The courts of the Russian Federation are considering the question of whether it is possible to seize the property of companies in favor of their bankrupt beneficiary

As Kommersant found out, the courts of the Russian Federation are considering the potentially pressing issue of whether it is possible to seize the property of companies in favor of their bankrupt beneficiary. The dispute was started by Sberbank, which is trying to foreclose on the debts of Nikolai Sadovsky on the assets of legal entities allegedly controlled by it. The court of first instance supported the bank, but the appeal rejected the claims, considering the connection between the debtor, the companies and their property unproven. Experts consider the idea of ​​taking assets from legal entities for the debts of even a proven beneficiary controversial, since the property of an organization is separated from its owners, and companies may have their own creditors. Lawyers consider the dispute important for practice, hoping that it will be of interest to the Supreme Court.

In 2018, Nikolai Sadovsky (in the 2000s, he managed and owned factories for the production of glass containers for the food, perfume and cosmetics industries in the Moscow region and Omsk region) was declared bankrupt at the request of Sberbank, demanding about 300 million rubles.

The debt arose from guarantees for loans from companies, including Klin-Steklotara CJSC and KSE LLC. By 2020, the total amount of the citizen’s registered debts amounted to 1.229 billion rubles, but no liquid property was found. The shares he owned in the companies were worth almost nothing, since the legal entity was already in the process of bankruptcy; as a result, the bankruptcy estate was not formed and the claims of the registered creditors were not repaid.

In February 2020, the court found that Nikolai Sadovsky had no property, completed bankruptcy and wrote off the remaining debts. But based on a complaint from Sberbank, which announced the discovery of property hidden by the debtor through the offshore company Nadina Ltd (BVI), the cassation in November 2020 overturned this decision and resumed the bankruptcy case.

A month later, the bank filed a lawsuit challenging the chain of transactions (since 2012), as a result of which, in its opinion, a number of assets were not included in the debtor’s bankruptcy estate, through which debts to creditors could be repaid. Sberbank claims that this property was registered by the debtor in the name of persons controlled by him, and their actual owner was Nikolai Sadovsky himself. In particular, we are talking about Nadina Ltd and JSC Nadina. The latter owns commercial real estate in Moscow with a cadastral value of more than 2 billion rubles. (managed by NJSC “Basis MSK”). The owners of the defendant companies stated in court that Nikolai Sadovsky was never their beneficiary.

On March 2, 2023, the Moscow Arbitration Court upheld the bank’s claim, agreeing that Mr. Sadovsky hid property from creditors by registering it in the name of other persons. The court noted that the shareholders of the JSC Alexander Goncharov and Maria Kostyuchenko, who bought the company’s shares in 2020, did not have sufficient funds for this and act as nominal owners. According to the Federal Tax Service, the average monthly income of these citizens at the time of purchase of shares was 11–25 thousand rubles, while the book value of the company’s property exceeded 600 million rubles.

In addition, the decision states that Mr. Sadovsky negotiated with counterparties of Nadina Ltd, signed documents on behalf of the company, controlled its activities through close relatives, and made payments from a personal account. The debtor’s brother, Ivan Sadovsky, lived at the same address as the director and owner of Nadina Ltd, Sergei Sudakov, and received from the latter a power of attorney to manage the company and dispose of its property. The main benefit from Basis MSK, which manages Nadina’s commercial real estate, came from “entities exclusively controlled by the debtor,” including brother Ivan, who received 130 million rubles from Basis.

As a result, the court canceled the chain of transactions on the transfer of assets, recognizing the debtor as the owner of 100% of the shares of the joint-stock company and the disputed property of both companies. Among the assets were non-residential premises on Lev Tolstoy Street in Moscow, land plots in the Kashirsky district of the Moscow region and the right of claim of an offshore company to collect payment for disputed transactions (accounts receivable).

Control and benefit not proven

In June 2023, the appeal court overturned this decision, considering it unestablished that “the debtor received economic benefits from the use of the property involved in the disputed transactions.” In addition, the appeal resolution states, Nadina’s capital real estate was previously owned by Nechernozemagropromstroy Corporation JSC, but there is no evidence that the debtor was related to this legal entity and participated in its acquisition of assets.

The appeal also found erroneous the conclusion of the first instance that the chain of transactions was “involved in a single intent aimed at concealing the debtor’s property,” since the transactions were made “with significant intervals in time, in relation to different property and property rights.” According to the court, at the time of the previous transaction, its participants “did not have the opportunity to plan the subsequent one,” since it was carried out as a result of court decisions on the award of this or that property.

