Can Creditor Status Protect Against Subsidiary Liability in Bankruptcy?

In bankruptcy proceedings, creditor status has traditionally been perceived as the procedural position of a party that suffered losses due to the debtor’s insolvency. The logic appears straightforward: if a person files creditor claims and is included in the register of creditors, they stand on the opposite side of the dispute and therefore should not simultaneously be considered a party whose actions caused the company’s bankruptcy.

However, recent Supreme Court practice demonstrates a far more complex legal framework.

The regulatory structure of subsidiary liability in bankruptcy proceedings consists of several interconnected elements. Article 619 of the Civil Code of Ukraine allows additional, or subsidiary, liability of another person to be established by law or contract alongside the liability of the principal debtor. In insolvency proceedings, the relevant special regulation is provided by the Bankruptcy Procedures Code of Ukraine.

Part 2 of Article 61 of the Bankruptcy Procedures Code authorizes a liquidator to bring claims against persons whose actions or omissions caused the debtor’s bankruptcy if the liquidation estate is insufficient to satisfy creditors’ claims.

At the same time, this mechanism does not imply automatic liability. It operates through a rebuttable presumption. Insufficient assets and indicators of insolvency may create grounds to raise the issue of liability, but they do not relieve the court of the obligation to establish a causal connection between the conduct of a particular individual and the consequences for the company.

For that reason, disputes of this nature involve not only the financial outcome of the company’s activities but also specific management decisions, the nature of influence over the debtor, and the scope of actual control.

In case No. 44/440-b, the Supreme Court drew attention to a circumstance that had not been properly assessed by lower courts. The individual whose subsidiary liability was under consideration did not hold the status of a director or shareholder of the company but had authority to approve the management of the company’s financial resources.

This issue extends beyond the specific dispute itself.

For many years, cases of this category focused primarily on formal management structures: directors, shareholders, or signatories. However, corporate reality has long functioned in a far more complex way than reflected in official records.

A company’s financial policy may be determined by beneficial owners, affiliated creditors, internal financial structures, or individuals who formally do not belong to management bodies but effectively approve asset transfers, influence lending policies, or participate in key decision-making processes. Under such circumstances, the absence of a person’s name in the state register does not automatically mean an absence of control.

Another important aspect of this case concerns creditor status itself. The lower courts considered the fact that the relevant individual had been included in the creditors’ register with significant monetary claims. In practice, this circumstance was treated as an argument against the application of subsidiary liability. The Court disagreed. Creditor status alone neither proves the absence of fault nor creates procedural immunity from claims brought by a liquidator. Inclusion in the creditors’ register does not eliminate the need to examine a person’s actual role in the debtor’s activities.

From a practical standpoint, this position reaches far beyond a single case. In modern corporate structures, creditors are often not external banks or independent investors. They may be affiliated entities, internal creditors, beneficial owners, or companies within the same corporate group. Formally, such entities hold creditor status. Yet they may simultaneously determine financial decisions, control cash flows, or exercise actual control over the business.

As a result, inclusion in the creditors’ register does not always represent a legally safe position. The Court also addressed an important procedural issue. Courts cannot rely solely on general conclusions regarding deterioration of a company’s financial condition or formal indicators of control. They must identify specific acts or omissions, establish a causal connection, and assess all evidence in its entirety. This is particularly relevant in light of Article 300 of the Commercial Procedural Code, which establishes the limits of cassation review. Without a proper assessment of evidence and arguments raised by the parties, it becomes impossible to verify whether substantive legal norms have been correctly applied.

Recent practice demonstrates a gradual shift in approaches to subsidiary liability disputes. Formal status is becoming increasingly less decisive. Instead, greater importance is placed on actual influence and proven causation between a person’s conduct and the debtor’s insolvency.