A Subsidiary Liability Claim Has Already Been Filed Against You
An insolvency administrator, creditor or other applicant is seeking to make you subsidiarily liable for the company’s debts.
DEFENSE OF DIRECTORS AND OWNERS
Defense Against Subsidiary Liability in Bankruptcy
We defend directors, owners, beneficiaries and other controlling persons when bankruptcy proceedings include claims seeking to make them personally liable for the company’s debts. We analyze the application, the debtor’s documents, transactions and the causes of insolvency, prepare objections and represent the defense in Russian commercial courts.
WHEN DEFENSE IS NEEDED
What Happened?
You Are a Former Director of the Company
Your authority has already ended, but actions taken while you managed the debtor have become the subject of a bankruptcy dispute.
The Claim Is Against an Owner or Beneficiary
The applicant alleges that you effectively determined the company’s actions and should be liable for its obligations.
You Are Being Treated as a Controlling Person
It is necessary to determine whether you actually had the ability to direct the debtor’s actions and what evidence the applicant relies on.
The Claim Is Based on a Failure to File for Bankruptcy
The applicant argues that the director should have filed the debtor’s bankruptcy petition with the Russian commercial court earlier.
You Are Blamed for Transactions or the Removal of Assets
Business decisions, payments, transfers of property or transactions completed before bankruptcy are being challenged.
The Allegations Concern Accounting or Corporate Records
The applicant relies on missing, incomplete or inaccurate debtor records and links this to the inability to satisfy creditor claims.
The Court Has Already Issued an Adverse Ruling
The court ruling, the deadline and the grounds for appeal or cassation review need to be assessed.
Nikolay NemkovManaging Partner, Konsultant Law Firm
Managing Partner’s Commentary
Nikolay Nemkov on Subsidiary Liability
Why the defense should not begin with a general statement such as “I am not at fault,” but with a review of the specific legal grounds of the claim, the person’s role in the company, the causes of bankruptcy and the evidence relating to each disputed episode.
Key Points
- 01Why the applicant considers you a controlling person
- 02Which actions are alleged to have harmed creditors
- 03Which documents support your defense
DEFENSE STRATEGY
Do Not Dispute Everything at Once. Break Down the Legal Basis Element by Element.
In a subsidiary liability dispute, it is essential to identify the specific legal basis on which the applicant seeks to recover the company’s debts from a particular individual. The status of a controlling person, the alleged acts or omissions, causation, fault, statutory presumptions and the amount of potential liability must each be reviewed separately.
01
Status as a Controlling Person
We examine the basis for alleging that the defendant could direct the debtor’s actions or make decisions binding on the company.
02
Grounds for Liability
We identify the specific acts or omissions alleged by the applicant and the legal provision on which the claim relies.
03
Causation and Evidence
We assess whether the evidence actually establishes that the alleged conduct caused the inability to satisfy creditor claims in full.
04
Amount of the Claim
We analyze the applicant’s calculation and the legal basis used to determine the potential amount of liability.
What the Defense Includes
Review of the Application and Case Materials
We study the subsidiary liability application, bankruptcy court rulings, the insolvency administrator’s reports and the documents relied upon by the applicant.
Review of Controlling-Person Status
We analyze formal authority, actual influence over the debtor’s operations and the circumstances the applicant relies on to establish control.
Analysis of the Causes of Insolvency
We review the company’s financial position, significant transactions, cash flows and circumstances that may have contributed to the bankruptcy.
Preparing the Defense Position and Evidence
We prepare the response and objections, organize the documents and determine which facts need to be established in court.
Representation in Court
We participate in the hearing of the claim, present evidence, challenge the applicant’s arguments and file the necessary motions.
Appeal of the Court Ruling
Where legally justified, we prepare an appeal or cassation complaint and represent the client during review of the court ruling.
Konsultant Law Firm
The firm has been practicing since 2007. We handle litigation and complex legal matters for businesses in Krasnoyarsk, Moscow and other regions of Russia.
