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;
A non-use court action is routine for the IP court. Every year several hundred cases are considered and granted. Sometimes, however, a cancellation action stumbles at unexpected obstacles.
Третейские решения нередко используются для получения неправомерного контроля в делах о банкротстве. Схема установления контроля между аффилированными компаниями, позволяющая неправомерно получить статус первого заявителя в будущем деле о банкротстве и контролировать данный процесс, в общих чертах выглядит следующим образом:
– Между готовящейся к банкротству компанией А и ее аффилированной компанией Б создается сомнительное долговое обязательство на крупную сумму (поставка товаров, оказание услуг, заем и т.д.).
Arbitral awards are often used to obtain an undue control in bankruptcy cases. In simple terms, affiliated companies use the mechanism described below to enable a creditor to unlawfully gain the status of a first applicant in subsequent bankruptcy proceedings, and thus, control the proceedings:
– A dubious obligation to pay a large amount (e.g. for delivery of goods, provision of services or a loan, etc.) is created between Company A, which is being prepared for bankruptcy, and its affiliated Company B.
The status of the creditor whose claims are secured by means of a pledge (hereinafter referred to as a “pledge creditor”) in the bankruptcy proceedings is often named as the privileged one. This status provides not only the “privileges” to such a creditor but also imposes a number of serious restrictions in comparison to the status of a regular bankruptcy creditor.
The Plenum of the Supreme Court of the Russian Federation adopted Resolution No. 54 “On Certain Issues of Applying the General Provisions of the Russian Civil Code on Obligations and Their Performance”* on 22 November 2016.
The Resolution contains 59 paragraphs that clarify various provisions of the Russian Civil Code.
Among other things, the clarifications on the following issues are of interest to businesses from a practical perspective:
In Russian insolvency procedures, it is quite common for third parties to try to exclude property from a debtor’s insolvent estate (konkursnaya massa) by claiming title to its real property in the absence of the registered title. These third parties may refer to the agreements that had been made prior to the commencement of the insolvency procedure as well as to the actual transfer of property to them.
New grounds and conditions have been introduced to allow creditors to bring the executives and/or members of the management bodies of bankrupt Russian companies to subsidiary liability. This is expected to increase debtors’ assets that can be used to satisfy creditors’ claims as fully as possible. Also, any person will be able to find out whether bankruptcy procedures have been initiated against a legal entity by searching the * (the “Company Register”).