Protecting the clients' interests in Russia and abroad
We are proud to offer a full range of legal services in Russia’s corporate bankruptcy and subsidiary liability. With many years of experience and strong ties with our partner law firms in Moscow, we will ensure that your interests are duly represented and protected in Russia and abroad.
BANKRUPTCY AND SUBSIDIARY LIABILITY IN RUSSIA
- Main Features of Bankruptcy in Russia
- Subsidiary Liability
- Criminal Prosecution
- Why Leaving Russia Is Not Enough?
- Why Do You Need to Take Part in Bankruptcy Proceedings in Russia?
- How Can We Help?
Bankruptcy in Russia
Customized comprehensive strategies for protecting clients' interests in bankruptcy in Russia
Assessment of possible threats, implementation of measures to reduce risks in Russia and abroad
Bankruptcy of Banks
Many years of experience in protecting the interests of clients in bankruptcy of banks in Russia
Strategy consulting in bankruptcy and subsidiary liability proceedings in the Russian Federation
Main Features of Bankruptcy in Russia
The bankruptcy of a legal entity in any country is a complex and lengthy process. However, in comparison with other countries, bankruptcy in the Russian Federation has its characteristic features. The two most important of them are:
- subsidiary liability
- criminal prosecution
Bankruptcy and subsidiary liability too often go side by side in Russia. For example, if the legal entity had significant assets at the bankruptcy declaration, subsidiary liability claims would surely arise. Moreover, subsidiary liability often threatens not only major shareholders but also top managers of the company.
Subsidiary liability claims against controlling shareholders and top managers often mean confiscating all their property and savings in Russia and other jurisdictions at the request of the Russian authorities.
Bankruptcy and subsidiary liability have become a creepy nightmare for major shareholders and top managers of bankrupt organizations in Russia. One of the instruments of pressure on them is criminal prosecution. As a rule, criminal cases against persons involved in bankruptcy are initiated immediately after the declaration of bankruptcy. Moreover, the larger the size of the bankrupt company’s assets, the higher the likelihood of bringing the controlling persons to subsidiary and criminal liability.
The reason for this is quite apparent. The organizers of the prosecution expect that those under investigation should be more accommodating and inclined to cooperate with the investigating authorities in the hope of mitigating their sentences. Therefore, the persons involved in high-profile bankruptcy cases are arrested and placed in a pre-trial detention center, where investigators can pressure them.
No wonder that principal shareholders and top managers try to leave the territory of the Russian Federation before their company declares bankruptcy. And who can blame them for this if the number of acquittals in criminal cases in Russia is only about 0.2%?
Why Leaving Russia Is Not Enough?
However, fleeing to another country cannot be a long-term solution. As bankruptcy and criminal proceedings unfold in Russia, the risks of legal actions against former controlling persons increase in the jurisdictions where they or their assets are. And if these persons did not try to defend their position in court in Russia, then foreign courts could regard this as a tacit admission of guilt.
Thus, even if you think that the whole process is unfair and biased in Russia, you cannot afford to ignore it. For instance, let’s suppose the legal authorities of the country where you reside receive a request from the Russian authorities to freeze all your assets. For sure, you will try to fight this request in the local court. However, unless you have a well-substantiated case and can demonstrate that the whole process in Russia was biased and unfair to you, you have little chance to succeed.
The court can take your side only if you have solid documentary evidence of multiple cases of abuse of power, violations of laws, procedures, and other significant inconsistencies during the Russian bankruptcy process. And the only way you can collect all this critical evidence is by taking part in the bankruptcy in Russia and getting access to the Russian court materials.
Why Do You Need to Take Part in Bankruptcy Proceedings in Russia?
Suppose you left Russia before the bankruptcy and subsidiary liability cases arise. Then you still need to take part in the litigation or at least monitor bankruptcy in Russia for the following reasons:
-To keep abreast of what is happening there.
-To try to defend what is defendable.
-To dispute the amount of the subsidiary liability and its ground. Both will be very important in protecting your interests in court in Russia and abroad.
-To collect evidence that you did not plead guilty to what happened to your bank or company and tried to defend your interests in the Russian court. Then, in foreign jurisdictions, the plaintiff will not be able to say that you fled from justice, did not dispute the charges against you in any way, and thus actually admitted your guilt.
-So that later you can file a complaint on your behalf with the European Court of Human Rights (ECHR) . And for this, you need to go through all the instances of Russian legal proceedings without exception.
-To be able to document all violations of the law and due process in your case. It is crucial to have these materials when protecting your interests in Russia and other jurisdictions.
-To get access to the materials of the process, which will allow you to:
- receive timely information on the progress of the process;
- better understand and in some cases even anticipate specific actions of the other party in the process;
- plan your following activities depending on this.
How Can We Help?
Bankruptcy and subsidiary liability in Russia do not have to be a personal disaster, even if it caught you by surprise. It all depends on how soon you start building your defense. Contact us, and we will let you know how we can develop and implement comprehensive protection of your interests.
QUESTIONS & ANSWERS
Corporate bankruptcy in Russia has its specific features. On the formal side, one of the peculiar features of the law on bankruptcy and insolvency is a subsidiary liability. On the practical side, it is noteworthy that the bankruptcy of companies with substantial assets often involves criminal lawsuits against their controlling shareholders.
Subsidiary liability is the personal liability of those controlling shareholders of a company, which actions or inactions led to the company’s bankruptcy, as established by the court.
Subsidiary liability often arises when (1) the company is under bankruptcy, and (2) it has significant assets, or (3) the company’s controlling shareholders have significant assets.
You often encounter criminal investigations in corporate bankruptcies when the company under bankruptcy or its controlling shareholders have significant assets.
Under the Federal Law on insolvency (bankruptcy) of the Russian Federation #127 of 2002, the corporate bankruptcy should generally be over in 3 years. However, it all depends on how big the company is, its assets, etc. It’s not unusual when the court repeatedly extends this term. For instance, big banks’ bankruptcy could take 5-8 years.