Legal Services For Attracting And Protecting Against Subsidiary Liability

Subsidiary liability of controlling persons – in what cases can a person be subjected to such a measure?

Subsidiary liability is a measure of civil liability applicable to a person bearing additional liability to the liability of another person.

A company may end up in bankruptcy proceedings for several reasons, for example, due to unprofessional actions of management or unfair failure to fulfill obligations to counterparties.

Often, a company’s inability to fulfill its obligations is due to changes in market conditions, a worsening economic situation, or other external factors. In some cases, the deterioration of the financial and economic condition of the company is caused by the actions of the company’s management itself.

In such cases, the law imposes certain duties and responsibilities on those who make decisions that are significant to the company.

Subsidiary responsibility of the head of the organization – how do legal mechanisms work?

The subsidiary liability of the head of the organization (head, founder and other person whose orders are binding on the corporation) is financial liability in the amount equal to the outstanding debt of the business entity to its creditors. At the same time, the guilt of these persons in allowing the actions that led to the bankruptcy of the company is assumed.

Subsidiary liability for the company’s debts may arise as a result of:

violation by the head of the obligation to timely apply to the arbitration court with an application for declaring the company bankrupt;
commission of actions of controlling persons in the presence of a conflict between his personal interests and the interests of a legal entity;
retention and evasion after the termination of their powers from transferring to a legal entity documents relating to circumstances that entailed adverse consequences for a legal entity;
committing actions (inaction) that do not meet the interests of the legal entity, which arose as a result of the inefficient activities of the company.

In some cases, span bringing the responsible person to subsidiary liability may occur in the presence of only a formal violation of the requirements of the law, which can be recognized by a sufficient court even in the absence of direct harm to the company.

How to avoid vicarious liability?

Since the analysis of the presence or absence of grounds for bringing to subsidiary liability will analyze the specific actions of the persons controlling the debtor, in order to exclude such liability, it is necessary to avoid transactions aimed at withdrawing the company’s assets in anticipation of filing a bankruptcy petition with the court. It is also not recommended to enter into transactions that go beyond the normal business activities of the company, as well as otherwise violate financial discipline. Otherwise, additional risks arise for the emergence of other grounds for bringing to subsidiary liability.

If, nevertheless, it happened that the arbitration manager or bankruptcy creditor filed a claim for subsidiary liability, then it is necessary to use the services of professional lawyers who specialize in bankruptcy law and have the necessary competence and judicial practice in this area. Such cases require a detailed analysis of the results of the economic activity of the enterprise and serious legal support.

LEGAL RIGHT lawyers have extensive experience in attracting and protecting the interests of former business leaders and owners from claims for bringing to subsidiary liability for the obligations of bankrupt companies.

Projects

The dispute on the claims of the bankruptcy trustee of the energy company OJSC OlaInterCom, legal support of which is provided by LEGAL RIGHT, on bringing the former head to subsidiary liability was resolved positively. Based on the results of the debtor’s settlements with creditors, the amount of subsidiary liability may amount to more than 300 million rubles.
LEGAL RIGHT has successfully completed the representation of the interests of the former head of the construction company TSS LLC in the case of his bringing the company’s creditor to subsidiary liability. Legal analysis and development by lawyers of a legal position on the case prompted the creditor, who applied to the court, to abandon his claims in full.
Successful legal support for the former head of the construction company Kontraktstroy LLC on bringing the bankruptcy trustee to subsidiary liability for the company’s obligations in the amount of 13.6 million rubles. The courts of the first instance and the court of appeal denied the bankruptcy trustee’s claims against the LEGAL RIGHT client.