Liability for a reckless director. Case № А33-16565/2014

4 august 2018

KEY MATTERS IN DISPUTE

If a company's management is changed – documents for which period may be obtained from the former director (considering that some papers have a certain shelf life period)? And what fine may be imposed for a failure to perform a court ruling on production of documents?

BACKGROUND

For some time Unisam-6 Karavay OOO, part of Krasnoyarsk trade chain 'Karavay', was managed by Pavel Tyukov. He refused to produce accounting reports and over 100 contracts to the new director. In the end of 2014 the company filed a claim against Tyukov requesting production of papers for 2005-2011 under penalty of compensation (amount to be determined by the court).

RULING BY THE COURT OF FIRST INSTANCE

The court obliged the respondent to hand over the documents, imposed a court fine for a failure to abide the ruling in the amount of RUR 10.000 daily. According to the court, such an amount was 'fair and ensured the balance of the parties' interests'.

RULING BY THE COURTS OF APPEAL AND CASSATION

Courts decided that only documents for the period after 2010 may be requested – i.e. the period which may be inspected by tax authorities. The claimant failed to substantiate other reasons for which it might need to have older papers which meant that its rights were not breached. Moreover, legally prescribed shelf life period of accounting documents was the minimum of 5 years. Amount of compensation was also excessive and had no upper limit. At the same time, director was not a businessman, the court did not examine his income level and his capacity to perform the ruling in a short term. Therefore, another fine was more appropriate – RUR 100 daily but no more than RUR 50.000 in total.

RULING BY SUPREME COURT

The court stated that lower courts should have been guided not by the law on accounting but on archive keeping which did not prescribe a strict storage term of 5 years. Moreover, lapse of this period as such did not mean that documents should be destroyed. Therefore, the court of first instance was right having obliged the director to produce all the documents without any limitation of time. At the same time, in what relates to compensations Supreme Court upheld the position voiced by the courts of appeal and cassation. This was due to the fact that amount of fine should be substantiated not limited to general criteria: debtor's income level should be examined, so as the issue of how easy (or difficult) it would be for him to perform the court’s ruling.

COMMENT BY S&K VERTICAL

Supreme Court logically and soundly decided that former director shall produce all the documents disregarding the statutory storage periods. However, in what relates to the issue of compensation the court demonstrated inexplicable goodness towards the former director. Capped fines rarely stimulate directors for complying with rulings. Such an approach definitely does not meet the basic goals of astreinte concept.

 

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