When does a company's debt become the personal debt of its leader

To date, the legal transfer of the obligation to pay the debt of the company to its leader or founder is provided by the provisions of Art. 61 of the Code of Ukraine on Bankruptcy Procedures (KUPB). An example of actions that are described by the courts as "causing bankruptcy" is the adoption and implementation of decisions on the conclusion of contracts on openly unfavorable terms or those that are directed against the interests of the debtor.

In general, among the dubious actions are additionally distinguished and the following:

• making key business decisions in violation of the principles of good faith and reasonableness, including coordination, conclusion or approval of transactions on knowingly unfavorable terms or with persons knowingly unable to fulfill their obligations ("one-day companies", etc.);
• providing instructions on the commission of clearly unprofitable transactions;
• appointing to management positions of persons whose results of activity clearly do not correspond to the interests of the legal entity;
• creating and maintenancing of such a management system of the debtor, which is aimed at the systematic receipt of benefits by a third party to the detriment of the debtor and his creditors;
• using of document flow, which does not reflect the real business transactions;
• using and disposing of the debtor's property as personal property, neglecting the interests of creditors;
• committing other legal actions that do not comply with the principle of good faith in commercial (business) practice, etc.

Similar conclusions on the range of circumstances (the list of which is not exhaustive) should be taken into account when considering the application of subsidiary liability in the bankruptcy case formed in the decisions of the Commercial Court of Cassation as part of the Supreme Court from 16.06.2020 in the case №910/21232/16 dd 30.01.2018 in case №923/862/15 dd 05.02.2019 in case №923/1432/15 dd 10.03.2020 in case № 902/318/16 dd 01.10.2020 in case № 914/3120/15.

The amount that could potentially be recovered from subsidiaries persons is the difference between the amount of accounts payable recognized by the court in the bankruptcy proceedings and the proceeds from the sale of the debtor's property in the liquidation proceedings. That is, when businessmen’s, owners, leaders, managers, as well as other responsible persons increasing debts and did not carry out about its reimbursements – the , liability can reach 100% of the company's debts.

After all, in contrast to the Criminal Code of Ukraine and the Code of Ukraine on Administrative Offenses, in the provisions of which the legislator clearly defined the disposition of criminal and administrative violations to bring to bankruptcy and fictitious bankruptcy (Part 2 of Art. 61 of the Code of Civil Procedure) has its own disposition (content) of the offense: “Bankruptcy of the debtor through the fault of its founders or other persons who have the right to give mandatory instructions to the debtor or have the opportunity to otherwise determine its actions persons or other persons in case of insufficiency of the debtor's property… ».

At the same time, the jurisprudence continues to place some safeguards in this direction. (for example, case № 915/1624/16 dd 22 April 2021 https://reyestr.court.gov.ua/Review/97451198).

The Supreme Court noted that the determining factor for the application of subsidiary liability is the proof in accordance with Part 2 of Art. 61 of the Code of Administrative Offenses (dd 21.10.2019) and taking into account the provisions of Articles 74, 76, 77 of the Code of Civil Procedure of Ukraine - the causal link between the guilty actions / inaction of the subject of liability and the occurrence of negative consequences for the debtor (insolvency of the debtor and lack of assets of the debtor to meet the claims recognized in the bankruptcy proceedings of creditors) is the responsibility of the liquidator.

Article 61 of the Code of Civil Procedure establishes a legal presumption of subsidiary liability of persons involved in it, the components of which are the insufficiency of the liquidation estate to satisfy creditors' claims and the presence of signs of bringing the debtor to bankruptcy. However, this presumption is rebuttable, as it provides the possibility for these persons to prove their innocence in the bankruptcy of the debtor and avoid liability. Rebutting this presumption, the person prosecuted has the right to prove his good faith. Confirming, in particular, the paid acquisition of the debtor's assets on the terms on which in comparable circumstances are usually concluded similar transactions and proving that transactions with his participation (influence) bring income , reflected in accordance with their actual economic content, and the benefit received by the debtor due to reasonable economic factors.

In addition, the same resolution states that the report on the analysis results of the financial and economic condition of the debtor prepared in accordance with the Guidelines for identifying signs of insolvency is not unconditional proof of bankruptcy of the debtor. Its presence (or deficiencies) is not a determining criterion for bringing the perpetrators to subsidiary liability, as the establishment of grounds for its imposition belongs to the discretion of the court, which is carried out by the court on the basis of a joint assessment of all available evidence, including this report, which is one of proof means.

Therefore, the protection of the leaders rights should be as effective as the protection of the rights of creditors.