Supreme Court of Russia resolved the issue of downgrading the claims of an affiliated creditor

The Economic Board considered the complaint of the debtor and the tax authority against the decisions of the courts of appeal and the district, by which the claims of the creditor affiliated with the debtor were included in the register of creditors’ claims.  The applicants considered that the debt should be subordinated, as the judge at first instance considered.  The Supreme Court of Russia put an end to the matter with the polarity of positions of the courts.

As part of the debtor's insolvency, the bankruptcy trustee of the creditor filed a claim to include the restorative debt in the register of creditors’ claims. It was formed as a result of the invalidation of the transfer of funds by the creditor in favor of the debtor with the recognition of the operation as compensatory financing.

The court of first instance, taking into account the affiliation of parties and their subordination to one beneficiary, satisfied the claim, included the debt in the register, having subordinated it.

However, this position did not survive further challenge of the judicial act.

The appeal and the district courts considered that subordination in this case could not be applied, since it violated the rights and legitimate interests of creditors of a bankrupt creditor in insolvency proceedings.

The issue was referred to the Economic Board, which indicated the following. In the legal relations that had developed between the parties, the creditor sent funds to the debtor (to the detriment of the interests of his creditors), without having any grounds for this, which can usually be observed between two companies. The fact that the creditor preferred an affiliated company to the detriment of the interests of third parties did not affect the qualification of the debtor's financing as compensatory, and therefore such a claim should have been subordinated in the register.

The Supreme Court of the Russian Federation canceled the decisions of the court of appeal and the district court and upheld the act of the court of first instance (decision No. 308-ES18-3917 (3, 4) dated January 27, 2022 in case № A20-3223 / 2017).