The Economic Board of the Armed Forces of the Russian Federation decided that a potential bankrupt has the right to issue financial assistance to employees

Financial difficulties do not limit the right of a company to financially help its employee “in a difficult life situation,” the Supreme Court of the Russian Federation (SC) recognized. The economic board of the court refused to recover 1.8 million rubles from the bankruptcy estate, which the company gave to an employee for oncology treatment shortly before bankruptcy. The bankruptcy trustee asked for this, insisting that the payment was incorrectly executed and violated the interests of creditors. The Supreme Court decided that an employee who is not the head of an organization is not required to know about its financial problems, but must only confirm the expenditure of money for the stated purposes. Lawyers do not see any big risks for withdrawing funds through financial assistance to employees and consider the position of the Supreme Court to be justified.

The Supreme Court resolved a dispute about the legality of transferring funds to an employee of an organization shortly before its bankruptcy. From June 2016 to January 2017, Dorstroyservis LLC transferred 1.83 million rubles to its employee Felix Gutnov. After the company was declared insolvent, in 2020 its bankruptcy trustee challenged the transfer of funds to an employee as a transaction made within a year before the bankruptcy and violating the interests of creditors. In particular, the basis for the payment was called “accountable transfer of funds,” but there was no report or counter-execution. Mr. Gutnov insisted that this was help from the employer for the treatment of cancer.

The Arbitration Court of North Ossetia-Alania rejected the claim of the administrator. But the appeal and cassation were recovered from the employee 1.83 million rubles. into the bankruptcy estate of the LLC. According to the courts, the allocation of funds for treatment was not formalized according to the rules and could cover “possible cashing out of money,” and the employee in the position of chief engineer “should have known” about the financial problems of the enterprise, that is, he pursued the goal of “causing harm to the creditors” of the company.

Based on Felix Gutnov’s complaint, the case was transferred to the Economic Collegium of the Supreme Court, which supported the employee. The Supreme Court emphasized that the legislation “does not contain restrictions on the provision by the employer of material assistance to the employee that is not directly related to the performance of work duties.” Such payments are an additional measure of social support “in difficult life situations.” The instruction to transfer money “accountably,” according to the Supreme Court, did not prevent the courts from establishing “where the funds were actually sent.” The employee provided documents on expenses for examination and treatment of the disease, including surgery in Israel. Thus, the money was “free financial assistance for treatment that requires significant costs,” and the absence of internal documents of the LLC about this “in itself does not refute this conclusion,” the Supreme Court pointed out.

In addition, “such payments, in principle, do not provide for counter-performance,” therefore, to cancel them, it is necessary to prove that the employee knew about the purpose of causing harm to creditors, that is, about the signs of the employer’s insolvency, the board’s ruling says. But the position of chief engineer does not confirm such awareness, the Supreme Court noted. The manager’s claim was rejected, and the payment to the employee was recognized as legal.

Pavel Novikov, head of the bankruptcy practice at the law firm Melling, Voitishkin and Partners, says that in practice, when challenging suspicious transactions, the courts often proceed from only two alternatives – “either the debtor’s money was used to benefit the debtor himself, or the funds were withdrawn with the aim of causing harm to creditors, Moreover, the latter option often includes all other facts of spending money.” Now, the lawyer believes, the approach must be adjusted.

As the head of the judicial and arbitration practice of Asto Consulting, Veronika Chelnokova, explains, gratuitous financial assistance to an employee can only be challenged if the recipient knows about the signs of the company’s insolvency. The law presupposes that the other party knows this if it is an “interested party” in relation to the debtor. But the courts “interpret this concept extremely broadly, including long-term employees as such persons,” and the Supreme Court rightfully disagreed with this position, notes Ms. Chelnokova. In general, says Oleg Permyakov, partner at Rustam Kurmaev and Partners, the Supreme Court has begun to “more often take a position in favor of the employees of the debtor organization as the weakest party when challenging transactions.”

According to Veronica Chelnokova, to confirm financial assistance, it is enough to confirm the purpose and spend funds on it. In addition, adds arbitration manager Pavel Zamalaev, it is necessary to “take into account the scale of the enterprise’s activities” – here “the company implemented billion-dollar contracts, against the background of which assistance to the employee amounted to 1.8 million rubles. doesn’t look unnatural.” Forward Legal lawyer Arpine Pirumyan also supports the decision of the Supreme Court, noting that it “is consistent with the conclusions of the court on payments to charity by debtors.”

Pavel Novikov notes that “challenging payments to employees causes certain difficulties for creditors and the managing debtor.” But the lawyer admits that “if the spending of funds on treatment or other social purposes is confirmed, then neither the employee nor the employer could dispose of them with malicious intent.” In this regard, Ms. Pirumyan is not afraid of the negative consequences of the decision of the Supreme Court, believing that the courts “will be able to stop” attempts to actually withdraw assets through financial assistance. Oleg Permyakov admits the possibility of abuse, but not too large-scale.

Anna Zanina