restructuring procedure designed to restore the debtor’s solvency while protecting it from creditor enforcement action
• Bankruptcy — a court-supervised liquidation procedure resulting in the realisation of the debtor’s assets and distribution to creditors in statutory priority order

Two further routes sit alongside them. Debt restructuring is open only to the debtor, on the same temporary insolvency test as rehabilitation, and ends in a court-approved agreement with creditors (Articles 28-1 to 28-5). Liquidation without bankruptcy proceedings is a simplified route for an absent debtor, or for a debtor that owes no more than 2,500 monthly calculation indices and has had no assets, payments or challengeable transactions for three years; the court decides and the authorised body carries it out (Articles 113 to 118-1).

Rehabilitation — Court-Supervised Restructuring

Rehabilitation is initiated by an application from the debtor or a creditor to the Specialised Inter-district Economic Court (SIDEC) of the debtor’s location. Tax and customs creditors, state bodies and state-owned entities cannot apply (Article 38). The ground is temporary insolvency: wages and similar obligations unpaid for three months, or other obligations unpaid for four months (Article 5-1). No plan is filed with the application. The plan is drawn up with the creditors within three months after the rehabilitation decision takes effect, and it must show how the debtor will restore solvency within no more than five years (Article 73). The court may extend the procedure once, by up to six months, or by up to two years for natural monopolies and for strategic and town-forming entities (Article 64).

Upon commencement of rehabilitation proceedings, an automatic moratorium applies — creditors cannot enforce judgments, attach assets, or initiate new claims against the debtor during the moratorium period. Claims under third-party guarantees, and enforcement against pledges given by third parties, are not caught (Article 50). This protection is the main reason debtors seek rehabilitation.

What creditors need to know about rehabilitation:

• Creditors must file proof of claim within one month of publication of the notice — a late claim drops to sixth priority, save for the secured part of a secured claim, and the creditor has no vote until the timely claims are paid in full (Article 72)
• The rehabilitation plan must be approved by a creditors’ meeting. It passes only if a majority of second-priority creditors and a majority of fourth-priority creditors both vote for it (Article 26-1), so either group can block it. A creditor who voted against can also ask the court to refuse approval by showing that it would receive less than in bankruptcy (Article 73(11))
• Secured creditors hold a privileged position — their claims are satisfied from the proceeds of the pledged assets before general creditor distributions
• The first creditors’ meeting decides whether the debtor’s own management stays in place or a rehabilitation administrator takes over. The meeting chooses the administrator and the authorised body, not the court, makes the appointment (Article 69). A creditors’ meeting decision is a ground for removal (Article 12(7))

Bankruptcy — Liquidation Procedure

Bankruptcy proceedings are initiated either by the debtor (voluntary bankruptcy) or by a creditor (involuntary bankruptcy). The law sets no minimum claim and no minimum unpaid period for a creditor’s petition. The creditor must instead hold an unpaid money obligation confirmed by a final court judgment, an enforcement document or the debtor’s acknowledgement of the debt (Article 5(2)), and a tax or customs creditor must first exhaust enforcement measures. The Supreme Court accepts a written reply to a claim, a signed reconciliation statement or a guarantee letter as an acknowledgement (Normative Resolution No. 2 of 2 November 2023, paragraph 7). Involuntary bankruptcy is therefore available to trade creditors as well as financial institutions, provided the debt has been documented in one of these ways.

After the debtor is declared bankrupt, a bankruptcy administrator chosen by the creditors’ meeting is appointed by the authorised body, not the court (Articles 1 and 93). The administrator takes control of the debtor’s assets, investigates the causes of insolvency, identifies and recovers assets transferred in suspicious circumstances, and distributes the bankruptcy estate to creditors in statutory priority order.