The resolution notes that the debtor’s financial situation did not allow him to finance the acquisition of property and property rights and there is no evidence confirming the purchase of the disputed assets by the defendants at the expense of Nikolai Sadovsky. In addition, there is no evidence that the debtor was a participant or a member of the management bodies of the companies. The appeal also did not agree that the shareholder and head of Nadina Ltd, Sergei Sudakov, acted as a “nominee acting under the control of the debtor.”

Separately, the court clarified that it is impossible, as part of a bank’s lawsuit to challenge pre-bankruptcy transactions, to cancel the state registration of companies’ ownership of real estate and recognize the debtor as the owner of this property. A claim for recognition of the right to real estate can only be filed by “a person who considers himself the owner of real estate in his possession, the right to which is registered with another entity,” the resolution says. The dispute has not yet come to an end – the cassation hearing is scheduled for October 18.

Sberbank considers the decision of the first instance “legal and justified,” emphasizing that “the return of expensive real estate to the debtor’s bankruptcy estate will allow creditors to satisfy their claims.” The debtor’s financial manager, Maxim Shkarupin, told Kommersant that in the first instance he objected to the bank’s demands because he did not see evidence of Nikolai Sadovsky’s affiliation with third parties, including Nadina JSC. However, after submitting the documents, the manager supported the claim to challenge the transactions and include the disputed property in the bankruptcy estate and in the appeal already acted on the side of the bank. It was not possible to contact Nikolai Sadovsky. Lawyers representing the interests of Nadina JSC and its shareholders did not answer Kommersant.

Separation of property from the owner

Lawyers point out two key points in this dispute. The first is the difficulty of proving beneficial ownership. The issue of connections between a legal entity and its intended beneficiary arises, as a rule, within the framework of the bankruptcy of a company, when attempts are made to bring its controlling persons to subsidiary liability, says Ivan Stasiuk, adviser to the RKT consulting group. In personal bankruptcy, such disputes are less common, mainly when the debtor was or is the owner of a business.

Guskov & Associates partner Igor Guskov notes that identifying the connection of a debtor-citizen with companies controlled by him “is a labor-intensive process where indirect evidence is often used.” Managing partner of RI-Consulting, Elena Gladysheva, notes that “the final beneficiary, who does not have the appropriate formal authority, is not interested in disclosing his position, and his relations with controlled companies are not regulated by acts that would establish the relevant rules.” Mr. Stasiuk confirms that the shadow beneficiary usually tries to minimize his formal powers; powers of attorney are usually not issued to him, he does not sign documents on behalf of the company, etc.

Mr. Guskov emphasizes that the creditor “does not have sufficient tools to obtain all the information about the controversial transactions and the persons who carried them out,” therefore “the defendants must disclose the real motives for the transactions, the origin of capital, the reasons for the flow of funds, the list of beneficiaries and the inconsistency of the plaintiff’s arguments.” You cannot limit yourself to “a formal denial of the arguments and failure to prove all the conditions for challenging transactions,” the lawyer clarifies. In this dispute, it is appropriate to apply the “doctrine of tearing away the corporate veil,” especially since the elements of the chain of transactions are “foreign entities, the proof of beneficial ownership of which is complicated by obtaining direct evidence,” Ms. Gladysheva believes.

The second important aspect is the possibility of recognizing a bankrupt citizen as the owner of the property of legal entities controlled by him and transferring these assets to his bankruptcy estate. Lawyers have no consensus on this matter.

Elena Gladysheva believes that “direct transfer of the property of third parties into the ownership of their beneficiary is impossible.” Ivan Stasiuk also doubts the legality of such a decision: “The fact that someone was the actual owner of the company and benefited from the use of property by the company does not mean that this property is his personal. After all, a legal entity may have its own creditors, who are based on the company’s assets.”

If the property was involved in business processes, and did not just hang on the balance sheet, it belongs to the legal entity, and not to its owner, Mr. Stasiuk believes. But, the lawyer clarifies, it is possible to recognize the right of a bankrupt citizen to the company’s shares if it can be proven that they are registered in the name of dummies. In addition, Ms. Gladysheva notes, it is possible to “challenge transactions that reduce the value of shares of companies owned by the debtor, since such actions actually cause damage to its creditors.”

Igor Guskov, on the contrary, considers it possible to recognize the property of legal entities as the property of the beneficiary citizen, “if under multi-level structures and chains of transactions there is an attempt to legalize the ownership of third parties to assets that they received under the control and at the expense of the debtor.” If this is proven, the lawyer adds, the defendants’ creditors “should not lay claim to the disputed assets.”

Elena Gladysheva hopes that the Supreme Court will be interested in the case, since “the practice of proving beneficial ownership is now actively being formed.”

Anna Zanina, Ekaterina Volkova