Personal and Sole-Trader Bankruptcy in Armenia: The New Interim Rules (HO-263-N)

Since 12 July 2026, a natural person in Armenia can be declared bankrupt on undisputed payment obligations strictly exceeding AMD 2,000,000 (roughly USD 5,060) that have been overdue for at least 30 days and remain overdue when the court rules. The amendment that did this, HO-263-N, also splits a sole trader’s liabilities into two tracks and bars a person who has been through bankruptcy from company management for three years. It is an interim regime with a fixed shelf life: the 2006 Law on Bankruptcy it amends is repealed on 3 July 2027.

What changed on 12 July 2026

HO-263-N was adopted on 18 June 2026 and published on 2 July 2026. Under its own Article 11(1) it entered into force on the tenth day after publication, which is 12 July 2026, and it applies to compulsory and voluntary natural-person petitions submitted from that date. It does not replace the Law on Bankruptcy (HO-51-N of 25 December 2006); it amends it, and HO-51-N remains the governing statute for another year.

Five operative changes came in together. Article 3(2.1) is new and creates a bankruptcy ground built specifically for natural persons. Article 3(2), the older test, was narrowed so that it now speaks only to legal-entity debtors. Article 100(1.1) is new and tells a court which set of grounds to apply to an individual entrepreneur. Article 97.1 is new and restricts what a person can do in company management after the case closes. Article 97(2) tightens the circumstances in which debts survive the proceedings, and the look-back period in Article 97(1)(b) was extended from 90 days to one year for obligations above AMD 100,000 (about USD 255).

The personal bankruptcy threshold: amount, delay, timing

The statutory figure is 2,000 times the calculation base. The calculation base is AMD 1,000, which puts the threshold at AMD 2,000,000, roughly USD 5,060 at 395 AMD to the dollar. The multiplier runs on the calculation base, so the statutory minimum monthly wage of AMD 75,000 plays no part in the arithmetic; reading it in would produce a figure seventy-five times too high.

The statute says obligations "exceeding" that amount, so a debt of exactly AMD 2,000,000 falls short of the ground. Three conditions have to hold at once: the amount, a delinquency of at least 30 days, and the obligation still being unpaid at the moment the court issues judgment. A debtor who clears the arrears mid-proceeding removes the third condition.

What "undisputed" means here

An unpaid invoice does not qualify a creditor to petition. The obligation counts as undisputed where it has been recognised by a final judicial or arbitral act, or by a notarial payment order on which enforcement has been attempted without success or has been suspended, or where it is a tax or duty claim resting on an administratively final act. A creditor who has never taken the debt through one of those channels has to do so before the threshold is even in play, which in practice puts several months between a missed payment and a petition. The related reforms to electronic enforcement and asset controls are covered in our bankruptcy reform watch.

The two-track test for individual entrepreneurs

An individual entrepreneur in Armenia is a registered natural person, so before July 2026 there was one debtor and one set of grounds. Article 100(1.1) now sorts the obligations first. Obligations connected with entrepreneurial activity import the legal-entity grounds in full, including the 90-day creditor test and the balance-sheet route an entity can use on its own petition. Obligations unconnected with the business are tested under the natural-person ground, at AMD 2,000,000 and 30 days.

The Bankruptcy Law does not define entrepreneurial activity, so the Civil Code definition in Article 2 supplies the content. What decides a given obligation in practice is documentary: the counterparty contract and whose name is on it, the stated purpose in a loan file, and whether the arrears sit with the State Revenue Committee as business turnover tax or as personal property tax. Anyone running an IE alongside personal borrowing should expect that sorting exercise to happen on the creditor’s terms unless the paperwork settles it first, which is one of the reasons the structure you register under matters; see our business registration and Armenian tax guides.

Mixed-use loans and personal guarantees given for business debt sit exactly on the seam, and there is no Cassation Court guidance on them: Article 100(1.1) has existed only since July 2026 and no published decision has applied it. What the Cassation Court has settled, in Ardshi Bank v. Grigoryan (SND/0276/04/19), is that an individual entrepreneur can be declared bankrupt at all and that an arbitration clause in the underlying contract does not remove a creditor’s right to petition.

Consequences: management restrictions and debts that survive

The three-year management bar

Article 97.1 prevents a person who has completed bankruptcy proceedings from holding a position in the management bodies of a legal entity, or otherwise participating in its management, for three years. The period runs to ten years where the entity is a bank, a credit organization or an insurance company. That list is exhaustive: an investment company, an investment fund manager, a payment organization or a crypto-asset service provider falls under the general three-year rule unless a separate law says otherwise.

