Subsidiary Liability

The institution of subsidiary liability in its current form is used, in particular, as another opportunity to replenish the bankruptcy estate. In this regard, even a conscientious director who has faithfully performed the duties assigned to him can held subsidiary liability if he takes a passive position in court and cannot prove that the bankruptcy of the company was the result of many external factors, and not of his unfair or unreasonable actions.

Until recently, the mechanism for bringing the persons controlling the debtor to subsidiary liability did not actually function and did not affect the formation of the bankruptcy estate. Business beneficiaries and managers in most cases withdrew assets from the company with impunity, concealed or distorted accounting documents, appointed nominee managers, and committed other actions aimed at deceiving creditors and preserving the remaining assets of the failed enterprise.

Development of the institution of challenging transactions made it possible to return the debtor's property that had been illegally withdrawn from the bankruptcy estate, but unscrupulous business owners were not held liable.  Reform of the bankruptcy law in terms of bringing controlling persons to subsidiary liability, which began in 2009, has significantly changed the situation.

The current rules on subsidiary liability, set out in the Federal Law "On Insolvency (Bankruptcy)", establish numerous presumptions of guilt of persons controlling the debtor in the inability to fully satisfy creditors' claims and, as a result, the bankruptcy of the company. Statement on the imposition of subsidiary liability is delivered by trustees in bankruptcy or creditors in virtually every bankruptcy proceeding.

The experts of the Anti-Crisis Group "Pilot" have extensive experience in disputes on bringing to subsidiary liability both on the part of applicants and defendants.

We provide the following services in this category of cases:

• Full support of isolated disputes on bringing the persons controlling the debtor to subsidiary liability both on the part of applicants and defendants;
• Determination of the moment when the person controlling the debtor has the obligation to apply for recognition of the debtor as a bankrupt in order to release or bring to subsidiary liability for obligations arising after the expiration of the term of performance of this obligation;
• Analysis of accounting and other documentation of the debtor in order to identify the actions of controlling persons that led to inability to fully repay creditors' claims and bankruptcy of the company;
• Advising the client on optimization of the company's activities in order to prevent the risk of being subsidiary liable in the future;
• Preparation of statements (responses to statements) on bringing the persons controlling the debtor to subsidiary liability, as well as other procedural documents in this category of disputes;
• Assistance in choosing the method of disposing of the right of claim to the persons controlling the debtor based on the circumstances of a particular case;
• Advising the client on issues related to the consideration of disputes on bringing to subsidiary liability (publications in the Unified Federal Register of Bankruptcy Information, timely submission of an application for inclusion of claims in the register of creditors' claims of controlling persons in the event of bankruptcy, etc.).