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.

On March 23 2017 the Federal Tax Service issued a notification entitled On Identifying the Circumstances of an Unjustified Tax Benefit (ED-5-9/547@), which summarises the law enforcement practice associated with assessing the validity of a tax benefit in disputes relating to bad-faith contracting parties.

This review concerns a number of amendments to Federal Law "On insolvency"1 (the "Law") introduced by federal laws No. 222-FZ2 and No. 488-FZ3, and the interpretation of the amendments in the Review of Court Practice on Matters Related to Participation of State Authorities in Insolvency Proceedings and Procedures Applicable in these Proceedings, approved by the Presidium of the Supreme Court of the Russian Federation on 20 December 2016 (the "Review").

This review covers the following most important amendments:

On July 31, 2017, the Bankruptcy Court for the Southern District of New York recognized a Russian insolvency proceeding as a foreign main proceeding under chapter 15 of the U.S. Bankruptcy Code (“Code”), concluding that (i) a retainer deposited with the debtor’s attorneys in the U.S. was sufficient property within the United States to establish jurisdiction over a debtor under section 109(a) of the Code and (ii) the Russian insolvency proceeding was not “manifestly contrary to public policy of the United States.”

The key to understanding how the transfer of immovable property and service provision works for specialised companies in Russia.

The maintenance activities of Russian specialised companies (SPVs) are not only limited to charter activities. This article looks at the transfer of immovable property to a SPV balance and the transfer of service provision to standby service agents in Russia.

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.