Judicial Board on economic disputes of the Supreme Court of the Russian Federation (further – Judicial Board of the SC of the Russian Federation) on 21 April 2016 issued an interesting definition regarding vicarious liability in bankruptcy (case No. 302-ES14-1472).
Brief facts of the case: in the framework of bankruptcy proceedings, the bankruptcy Trustee filed a statement on bringing to the vicarious liability of the former head, as well as limited liability companies, which was the founder of the debtor.
Definitions of first and appeal instances the statement of the plaintiff was satisfied. The court of cassation instance has sent the case on new consideration to court of first instance, where the plaintiff had been granted in part the attraction of the debtor to subsidiary responsibility and involve the civil society as the sole founder – denied.
Russian Federal tax service filed an appeal in the Supreme Court and requested to annul these acts in terms of failure of attracting companies to vicarious liability.
Judicial Board of the SC of the Russian Federation quashed the lower courts’ decisions in terms of failure to meet the requirements of the society – the only party, stating that the Civil Code of the Russian Federation (hereinafter – the Civil Code) and Federal laws enshrine the provision on vicarious liability of the party who has the right to give obligatory for the debtor’s instructions or otherwise has the power to govern the organization’s actions, in a situation when insolvency (bankruptcy) of the economic society caused by such party’s and legal entity’s property is insufficient for settlements with creditors.
The court emphasized that imposing vicarious liability requires the existence of a causal link between the use of their rights in relation to the controlled entity and the set of legally relevant actions committed by the controlled organization. Subsidiary liability of a participant may occur only when the debtor is just not harmed, and he became bankrupt.
The founder of the company was not provided with evidence of the reasonableness of its actions to seize proceeds and assets used for production purposes, which aggravated the financial situation of the controlled companies so that bankruptcy was inevitable.
Business is directed on new consideration.