Andrey Mikonin for Delovoy Peterburg on personal liability of owners of bankrupt companies

20 March 2014

A unique case will be considered by the Arbitration Court for St. Petersburg and Leningrad Region on 10 April. The Deposit Insurance Agency is seeking the compensation for the debts of IncasBank from the top management of the VEFK Group and personally from Alexander Gitelson. It is the state corporation’s opinion that it was them whose actions as the bank’s owners resulted in its bankruptcy in 2008. The Court will investigate the credit policy of the bank, the financial assessment of the debtors and even the family status of the shareholders.


Lucky to shout “fire” just in time

Formally the rule as to an opportunity to hold personally liable the owners and managers (so-called controlling parties) was established in the RF Civil Code as early as in 1994. But in reality it started being applied only in 2009, after the amendments to the law on bankruptcy. In particular, it was stated that the controlling parties may be held personally liable in case of forging or losing the accounting materials of a company. There was also their obligation – support by the sanction in the form of personal liability – to declare effective insolvency of the company, - says partner of S&K Vertical Law Offices Andrey Mikonin.

But to carry out this logical approach is not always possible. For example, just a few days ago a court denied the claim for about 3 billion Rubles against the former managers of LLC Ros-Product (that was within the Euroservis group of Konstantin Mireli), Igor Beloshchuk and Igor Ometsinsky who, as the official receiver stated, made the company insolvent. The plaintiff failed to establish the date when the company became insolvent and therefore the moment when the defendants must have declared the company insolvent.

Another decision was taken by the arbitration court in respect of the action of ASV against the owner and manager of LLC “Granat” Andrey Kirshinin. It was found that the company acquired non-operable debts well before the beginning of the bankruptcy proceedings, but the CEO did not consider it necessary to declare that the company was insolvent. The cost of that passiveness amounted to 635 million Rubles.

Liable without guilt

Yevgenia Stanislavskaya, senior associate at litigation department of Rightmark Group, the guilt of a controlling party is presumed – it is considered guilty if the otherwise is not proved. But Andrey Mikonin, conversely, thinks that the guilt is considered absent if a controlling party acted reasonably , cautiously and in good faith. If, however, it will be relieved that the owner or manager intentionally cause the company’s bankruptcy then the losses may be indemnified within a criminal case” –Andrey Mikonin reminds.

Most usually you cannot bring the owners dumping their firms to personal liability unless you prove that they intentionally took out the assets. The most scandalous case of this kind is the bankruptcy of the State Enterprise “St. Petersburg Pharmacies No. 2”, where the liability was imposed on the City Property Management Committee and the City Health Care Committee. Higher Arbitration Court of the Russian Federation itself took the final decision on taking the compensation from the Committees in favor of the bankruptcy estate in an amount of the assets taken out. And although the whole sum of compensation did not exceed 756 thousand Rubles, the mere fact of holding the State liable for the debts of a state enterprise is of paramount importance, as lawyers say.

Of now less importance is the judgment for 27 million Rubles payable by the owner and former CEO of Doverie Insurance Company Victor Rudnitsky. Official receiver uncovered the lack of a considerable number of assets previously purchased by the company and proved that Rudnitsky transferred the Doverie’s stocks and bonds on himself. Another 25 million Rubles judgment was rendered against the former CEO of LLC Etalon Vasily Kovilyak who reportedly falsified the tax documents (which led to the sanctions and ultimate bankruptcy) and lost the accounting documents of the company.

Grave debts

Andrey Mikonin thinks that the institution of personal liability of corporate officials and owners is the most effective mechanism to withstand abuse of powers. Yevgenia Stanislavskaya shares this opinion. Схожего мнения придерживается и Евгения Станиславская. “Although unlucky businessmen do often dump their unlucky businesses, this usually is a consequence of low culture of doing business, rather than of the flaws in the laws” – she says. At the same time, according to the Arbitration Court for St. Petersburg and Leningrad Region, in 476 bankruptcy cases there were only 26 applications to hold the debtors liable. And only a few of them were sustained. This skepticism of the creditors as to the perspectives of personal liability of controlling parties is linked with the problems of enforcement of such decisions. For example, according to the Federal Service of Enforcement of Judgments, ASV still cannot enforce the judgment against Andrey Kirshinin. Equally, Victor Rudnitsky turned out to have no assests; as he himself said, the multimillion debt is deducted against a half of his disability pension benefits. Nevertheless, since the bankrupt company does not have any other assets, the accounts payable by an individual is as itself a subject to bankruptcy distribution.

Pavel Netupsky

"Деловой Петербург" №043 (4012) от 20 марта 2014г.

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