Since 2007
in legal practice
1,000+
court proceedings
Across Russia
Krasnoyarsk • Moscow • other regions
The Company’s Debts Do Not Automatically Become Personal Debts
The bankruptcy of a legal entity does not automatically mean that its debts can be recovered from its director, owner or beneficiary. The dispute must establish the statutory grounds for imposing liability on the particular person.
At the same time, Russian bankruptcy law contains special presumptions and rules on the burden of proof. The defense therefore needs to address the specific allegations and evidence relied upon for each asserted ground, rather than respond to an abstract accusation.
How We Start Working on the Matter
01We Receive the Case Materials
The subsidiary liability application, bankruptcy court rulings and the documents on which the applicant relies.
02We Break Down the Legal Grounds
We determine why the person is alleged to be controlling the debtor and what acts or omissions are attributed to them.
03We Assemble the Defense Evidence
We identify documents and circumstances showing the defendant’s actual role, the economic rationale of business decisions and the causes of the company’s financial condition.
04We Develop the Procedural Position
We prepare objections, evidence and an action plan based on the current stage of the court dispute.
Initial Legal AssessmentLegal consultation with review of the matter — from RUB 5,000
MANAGING PARTNER
Konsultant Law Firm Lawyers
Managing Partner, Konsultant Law Firm
Nikolay Nemkov
More than 20 years of practice in complex property and corporate disputes. Practicing insolvency practitioner.
Subsidiary Liability Questions
Who can be recognized as a controlling person of the debtor?
A controlling person may be an individual or a legal entity that, during the period specified by law, had the ability to give the debtor binding instructions or otherwise determine its actions. The law establishes specific presumptions for directors, persons with decisive corporate participation and certain other situations. The court may also establish control based on other factual circumstances.
Is a director automatically liable for the debts of a bankrupt company?
No. Holding the position of director does not automatically mean that the company’s entire debt can be recovered from that person. A director is among the persons for whom the law establishes a presumption of control, but subsidiary liability still requires the court to examine the relevant statutory ground and the circumstances of the specific case.
What are the grounds for subsidiary liability?
One of the principal grounds is provided by Article 61.11 of the Russian Bankruptcy Law: the inability to satisfy creditor claims in full as a result of acts or omissions of a controlling person of the debtor. A separate ground is provided by Article 61.12 for failure to file, or late filing of, the debtor’s bankruptcy petition where the statutory duty to file existed.
Can a defense still be mounted after the court has accepted the application?
Yes. Acceptance of the application for consideration does not mean that the claim will be granted. The legal basis of the application must be reviewed and a full response, evidence and objections must be submitted regarding the circumstances relied upon by the applicant. The law contains special rules on the allocation of the burden of proof, so an incomplete or purely formal response can significantly complicate the defense.
Can subsidiary liability equal all of the company’s unpaid debts?
As a general rule under Article 61.11 of the Russian Bankruptcy Law, the amount of liability is determined by reference to creditor claims that remained unpaid because the debtor lacked sufficient assets, subject to the statutory rules. The law also permits the amount to be reduced if it is proven that the harm caused by the particular person is substantially less than the amount claimed against them.
Can the court freeze or attach the defendant’s assets?
Interim measures may be imposed in subsidiary liability proceedings. The law expressly permits attachment of the property of the person against whom liability is sought, or other interim measures, where the relevant legal grounds exist and the court issues the appropriate ruling.
What should be done if the court has already imposed subsidiary liability?
The court ruling, the date it was issued and received, the court’s reasoning and the case materials should be reviewed immediately. Court rulings imposing or refusing to impose subsidiary liability may be appealed. The next steps depend on the current court instance and the applicable procedural deadlines.
Let Us Review the Claims Against You Personally
Describe your role in the company, who is seeking to make you subsidiarily liable and the current stage of the case. If an application has already been filed, include the bankruptcy case number and the date of the next court hearing.