Foreigners will add bankruptcies to Russia – Kommersant
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The number of bankruptcy proceedings in Russian courts may expand due to foreign companies, lawyers say. In February, the Supreme Court of the Russian Federation (SC) in the Westwalk Projects Ltd case directly allowed cross-border bankruptcy in the Russian Federation, that is, the recognition of a foreign company as insolvent (see “Kommersant” dated February 10). “The court proceeds from the fact that current legislation allows a Russian court to initiate bankruptcy proceedings with the participation of a foreign entity on both the creditor and debtor’s side, provided that the debtor’s business is closely connected with the territory of the Russian Federation,” explains a partner at the Kamenskaya & Partners law firm » Anna Akifeva. It follows from the decision of the Supreme Court that this could be, for example, a focus on the Russian market, the location of the debtor’s assets and management bodies in the Russian Federation.
Partner in the litigation and arbitration practice of AB EPAM, Vera Richterman, expects in 2024 “an increase in bankruptcy applications for foreign companies filed in Russian courts.” Orchards partner Alexey Stankevich even admits the possibility of a “boom in foreign bankruptcies,” given that the Supreme Court is “as broad as possible” in interpreting the concept of “close connection” with the country and “in fact allows you to go to the Russian arbitration court if the dispute has at least some relation to Russia.”
Ms. Richterman emphasizes the risks for beneficiaries and top management of foreign debtors: “There is a high probability of application of rules on their personal liability as part of the main cross-border bankruptcy procedures, and therefore it is worth being prepared in advance for protection from subsidiary liability and recovery of losses.”
At the same time, the courts have begun to take a broader approach to recognizing a citizen as the ultimate owner of an asset formally owned by a legal entity. There is a trend towards a more serious “piercing of the corporate veil,” Mr. Stankevich emphasizes: “For example, in the bankruptcy case of Georgy Bedzhamov, the courts recognized his ownership of a piece of real estate, the owner of which he was never legally listed as. The courts found that the foreign person who was the owner of this property was under the control of the debtor, and recognized that he was the actual owner.”
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