The Supreme Court will decide whether a company can pay for the treatment of its employees on the eve of bankruptcy

The Supreme Court of the Russian Federation (SC) will decide whether the company had the right, on the eve of bankruptcy, to transfer money to an employee for the treatment of a serious illness or whether this violates the rights of its creditors. The positions of the lower courts were divided – the first instance supported the employee, but the appeal and cassation ordered him to return the funds. The decision of the Supreme Court determines which path the practice will take. Lawyers say that an employer can provide free assistance to employees, but it is important to formalize it correctly and confirm the expenses. In the absence of documents, there are risks of both withdrawal of assets and punishment of a conscientious employee who is not aware of the company’s problems.

The Supreme Court will consider a case challenging a company’s transfer of money to an employee shortly before its bankruptcy. From June 2016 to January 2017, Dorstroyservis LLC (registered in the Republic of North Ossetia-Alania) transferred 1.83 million rubles. Felix Gutnov. He has worked for the company since May 2015, first as a project manager and then as chief engineer. At the end of July 2017, Mr. Gutnov resigned. Shortly before this, in May, insolvency proceedings were opened against Dorstroyservice, and in February 2019 the LLC was declared bankrupt. The bankruptcy trustee challenged the debtor’s pre-bankruptcy transactions, including the transfer of money to the employee.

The manager stated that the transactions were carried out during a period of suspicion (within a year before the initiation of bankruptcy proceedings), the basis for the transfer in the payment order was indicated as “accountable transfer of funds,” but there was no report or counter-execution, which violates the interests of creditors. The employee responded by saying that he did not know about the “financially difficult situation” of the company, and the money was provided to him “for the treatment of cancer” in Israel and St. Petersburg. In confirmation, Felix Gutnov brought copies of the epicrisis, histology results and the operation protocol from Russian and Israeli clinics.

The republic’s arbitration court sided with the employee, rejecting the manager’s demands. The court recognized that the disputed funds were used to treat a specific type of cancer, including a course of biochemistry, surgery and radiation therapy. The first instance also admitted that when filling out the “purpose of payment” column, the accountant mistakenly indicated the accountability of the funds instead of “material gratuitous assistance.”

But the appeal and cassation supported the plaintiff’s arguments, declared the transfer of funds invalid and recovered 1.83 million rubles from Mr. Gutnov. into the bankruptcy estate. The courts noted that the allocation of funds for treatment to the employee was not formalized, and Dorstroyservice already had unpaid debts. The courts also found that there was insufficient evidence of spending money specifically on treatment, and suggested that the funds could have been issued “for the purpose of cashing out.” The employee filed a complaint with the Supreme Court. The Economic Board will consider the case on December 7.

The practice of challenging such payments is quite widespread, says Zoya Galeeva, managing partner of the Center for Working with Troubled Assets, but this is the first time a dispute has appeared in the Economic College of the Supreme Court. Forward Legal lawyer Arpine Pirumyan believes that there are no grounds for collecting funds from the employee, since he provided evidence of illness and expenses. She points out that both the appeal’s assumption “about possible cashing out” and the conclusion about the employee’s dishonesty and his awareness of the company’s financial problems are unconfirmed.

Sergey Uchitel, partner at the Pen & Paper Bar Association, explains that the employer has the right to allocate funds to support employees; the list of grounds “can be established in an employment or collective agreement, or other local regulatory act of the enterprise.”

The law does not oblige the procedure for paying financial assistance, clarifies Zoya Galeeva. But in order to avoid claims, it is important to correctly formalize assistance from the employer, Mr. Uchitel emphasizes: there must be an application from the employee, an order from the manager for payment, an indication in the payment slip for financial assistance, payment of personal income tax on amounts over 4 thousand rubles, documents on the expenditure of funds. The lack of documents gave the courts grounds to invalidate the payment, the lawyer believes. Ms. Galeeva adds that the employee could not “influence the registration and accounting of the assistance allocated to him,” but had to confirm in court not just the diagnosis and the need for the operation, but precisely the payment for treatment with this money. In the absence of evidence, the manager’s demands for a refund are justified, she believes.

“This dispute is a classic situation when the court is faced with the choice of being guided by the letter or spirit of the law, that is, not limiting itself to checking formal compliance with the norm, but proceeding from the goals of legal regulation,” says Sergei Uchitel. Arpine Pirumyan notes that the Supreme Court recently recognized the company’s right to donate money to the structures of the Russian Orthodox Church even on the eve of bankruptcy (see Kommersant on October 3). In her opinion, a similar approach can be applied to financial assistance to an employee if expenses for treatment are confirmed.

At the same time, it is impossible to prohibit challenging such payments by default, clarifies the head of the council of the Union of Autonomous Institution “National Center for Restructuring and Bankruptcy” Valeria Gerasimenko, “otherwise this will make it possible to disguise the withdrawal of assets through the provision of assistance.” She suggests also taking into account the position of the employee who received the money, since the company’s top managers should be aware of its financial difficulties.

Anna Zanina