Supreme Court of Russia pointed out the mistakes of courts in the case of debt within a group of companies

The Supreme Court of the Russian Federation resolved a dispute in the bankruptcy case of a company, one of creditors of which expressed his disagreement with the inclusion of a debt to a subsidiary in current payments.  This made it possible to satisfy the claims on a priority basis, bypassing the register of creditors’ claims.  Judges of the lower instances expressed different opinions on the situation, but the Supreme Court of the Russian Federation demanded that the case should be reconsidered.

The question concerned an agreement on logistics services that the debtor originally provided, and shortly before his bankruptcy, he entered into a mirror contract for the same services with his subsidiary.

As a result, the legal entity, which had accepted the execution, paid money to the bankrupt company, which, in turn, transferred them to the account of the actual performer.

One of the debtor's creditors decided to challenge such a scheme, demanding that the obligations to the subsidiary should be reduced in the register. The court of first instance rejected his claim, citing the fact that, as there was no such compensatory financing, the agreement concluded between the parties did not pursue such a goal. The court of appeal cancelled this decision, indicating that the debtor abused the right by transferring its activities to a third party. The district court supported the position of the first instance, noting that the debtor could not simply terminate the contract, as it would cost him penalties, so an alternative solution was found.

The Supreme Court of the Russian Federation cancelled all three decisions and called on the judges to look into the circumstances of the dispute in detail. In particular, this concerned the business model that had developed in the group, the relationship of companies among themselves and the movement of financial flows in the structure (decision No. 305-ES21-14470 (1, 2) dated February 10, 2022 in case № A40-101073 / 2019).