Article 97.1(2) carves out cases that concluded through financial rehabilitation. A debtor whose plan was approved and performed, so that the case closed through rehabilitation, is outside the restriction entirely.

The wording reaches management-body seats and participation in management. It does not define whether a purely passive holding, an ownership stake carrying no vote, no meeting attendance and no governance role, falls inside that phrase, and no court has applied the article since it took effect on 12 July 2026. A founder planning to stay on as a silent co-owner is in territory the statute has not yet mapped.

What can be said is what moves a holding from the arguable side to the difficult side. Attending a general meeting, even to abstain, signing a written or unanimous participants’ resolution, voting in person or by proxy, proposing agenda items, appointing or removing a director, exercising a contractual consent or veto, or giving instructions to management, formally or informally — each of these looks like participating in management rather than merely owning. Anyone relying on being passive should be able to show the absence of every one of them.

A single-participant company is the hardest case. Where one person holds the whole company, that person exercises all the rights and duties of the general meeting by operation of law, and every participant-level decision the company takes is theirs. Genuine non-participation is close to impossible to demonstrate on those facts, so a bankrupt founder who wants to keep a company should expect the sole-owner structure to be the version that attracts the argument.

Beneficial-ownership registration is a separate question, and appearing on that register does not by itself put a person inside the bar. The register records three different bases: holding 20 per cent or more of the voting interests or capital, exercising factual control by other means, or, where nobody meets either test, being the officer who runs the company. Where the entry rests on ownership alone, it records only that the ownership exists, and the passive-holding question above applies unchanged. Where it rests on factual control, or on being the officer in charge, the position is materially worse: control exercised by other means is hard to describe as anything other than participating in management. These rules do not reach entities registered by the Central Bank, whose beneficial-ownership disclosure runs under its own sectoral legislation.

Debts that are not discharged

Article 97(2) lists what keeps a debt alive after the case closes. A final criminal conviction for illegal or intentional bankruptcy is one trigger. A judicial finding that the debtor failed to provide required data, or supplied manifestly false data to the administrator or the court, is the second. The third is proven unlawful conduct, which the article reaches through named examples: evading repayment, entering transactions voidable under Article 54(1), concealing property, and giving false information to a creditor in order to obtain a loan.

The same amendment stretched the look-back window in Article 97(1)(b) from 90 days to one year for obligations above AMD 100,000 (about USD 255). Payments and transfers made in the twelve months before a petition are now open to examination on that basis, where previously only the final quarter was.

Where these rules sit in the rest of the Bankruptcy Law

Article 2 keeps a list of entities outside HO-51-N altogether: the Republic of Armenia, communities, the Central Bank, banks, credit organizations, investment companies, investment fund managers, insurance companies, crypto-asset service providers and certain funds, all of which are handled under separate financial-institution insolvency rules. Everyone else, individuals included, sits inside the law.

Once bankruptcy is declared, Article 15.5 freezes monetary claims, stays enforcement and stops interest accruing, and Article 82 fixes the order in which creditors are paid, with administrative expenses of the proceedings first, post-declaration claims next, then twelve months of employment claims, then life and health damage claims, ahead of the general unsecured pool. Secured creditors take from their collateral outside that queue. At company level, Article 5 also imposes a duty on the director to file within two months of discovering the grounds, with personal liability attached to a failure to do so. That route, dissolution and bankruptcy of the company itself, is covered in our guide to closing a company in Armenia; the page you are reading covers the individual and sole-trader rules.

What replaces this on 3 July 2027

HO-252-N, a 369-article Bankruptcy Code, was published on the same day as HO-263-N and takes effect on 3 July 2027 under its Article 369(1), repealing HO-51-N on entry into force under Article 369(2). Article 369(3) requires subordinate acts to be adopted before that date.

The Code does not carry the interim numbers forward. Its Articles 3 and 4 set a threshold of 5,000 times the calculation base, AMD 5,000,000 or about USD 12,660, with a one-month delinquency period applied to entities and natural persons alike. It also adds a cross-border bankruptcy chapter, Division 9, Chapter 50, running from Article 338, which the 2006 law lacks. The AMD 2,000,000 and 30-day figures on this page therefore belong to a defined window, 12 July 2026 to 2 July 2027, and anyone reading them later should check which regime governs the petition date.

Frequently asked questions

Last updated: August 12, 2026