Priority order for creditor distributions (Article 100):

• Outside the ranking, paid first: administrative and court costs of the proceedings
• First priority: claims for harm to life or health, alimony, wages and employment compensation with related social and pension contributions, and remuneration of authors of employee inventions
• Second priority: secured creditors — from the proceeds of pledged assets — and loans taken by the bankruptcy administrator during the procedure
• Third priority: tax and customs arrears
• Fourth priority: unsecured creditors — trade creditors, bondholders, other general creditors, and any shortfall on secured claims
• Fifth priority: damages and penalties
• Sixth priority: claims filed late

Any surplus goes to the owners (Article 108). The law has no separate class for shareholder loans, but creditors affiliated with the debtor have no vote until the other creditors are paid in full (Article 26(4)).

In our experience, unsecured foreign trade creditors often recover little or nothing from Kazakhstani bankruptcy estates, because wages, secured creditors and tax claims can exhaust the assets first. Pre-bankruptcy enforcement, including asset attachment and security perfection, is therefore critical for creditors with significant exposure.

Asset Recovery and Claw-Back

The Rehabilitation and Bankruptcy Law gives administrators significant powers to recover assets transferred by the debtor prior to insolvency. Transactions concluded within three years before the rehabilitation or bankruptcy case was opened can be challenged and set aside if they were made at an undervalue or on materially worse terms, without consideration, beyond the debtor’s authority, or as a sham to the detriment of creditors (Article 7). A preference is caught only in the six months before the case was opened. There is no longer period for related parties. Ordinary-course transactions on normal terms are excluded, and the administrator must apply to court within one month of discovering the transaction. The Supreme Court has confirmed that the three-year period also governs claims on the general Civil Code grounds (Normative Resolution No. 2, paragraph 24).

Foreign creditors and investors acquiring Kazakhstani assets should be aware that claw-back risk applies to assets acquired from a subsequently insolvent seller. The undervalue grounds in Article 7 turn on price and terms rather than on what the buyer knew, so good faith is not an express defence, although a sale at a genuine market price in the ordinary course falls outside them. A published review of 2016 to 2018 decisions by Tleulin and Partners found that courts granted four claims in ten, that 54% of claims concerned undervalued sales or gifts, and that courts often rejected such claims because the buyer was in good faith. Due diligence on the seller’s financial position and transaction history is essential before buying from a Kazakhstani entity in financial stress.

Construction Sector Insolvency

Construction has produced many of Kazakhstan’s complex insolvency proceedings, driven by over-leveraged developers, cost overruns and the difficulty of realising value from unfinished projects.

Construction insolvency raises specific issues:

• Equity participation agreements with individual buyers create a large group of creditors and a political sensitivity that affects the conduct of proceedings. Article 100 gives these buyers no special class, so a money claim without a pledge ranks with the fourth-priority creditors. Buyers may start bankruptcy of the authorised company and form a housing construction cooperative to finish the building (Law on Equity Participation in Housing Construction No. 486-V, Article 10)
• Construction licences and land use rights held by the insolvent entity may not transfer automatically to a purchaser of the bankruptcy estate, and separate approvals may be required
• Partially completed buildings present valuation and liability challenges in the bankruptcy estate — completion costs must be assessed against realisable value before the administrator decides whether to complete or liquidate at current state
• Subcontractor claims frequently compete with trade creditor claims in the priority order, requiring careful analysis of the contract chain

I have handled a significant number of Kazakhstan construction insolvency matters over my career and advise creditors, subcontractors, and equity participation agreement holders on their rights and recovery options in these proceedings.

Tax Disputes in Distressed Situations

Tax arrears claims by the State Revenue Committee are a frequent complication in Kazakhstani insolvency proceedings. Tax authorities hold third-priority claims in the bankruptcy waterfall — above unsecured creditors but below wages and secured debt — and are active participants in creditors’ meetings, although the vote on a rehabilitation plan is decided by the second and fourth priority classes (Article 26-1).

In restructuring negotiations, outstanding tax assessments often need to be addressed as part of the rehabilitation plan. Where a tax or customs creditor takes part, the plan must repay that debt in equal instalments over the approved schedule (Article 73(2)), and disputed assessments are best taken to administrative appeal before the proceedings formally commence.

