The Supreme Court prohibited tax authorities from liquidating a bankrupt until the end of the proceedings

The completion of bankruptcy of a company does not necessarily entail its immediate exclusion from the Unified State Register of Legal Entities. If there is a dispute with this legal entity in another court, which has taken interim measures in the form of a liquidation ban, they have priority, the Supreme Court of the Russian Federation (SC) recognized. Previously, there was no consensus on this issue. On the one hand, lawyers say, the position of the Supreme Court is useful for persons suing a company outside of its insolvency case, but on the other hand, this decision can be used to unfairly delay bankruptcy.

The Supreme Court considered the issue of the relationship between two contradictory judicial acts – the arbitration and city courts – concerning the fate of the same company. In December 2012, Profservice LLC rented a tower crane from Kramax CJSC. Two years later, the parties signed an agreement to terminate the contract, but the crane, according to ex-director of Kramax, Sergei Denisyev, was not returned. On the part of the JSC, the agreement was signed by another director, Evgeny Pavlov, who, according to Mr. Denisyev, embezzled the property.

Both companies later went bankrupt. As part of the bankruptcy of Kramax, they decided to bring Sergei Denisyev to subsidiary liability, charging him, among other things, with a debt of 4.8 million rubles related to the crane. In this regard, Mr. Denisyev challenged the termination of the lease agreement in the Konakovo City Court of the Tver Region, filing a claim against Profservis and Evgeny Pavlov, who signed the deal on behalf of Kramax. Meanwhile, the arbitration court completed the bankruptcy of Profservis, which implied its subsequent exclusion from the Unified State Register of Legal Entities.

To avoid liquidation of the defendant, Sergei Denisyev obtained interim measures from the city court in the form of a ban on the Federal Tax Service from making an entry on the exclusion of a legal entity from the state register. This determination was submitted to the tax office. But the inspectorate gave preference to the arbitration court’s decision to complete the bankruptcy that came into force. Mr. Denisyev appealed these actions of the inspectorate to the regional department of the Federal Tax Service, which supported his arguments and canceled the exclusion of Profservice from the Unified State Register of Legal Entities. But the federal service did not agree with this, deleting the company from the register.

After this, Sergei Denisyev went to court. But opinions also differed among courts at different levels. The Arbitration Court of First Instance upheld Mr. Denisyev’s claim, obliging the tax authorities to restore the company to the Unified State Register of Legal Entities. The appeal and cassation were supported by the Federal Tax Service.

Based on Sergei Denisyev’s complaint, the dispute was transferred to the Economic Collegium of the Supreme Court, which agreed with his arguments. The Supreme Court explained that interim measures in civil, arbitration and administrative proceedings are taken if “their failure to take may complicate or make impossible the execution of a court decision”; among such measures “there may be a ban on the liquidation of a legal entity.”

“By virtue of the principle of universally binding judicial decisions for all government bodies without exception,” when the Federal Tax Service receives “mutually exclusive judicial acts (one orders the liquidation of a legal entity, the other prohibits doing so.— “Kommersant”)” “a conflict arises that must be resolved in favor of a ban on the liquidation of a legal entity,” the panel explained.

According to the Supreme Court, an obstacle to the liquidation of a legal entity after completion of its bankruptcy may be the circumstances of disputes considered by other courts, “therefore, the act of securing the claim should be given priority.” In this regard, the panel upheld the decision of the arbitration court, which obliged the tax authorities to restore Profservice in the Unified State Register of Legal Entities as an active legal entity.

The Supreme Court resolved “the important problem of the correlation and resolution of the conflict of judicial acts, one of which has a final status (on the completion of bankruptcy and liquidation of the debtor), and the second is intermediate (on the adoption of interim measures in the form of a ban on liquidation),” explains Orchards adviser Vadim Borodkin. “When interim measures are taken within the framework of one case (in the bankruptcy of a company), there are no problems with their execution, since there is no competition between judicial acts,” the lawyer clarified. Controversial situations, according to him, arise when a parallel process is going on with a bankrupt company in another court. For tax authorities, according to Vadim Borodkin, the position of the Supreme Court “will most likely set a general vector – to implement rulings on the adoption of interim measures as a priority in comparison with other judicial acts.”

The decision of the economic board will be generally useful for considering disputes with similar circumstances, when, on the one hand, there will be a final judicial act, and on the other, a court ruling on the adoption of interim measures, says Vadim Borodkin. According to him, there are “quite a lot of such situations in practice.” Veronika Chelnokova, head of the judicial and arbitration practice of Asto Consulting, believes that the decision of the Supreme Court “will help protect truly violated interests, for example, in disputes about the recognition of property rights, about the recovery of property from someone else’s illegal possession and about the invalidation of transactions that are considered outside the case of bankruptcy.”

Specifically for Sergei Denisyev, the restoration of Profservice in the Unified State Register of Legal Entities makes it possible to complete the legal process with him, and if he wins, to present claims against the persons who controlled the company, explains Vadim Borodkin. Advisor to the RKT consulting group, Ivan Stasiuk, believes that this can help the ex-director protect himself from some of the claims for subsidiary liability.

Nevertheless, Mr. Stasiuk believes that after completing the bankruptcy procedure, the company should be excluded from the Unified State Register of Legal Entities: “If all the property is sold, there is nothing more to look for and sell, there is no point in the fact that the company is listed as operating.” The position of the Supreme Court creates “the risk that any persons can now initiate various lawsuits in different courts and prevent the company from being excluded from the Unified State Register of Legal Entities, which is unlikely to be done in good faith,” says Ivan Stasiuk. Veronika Chelnokova is also afraid of abuses: “The imposition of interim measures as a way to “slow down” the bankruptcy procedure is not uncommon among unscrupulous participants in the process. For example, a citizen claims rights to the debtor’s property and seeks measures in the form of a ban on its sale. As a result, bankruptcy auctions are postponed, the procedure is extended, and it is almost impossible to cancel such measures.”

Partner in the dispute resolution and bankruptcy practice of BGP Litigation, Sergey Lisin, even considers “the decision of the Supreme Court to be erroneous, which will bring more negativity to the field of bankruptcy and will increase the already considerable time of bankruptcy proceedings by an extra 12-18 months due to interim measures of courts of general jurisdiction.” In addition, Mr. Lisin fears that government agencies, such as the Federal Tax Service and the FSSP, may perceive the position of the Supreme Court in such a way that their own decisions on interim measures “will be able to stop any bankruptcy proceedings.”

Anna Zanina