Russian legal entity Hewlett-Packard Enterprise may be declared bankrupt

The creditor of the Russian “daughter” of Hewlett-Packard Enterprise (HPE), Pro Factor, announced its intention to initiate bankruptcy proceedings for the Russian division of the American corporation. The statement was published in the Fedresurs database.

“Pro Factor LLC, as the debtor’s creditor, announces its intention to apply to the arbitration court with an application for declaring Hewlett Packard Enterprise LLC bankrupt due to the presence of an outstanding debt in the amount of more than 300,000 rubles,” the Pro Factor a”.

The main activity profile of Pro Factor is the provision of financial services. The company was founded in 2016. The legal entity is actively filing bankruptcy claims against various companies, follows from the filing cabinet of arbitration cases. In 2022, arbitration courts in various regions of the Russian Federation registered over two dozen such claims filed directly from Pro Factor or with the participation of this company as one of the creditors.

Hewlett-Packard Enterprise (HPE) is a company that sells cloud solutions and servers. In this segment, the American company was one of the three largest Western suppliers both in unit terms of deliveries and in monetary terms. It was formed in 2015 after the division of Hewlett Packard into two companies – HP Inc., which manufactures PCs, laptops and printers, and HPE.

The revenue of Hewlett Packard Enterprise LLC in 2021 according to RAS amounted to 12.7 billion rubles, net profit – 3.8 billion rubles. Its largest customers in the Russian market were “Rostelecom“, MOEK (heat supply company of Moscow, part of”Gazprom energy holding) andGlonass”, follows from the data of SPARK-Interfax.

HPE also collaborated with integrator NVision Group on a joint server localization project based at the Saransk Television Plant, Kommersant wrote. It was planned to organize the production under the new Russian brand of more than 15 models of IT equipment, which, in addition to servers, were to include switches, routers and radio relay equipment.

HPE has made the decision to completely leave Russia and Belarus in June of this year. The company recorded total expenses of $161 million, “principally related to the company’s exit from its business in Russia and Belarus,” according to the corporation’s financial statements for the 2022 fiscal year ended October 31. Losses are mainly related to expected credit losses on financing and trade receivables, employee severance pay and abandoned assets, it follows from the document.

Vedomosti sent a request to Hewlett Packard Enterprise LLC. The telephone number of the Russian legal entity has an answering machine, which reports that “HP suspended all shipments in the territory of the Russian Federation in February and has now completed its business and operations.”

Over the past year, several major lawsuits have already been filed against Hewlett Packard Enterprise: OCC Center LLC is trying to recover 1.4 billion rubles from the American subsidiary of the corporation, Imcotrade LLC – 558 million rubles, Complit Company LLC — RUB 203.4 mln. for the sum of two claims.

Often, filing for bankruptcy is only aimed at forcing the debtor to pay off the debt without the real intention of introducing bankruptcy, says Aleksey Kostovarov, partner at the Liniya Prava law firm. This is partly confirmed by the results of a number of lawsuits on claims against HP, in which the plaintiffs waived their claims after receiving the money, he explains: “If you look at the filing cabinet of arbitration cases, there are about 20 claims filed against HP this year. As can be judged from the decision in one of the already considered cases (the claim of the Complit Company for the recovery of 38 million rubles), the reason for such a number of financial claims may be due to the termination of the company’s activities in Russia. Based on the amount of claims submitted to the court, if they are fully satisfied, the total debt of HP may be more than 2 billion rubles.

The bankruptcy petition was filed because the creditor expects to recover the debt, explains FG Finam analyst Leonid Delitsyn. Declaring the company bankrupt means that the state will appoint a bankruptcy trustee who will find out what the legal entity that is the defendant currently owns, he continues. “The Russian legal entity HPE can own, for example, a warehouse of electronics that can be sold and get money for it,” the expert noted. After that, the collected funds are usually distributed between the state, which received less taxes, creditors and shareholders, and others in the manner prescribed by law, says Delitsyn.

If at the moment there is not enough property for all creditors, the bankruptcy estate can be replenished by challenging suspicious transactions in the bankruptcy procedure or bringing the beneficiaries and the debtor’s management to subsidiary liability, Timur Tazhirov, Forward Legal’s lawyer, explains. It is now difficult to estimate the total debt of the HPE subsidiary, as the financial statements may not reflect the real picture of the company’s debt, he explains. Its size will become clear when everyone will include their claims in the register of claims of the debtor’s creditors in the bankruptcy proceedings, adds Tazhirov.

If an application for the recognition of an HPE division goes to court, the proceedings and the procedure for declaring a company bankrupt can drag on for years, Sergey Uchitel, a partner at Pen & Paper, draws attention. “Obviously, it will take considerable time to conduct a financial analysis, form a register of creditors, search for and challenge suspicious transactions on the eve of bankruptcy, form a bankruptcy estate and implement it,” Uchitel notes.

In addition, all those proceedings that are now in Russian courts in connection with the departure of HPE from Russia may also affect the bankruptcy procedure of a person, he added. “Obviously, these cases have the potential to affect the size of the requirements of the register of creditors in bankruptcy,” the lawyer continued.

But taking into account the fact that the founders of HPE companies registered in the Russian Federation are foreign legal entities, even if they are brought to subsidiary liability for the company’s debts in Russia, inevitable difficulties will arise with the execution of such a decision at the place of their registration, Teacher argues. “Therefore, HPE creditors should rely on those assets of the company that can be discovered and included in the bankruptcy estate as part of the bankruptcy case in Russia,” he concluded.