Enforcement Before Insolvency — Protecting Creditor Position

A creditor facing a distressed Kazakhstani counterparty usually does best before formal proceedings begin. Once rehabilitation or bankruptcy starts, the moratorium and priority rules limit what it can do.

Key steps when a counterparty shows signs of distress:

• Serve formal pre-trial demand immediately — this is a prerequisite for state court proceedings only where a law or the contract requires it (Civil Procedure Code, Article 8(6)), but a written reply admitting the debt can support a later bankruptcy petition
• Apply to the court for interim attachment of assets, which can stop the debtor dissipating them before judgment
• Review and perfect any security held over the debtor’s assets — a registered pledge of movable property ranks ahead of later and unregistered pledges (Law on Registration of Pledge of Movable Property No. 254, Article 8), and a claim under a pledge that required registration and was not registered ranks fourth, not second (Normative Resolution No. 2, paragraph 21)
• Assess the debtor’s asset position and identify any recent suspicious transactions that might be subject to claw-back if proceedings commence
• Consider an involuntary bankruptcy petition, which brings court supervision and an administrator chosen by the creditors' meeting, before the debtor files on its own terms

Bond Stone’s dispute resolution practice handles these enforcement steps together with any later insolvency work.

Out-of-Court Restructuring

Where the debtor has a viable business and a manageable creditor group, an out-of-court restructuring with its principal creditors can preserve more value than a formal procedure.

The usual tools are standstill agreements, forbearance arrangements, debt-for-equity exchanges and agreed changes to the security package. We have structured such arrangements in the construction, manufacturing, pharmaceutical and trading sectors.

The advantages are speed and confidentiality: court proceedings become public and trigger automatic legal consequences that can damage the business. The risk is that the deal needs all material creditors, and one who refuses can undermine it by starting formal proceedings or enforcing alone.

How the Courts Have Applied These Rules

The main guide is the Supreme Court’s Normative Resolution No. 2 of 2 November 2023, which binds the courts and is cited above. The volume of work is rising: in October 2026 the Chair of the Supreme Court reported a 28.4% rise in civil cases in the first nine months of the year and named bankruptcy claims as one of the causes. Two points from published decisions matter most to creditors.

• Documents and deadlines. In Alhambra Cooperatief U.F. v temporary manager of JV Saga Creek Gold Company LLP (Akmola Regional SIDEC, 23 June 2016), the court upheld the refusal of a KZT 966.7 million claim because the originals of the supporting documents were not presented. In Bekem Metals Inc v bankruptcy manager of Kyzyl Kain Mamyt LLP (Aktobe Regional SIDEC, 26 October 2016), reported in the same digest, the notice was published on 7 July 2016 and the complete claim with originals arrived on 25 August 2016, so the late ranking, then fifth priority, stood. The present law still requires originals for checking (Articles 72 and 90).
• Debt restructuring needs the creditors. In the KBI Energy LLP case (Pavlodar Regional SIDEC), the appeal court on 29 March 2021 set aside the approval of restructuring agreements and sent the case back. The debtor had notified 42 creditors but reached agreement with only six, it had not fully shown that the other debts were paid, and a creditor’s claim of about KZT 313 million had gone unanswered.

Bond Stone’s Restructuring and Bankruptcy Practice

Bond Stone acts for creditors and debtors from the first signs of stress through formal proceedings and asset recovery. Creditor representation includes proofs of claim, creditors' meetings, plan review and monitoring of the administrator. We also advise debtors on rehabilitation plans and creditor negotiations, buyers on claw-back risk in distressed targets, and creditors and equity participation holders in construction insolvencies, together with related tax disputes and asset tracing.

Related reading: Dispute Resolution in Kazakhstan • Legal Due Diligence Kazakhstan • M&A in Kazakhstan • Tax Advisory Kazakhstan • Real Estate and Construction Kazakhstan