The Supreme Court excluded the founders' loans from the register of bankruptcy claims. A comment on the situation for by Alena Bachinskaya, advocate at S&K Vertical

20 july 2018 2018-07-20

Founders give money to their company, and then it went bankrupt. Can they get into the queue of creditors? While judicial practice is favorable to them, but the trend may be broken by the Supreme Court's ruling in favor of independent creditors. When loans are issued for unlawful purposes, the Supreme Court proposes to re-qualify them as corporate one and not include in the register. Experts evaluated the decision positively, but explained why it would not be enough to reverse the trend.

УFounders often act as guarantors for the debts of their companies, and, having paid the debt, they get the right to collect it from the firm. They can also finance their enterprise by loans. Whether it is possible to include this debt in the register of claims against an insolvent company, is not an easy question. In other words, are such debts civil (included in the register) or corporate (not included)?

This issue has been raised many times, but, according to Alena Bachinskaya of S&K Vertical, it was usually resolved in favor of the founders. Courts basically understood the loans of from the fournders as civil-law loans. "But it can not be denied that they differ from ordinary loans that exist on the open market," argues the lawyer. - Participants can influence the terms of provision and return of the funds, as well as the interest rate. In addition, such loans are often used to obtain control in the subsequent bankruptcy. "

Whether to include a corporate loan in the claims register - instructions from the Supreme Court

The dispute over the intracorporate loans was considered by the Supreme Court, which, contrary to its ordinary practice, took the side of independent creditors. Bachinskaya calls its explanations one of the most anticipated. The dispute was around the bankruptcy of "Neftegazmash-Technologies" (case No. A32-19056/2014), and its founders Igor Sviridov and Viktor Yurkov wanted to become the company's creditors. The company owed them a total of 10.5 million rubles on loans and guarantees. The court included the debts in the register even though the businessmen provided the loans out of their own dividends. The appeals and the cassation instances agreed with this approach.

The Economic Chamber canceled their acts (the information on the meeting is available here). The chamber recalled that the law prohibits the inclusion of corporate claims in the register. These include those that appear to be out of civil law, but in fact they are not (for example, because they would not have been possible unless the lenders participated in the debtor's capital). As the Supreme Court explains:

"The founder of the company that has a debt arising out of participation in this company can not pose its claims against the claims of other (independent) creditors, because such a participant is subject to the risk of bankruptcy of the company, which is caused by its ineffective governance."

To decide whether to include in the register requirements for loans to participants, the Supreme Court advises to study in detail the nature of given relations, as well as the behavior of the creditor in the pre-bankrupt period. In particular, with the help of such transactions (including on preferential terms), the lender can temporarily correct the financial condition of the company, which deteriorated just because of the lender's decisions. In this situation, the injection of money disguises the increase in the authorized capital, so that in the event of bankruptcy, it will increase the controlled payables and reduce the votes of independent creditors, the ruling of the Supreme Court said. It follows that courts can re-qualify loans to increase the authorized capital or recognize the claim as having the corporate status, which entails a refusal to be included in the register.

Independent creditors against affiliates: the struggle continues

The problem that the Supreme Court has dealt with, as always, is simple: bona fide creditors are trying to get at least something, and the affiliates want to manage the procedure in order to devalue assets and then quietly buy them off, commented Vsevolod Vasiliev, senior associate of YUST Isakov, Afanasyev, Ivanov. The instructions of the Supreme Court will make it difficult to conduct controlled bankruptcies, and bona fide participants in the process will have enough objections to the corporate nature of the claim, predicts Elena Poleonova, partner at Olevinsky, Buyukyan & Partners. And those who want to enter the register, according to her, will need to methodically prove the civil law nature of the relationship. Vasiliev is more pessimistic. According to him, recognizing the unlawful purpose of the transaction in bankruptcy is a complex task that requires a lot of time. "Taking into account the burden on bankruptcy judges, it is easier for them to apply simple rules on obligations and to include claims in the register than to focus on complex positions of the Supreme Court in a one speicific dispute," Vasiliev believes.

The Supreme Court took another step towards bona fide creditors, but in order to radically reverse the trend, clear mechanisms for determining fake debts are needed, Vasiliev believes. They suggest that they be established in the resolution of the Plenary Session of the Supreme Court or, even better, in a separate chapter of the law on bankruptcy on transactions with affiliated persons. A good solution was made in one of the draft laws, which has been never submitted to the State Duma, recalls Poleonovf: there it was suggested to prohibit voting at meetings of creditors to those who are connected with the debtor.

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