The Supreme Court will decide which debts have priority in a citizen’s bankruptcy

The Supreme Court will decide in which order to repay debts arising from the subsidiary liability of the owner of a bankrupt company if he himself finds himself in insolvency proceedings. The problem arises if the personal bankruptcy began before the company bankruptcy. In this situation, the claims for the subsidy will always formally be current, that is, they will be repaid with priority over all registered creditors, which greatly reduces the latter’s chances of payment. Lower courts refused to give such priority, considering that it violates the balance of interests and rights of creditors in personal bankruptcy.

The Supreme Court will have to decide on the priority of creditors from the bankruptcy of a company over creditors from the bankruptcy of a citizen – the owner of this company.

In July 2016, Yuri Rubezhov established and headed JSC “Territorial Grid Organization “Nikola Tesla”” with an authorized capital of 50 million rubles, however, he never contributed these funds. In November 2016, insolvency proceedings were initiated against Mr. Rubezhov, and in 2018, a separate bankruptcy process for his JSC began.

As part of the latter, in 2020, the court held the businessman, as the head and owner of the debtor company, vicariously liable for failure to file a bankruptcy petition and failure to transfer documents to the bankruptcy trustee.

These violations were committed in January and September 2018, respectively. The amount of liability amounted to 21.5 million rubles – debts for this amount remained outstanding during the bankruptcy of Nikola Tesla.

Completing the bankruptcy of the company, due to the lack of other assets, the court transferred directly to the creditors of the joint-stock company the right to collect from Yuriy Rubezhov the debt awarded in the manner of subsidiary liability.

Each creditor received the right to the extent of its claims. Among them, in addition to the company’s counterparties and tax authorities, there were also arbitration managers who handled the bankruptcy of Nikola Tesla, and Dmitry Maslennikov, who provided them with legal services. In particular, the lawyer represented the interests of the manager in some court hearings; the amount of the debt was 610 thousand rubles. and related to the current requirements in the JSC insolvency case.

After the bankruptcy of the company was completed, Mr. Maslennikov filed claims for 610 thousand rubles. in the bankruptcy case of Yuri Rubezhov and asked to include them in current payments.

These are claims that arise after the initiation of bankruptcy proceedings against the debtor; they are paid off before the registered claims of creditors. But the financial manager refused to recognize the citizen’s debts to Dmitry Maslennikov as current, believing that they should be included in the register along with other creditors.

The disagreement went to the arbitration court, which supported the manager. Although formally the claims of Dmitry Maslennikov arose after the initiation of the bankruptcy case of Yuri Rubezhov, the court refused to recognize them as current and give them priority, considering that this “contradicts the goals of legal regulation” of the institution of insolvency and will upset the balance of interests of the participants in the bankruptcy case.

The classification of this debt as current “worsens the situation” of other creditors “solely due to the dishonest behavior” of Mr. Rubezhov, who was held vicariously liable for the debts of his company, the decision says. In addition, Mr. Maslennikov contacted the manager after a significant period of time (more than a year) after the rights of claim under the subsidy were transferred to him. The appeal and cassation agreed with this decision.

Dmitry Maslennikov filed a complaint with the Supreme Court, insisting on the priority of his demands and classifying them as current payments. In his opinion, the lower courts did not take into account the direct regulation of the bankruptcy law.

The case was transferred to the Economic Collegium of the Supreme Court, and hearings are scheduled for April 25.

Situations when both a company and its manager or owner go bankrupt are common in practice, lawyers say. But more often, a legal entity first goes bankrupt, its controlling persons are brought to subsidiary liability, and only after that bankruptcy processes for these citizens begin, explains Pavel Novikov, partner at the law firm Melling, Voitishkin and Partners. In this case, the lawyer explains, the claims of the creditors from subsidiary liability cannot become current.

But if a citizen goes bankrupt first, and only then his company, “this allows a number of debts from the bankruptcy of a legal entity to be repaid in priority (current) order before the claims of the registered creditors of the director or owner as part of his personal bankruptcy,” Mr. Novikov clarifies. He says that here “the literal text of the law and the interests of different categories of creditors in the framework of bankruptcies of citizens come into conflict.”

Lawyers disagree on whether creditor claims arising in a corporate bankruptcy should be given priority in the personal bankruptcy of a company owner or executive. “Since the obligation arose after the initiation of a bankruptcy case for an individual, it must be recognized as current,” says Zoya Galeeva, managing partner of the Center for Working with Troubled Assets. “Recognizing the creditor’s claims as current cannot violate the rights of other creditors, since such a regime of claims complies with the law. Especially considering the fact that Yuri Rubezhov’s violations, which became the basis for subsidiary liability, were committed after the start of his bankruptcy.”

“Courts are afraid that if, in such cases, claims arising within each subsequent bankruptcy are classified as current, this could create artificial bankruptcy procedures in a cascade,” Pavel Novikov explains the logic of lower authorities. He himself believes that Dmitry Maslennikov’s demands “fully comply with the law” and are current, although he recognizes this approach as “unfair towards registered creditors in a citizen’s bankruptcy.”

David Kononov, head of the bankruptcy practice of Lemchik, Krupsky and Partners, takes the opposite position. Firstly, the lawyer admits that “Dmitry Maslennikov’s claims arose due to specific procedural and temporary circumstances that could have been made specifically to circumvent the spirit of the law and abuse the right.” The lawyer sees “commercial interest” in Mr. Maslennikov’s actions, since current requirements have a higher priority when distributing the bankruptcy estate.” In his opinion, the debt from subsidiary liability should, in principle, belong “to the third stage of the register,” and it does not matter on what the creditor’s original claim was based.

Anna Zanina, Jan Nazarenko