The Supreme Court, in its ruling dated January 30, 2023, indicated that the exclusion of a company from the Unified State Register of Legal Entities in an administrative manner is not a ground for holding the company’s head liable due to the company’s outstanding debts to the creditor.

The creditor asked the court to bring the director of the debtor company to subsidiary liability: the debtor company had a profit in 2019, the director of the debtor company, at the same time being its sole member, ceased to provide financial and accounting statements, in addition, an entry was made in the Unified State Register of Legal Entities about the unreliability of the information about the company contained in the Unified State Register of Legal Entities, which led to its liquidation by way of an administrative procedure and the impossibility of satisfying the creditor’s claims.

By the decision of the Arbitration Court of the city of St. Petersburg and the Leningrad Region dated November 30, 2021, the creditor’s claim was dismissed. By the ruling of the Thirteenth Arbitration Court of Appeal dated March 09, 2022, upheld by the ruling of the Arbitration Court of the North-Western District dated July 04, 2022, the decision dated November 30, 2021 was overturned, the claim was satisfied.

The Supreme Court of the Russian Federation, considering this case, pointed out, referring to the previously formulated position on a similar issue [1], that the essence of the legal entity’s construction implies a ban on the use of the legal form of the legal entity for causing harm to independent participants in the turnover [2], and in exceptional cases, a member of the corporation and other controlling persons [3] may be held liable to the creditor of this legal entity, if the inability to satisfy the creditor’s claims is provoked by the exercise of the will of the controlling persons, whose behavior did not meet the criteria of good faith and reasonableness, and is not related to market or other objective factors, business risk inherent in doing business.

The exclusion of a company from the Unified State Register of Legal Entities in the manner prescribed by the federal law on state registration of legal entities for inactive legal entities entails the consequences provided for by the Civil Code of the Russian Federation for the refusal of the main debtor to fulfill the obligation [4].

In this case, if the failure to fulfill the obligations of the company (including as a result of causing harm) is due to the fact that the persons specified in Clauses 1-3, Article 53.1 of the Civil Code of the Russian Federation acted in bad faith or unreasonably, at the request of the creditor, such persons may be held subsidiary liability for the obligations of this company.

For the liability of controlling persons to occur, it is necessary that it is the unreasonable and (or) unfair action (inaction) of controlling persons that led to the fact that the company became unable to fulfill the obligations to the creditors [5].

The exclusion of the debtor company from the Unified State Register of Legal Entities in an administrative manner is not a sufficient ground to hold the company’s head liable for damage to the creditors.

In addition, the inaction and violations of the director, due to which the company was liquidated, do not mean that while maintaining the status of the operating legal entity, the company had the opportunity to make settlements with the creditor, but evaded the fulfillment of the monetary obligation.

The Supreme Court of the Russian Federation noted: when bringing a claim against a controlling person, the creditor must provide evidence substantiating with a reasonable degree of certainty that it has losses, the unfair or unreasonable nature of the behavior of the controlling person, and also that the corresponding behavior of the controlling person has become a necessary and sufficient reason for the impossibility of repaying the creditors’ claims.

The fact that the profit exceeded the amount of the debt is not a confirmation of the availability of property in the amount needed for settlements. Profit is a financial indicator of the activity of an economic entity (the difference between income received and expenses incurred), which is not identical to the sufficiency of property and the solvency of a person.

The Supreme Court of the Russian Federation sent the case for a new trial to the first instance, which, among other circumstances, will have to study the documents on the movement of funds in the bank account of the company, which will allow concluding whether there were any/no funds for settlements with counterparties, as well as concluding on the legality of spending the available funds[6].

  • [1] Clause 1 of Resolution No. 53 of the Plenum of the Supreme Court of the Russian Federation dated December 21, 2017 “On Certain Issues Related to Bringing the Persons Controlling the Debtor to Liability in Case of Bankruptcy” (Resolution No. 53)
  • [2] Clauses 3-4 of Article 1, Clause 1 of Article 10 of the Civil Code of the Russian Federation
  • [3] Clauses 1 – 3, Article 53.1 of the Civil Code of the Russian Federation
  • [4] Clause 3.1, Article 3 of Law No. 14-FZ
  • [5] Clause 1, Article 1064 of the Civil Code of the Russian Federation, Clause 2 of Resolution No. 53
  • [6] Ruling No. 307-ЭС22-18671 of the Supreme Court of the Russian Federation dated January 30, 2023
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