Liability extended:

Liability extended:

In accordance with the Moscow Arbitration court ruling from October 27, 2020 family members of the debtor controlling person, including minor children, may be held accountable for the debts of the company.

The court has imposed subsidiary liability for the debts of the company onto the children of the ex-director and owner of Alliance LLC, which assets were partially withdrawn via deeds of gift to the relatives. It has stated in the trend-setting ruling that the children, even minor ones, might be held liable for jointly caused harm pursuant to Art. 1080 of the Civil Code of the Russian Federation. As per ruling, "despite the fact that the grounds for creditors' claims against controlling persons (creating the necessary reasons for bankruptcy) and the relatives who acquired their property (making the execution impossible at the expense of the controlling persons' property) do not coincide, the creditors' claims against them pursue one goal - to compensate the harm(Art. 15, Civil Code of the Russian Federation), therefore the obligations of the controlling persons and the aforementioned relatives are joint and several."

The ruling will be soon appealed in the Court of Appeal, however it’s already clear that the position of the Russian courts is aimed at extending the subsidiary liability of the persons controlling the debtor and that such liability  gradually becomes the main tool for creditors’ claims satisfaction.

Moscow Arbitration Court, File  № А40-131425/16-30-203Б https://kad.arbitr.ru/Card/3a958c3e-79d9-4ba8-af8f-2666ecc419db