Russia's Supreme Court guidelines reduce high net worth individuals' ("HNWIs") asset protection opportunities and potentially create risks of additional creditor claims against HNWIs after divorce and asset division between the HNWI and his/her spouse.1

In addition, these guidelines enable third parties, notably creditors of the ex-spouse, to get access to information regarding the HNWI's disputed assets. We summarize the most important points of these guidelines below.

Key developments

The Constitutional Court of the Russian Federation has obliged a tax authority to check the relevancy of the claim to recognize a debtor as a bankrupt in terms of prospects and economic feasibility of initiating such dispute.

We recently published a blog identifying issues which cryptocurrency pose in insolvencies; not least identifying and classifying it, how to take control of it and realising value for the insolvency estate.

Given cryptocurrencies are global, the question of how to classify cryptocurrency on insolvency is not limited to just one jurisdiction.

The financial Director, who is the controlling person of the debtor, by virtue of the presumption established by law, withdrew from the current account of the debtor funds in the total amount of 1 500 000 rubles. These funds she spent by order of the Director in the period from 14.01.2015 to 13.01.2016.

By carrying out entrepreneurial activities, i.e. independent activities carried out at its own risk, aimed at systematic profit from the use of property, sale of goods, performance of works or provision of services, in conditions of market instability, exchange rate fluctuations and consumer demand, the company may experience signs of bankruptcy.

"Termination of the bankruptcy procedure is not the basis for termination of proceedings on the application for bringing to subsidiary liability of controlling persons of the debtor" - this is the conclusion reached by the Supreme court of the Russian Federation considering the complaint of the creditor-applicant in the bankruptcy case.

"17" November 2017 completed the procedure of bankruptcy proceedings of the debtor LLC "Novaport", case A40-70634/2016.

The 2015 reform of the Russian law of obligations (changes to the relevant section of the Civil Code of the Russian Federation (hereinafter – the Civil Code) came into force on June 1, 2015) may have a major impact on bankruptcy proceedings. The implementation of the new legal doctrines has only just begun, yet the first cases to reach the Supreme Court of the Russian Federation have already revealed major issues.

In a previous article, The Eagle and the Bear: Russian Proceedings Recognized Under Chapter 15, we discussed In re Poymanov, in which the Bankruptcy Court (SDNY) recognized a Russian foreign proceeding under chapter 15 of the Bankruptcy Code even though the debtor had only nominal assets in the United States (the “Recognition Order”). The Bankruptcy Court had declined to rule upon recognition whether the automatic stay under 11 U.S.C.

Russia’s bankruptcy law (the Law) has been amended to expand the list of persons who may be held vicariously liable for a bankrupt’s debts and clarify the grounds for such liability.

Definition of controlling person clarified

On 21 December 2017 the Supreme Court of the Russian Federation issued clarifications on the liability of controlling parties in the event of bankruptcy.1 These clarifications are important for shareholders and company management, since the changes to the Law on Bank ruptcy and current case law have extended the scope of liability of controlling parties in the event of bankruptcy.

The main cases where controlling parties can be held liable are:

(1) the declaration of bankruptcy of the debtor was not filed in pro per time;