101 ways to lose property

In 2017 and 2018, creditors of individuals and legal entities received a number of tools - due to changes in legislation or judicial practice - that allow them to more effectively receive payment of their debt, at least partially.

“Sell” property for a symbolic price (= donate) to mom, pledge assets to dad’s company, take money “on loans” or “on account” and not return it - with a probability of 99.9% it will be challenged or a person will be punished for such actions .    

1. Subsidiary liability and recovery of damages: who was affected and how to respond

In 2017, large-scale amendments were made to the bankruptcy law regarding the liability of the “controlling debtor of a person” (abbreviated as CDL). CDL is the one who actually managed the debtor company for 3 years before the appearance of signs of the inability of the legal entity to pay off debts. CDL is, of course, both the head and the management company, and the participant (shareholder) with a share of 50% or more, and the actual head, who acted, for example, by proxy and did not formally hold any position in the company.

After the reform, the rules on subsidiary liability of business management began to be more actively used. Former managers and business owners are liable for the bankruptcy of the debtor, for the untimely commencement of bankruptcy proceedings (subsidiary liability) or for causing losses to their company (fly-by-night work, unreasonable transactions, etc.). Such persons actually pay the debts of the company with their personal property.

Moreover, the KDL may also turn out to be employees whom the actual owner, who does not want to “shine” in business, “asked” to become directors; and shareholders - members of the board of directors who did not make management decisions; and executives who did their job in good faith sometime between the “rule period” of unscrupulous individuals who stole money from the business.

By default, such persons receive close attention from creditors, the arbitration manager and the court, and their property becomes that tablecloth-self-assembly that should saturate everyone. Failure to appear in court in a case of bringing to subsidiary liability or recovery of losses and not giving an explanation, not providing evidence of your non-involvement in bankruptcy / losses is tantamount to admitting the facts of which you are accused, and is guaranteed to entail monetary penalties by court decision.

What are the consequences of collecting money from the CDL by the court:

• Until July 1, 2017, problems with such penalties in the bankruptcy procedure were resolved relatively simply - the head's receivables were sold for amounts hundreds and thousands of times less than the debt (this is how the debt of the director of the Sunrise Tour company in 1 billion rubles was sold at auction for 1 million rubles).

• According to applications filed after this date, creditors have the right to demand the issuance of writ of execution against the debtor's leaders, whom the court brought to subsidiary liability.

• And both before July 1, 2017, and after, the creditors had and still have the right, instead of receiving money from the sale of the director’s “receivables” from the auction, to demand from the arbitration manager, including through the court, enforcement through bailiffs or bankruptcy of the offending manager.

All this is fraught for the director:

• personal bankruptcy as an individual with the possibility of challenging within the framework of this bankruptcy transactions for the withdrawal of personal assets by the director to affiliated persons or to formally not affiliated, but at a low price or without payment, collection of debts from all debtors of an individual;

• even after bankruptcy, the part of the debt not paid to creditors is not written off with the completion of the procedure and remains “hanging” on the individual;

• inability to manage companies for 3 years, insolvency for 5 years and other general consequences of personal bankruptcy.

For a manager without personal assets and an official source of income, such penalties are not a problem - he will not pay them. And for the rest of the solution to the problem are amicable agreements with creditors.

So, in one of the cases on the recovery of losses from the former head in the form of penalties and a fine for non-payment of taxes, the court satisfied the claim and ordered the bankrupt to pay an amount of approximately 10% of the entire register of claims. We managed to convince the meeting of creditors, and then the court, that debt collection through bailiffs or the procedure for the personal bankruptcy of the head will be longer and may not even lead to payment of the amount of the collected debt to creditors. Instead, some creditors agreed to accept the technique as compensation, while others agreed to installment payments for their part of the amount awarded.

2. Bankruptcy of an individual: the withdrawal of assets is disputed, the property is returned

It is an illusion to think of the personal bankruptcy procedure as a way to a) withdraw assets and evade settlements with creditors, b) write off absolutely all your debts. Tracking the practice of the Supreme Court of the Russian Federation in such cases, we note that more and more often the court discloses various asset transfer schemes in response to creditors' claims.

For example, in one case, an alimony agreement was challenged, under which almost all of the bankrupt's income was paid in alimony. The court considered such an agreement unreasonable and unfair, the debtor could not find a rationale for paying children an amount many times higher than the subsistence minimum.

Transferring assets to relatives has long been considered a fatal mistake. Legal assumptions (presumptions) are applied to transactions with related parties, which must be refuted by the recipient of the property. It is assumed that related parties act, realizing the unfair purpose of the transaction - infringement of the rights of creditors.

And the news of this year was a change in the approach to protecting the only housing of the debtor. According to the law, the only housing of the debtor, if it is not in a mortgage, is not foreclosed. The Supreme Court dealt with a situation where housing became the only one due to the actions of the debtor himself: before there was a lot of real estate, all of it had gone somewhere (sold, donated, redistributed), creditors were left with a nose, and the debtor was in a single housing. According to the court, these actions were committed to the detriment of the interests of creditors and the debtor should be responsible for this. The court will not kick him out into the street, but the question of whether the remaining housing is too spacious for the debtor will be decided. If it is, then it can be replaced with cheaper housing, and the difference is payable to creditors.

In general, transactions by which people try to save their property can only result in property losses for them if the decision on such transactions is made in haste and without assessing the possible risks.

3. Loans of individuals (founders / directors) issued to their organization and not returned by it may never be returned

We are talking about cases where the owners of the firm conduct business with it personally or through their other firms.

The simplest case - the participant gave money to his company. For any purpose: to close cash gaps, purchase the necessary equipment, develop (increase turnover) business, or generally “just in case” without a visible goal. At the same time, the money was indeed transferred, the goals were achieved. But a participant (shareholder) can return his money only without bankruptcy. If the firm has fallen into bankruptcy and it has creditors other than the owner-lender, the participant's claims will not be included in the register of creditors' claims.

The courts proceed from the fact that the participant must finance his business anyway, which means that the transfer of money is not an ordinary civil law transaction, but the fulfillment of the corporate obligation of the participant (shareholder). And the owner can receive a refund of his money only from the property remaining after settlements with all other creditors upon completion of the bankruptcy procedure.

This judicial approach is called “subordination of claims”.

However, in addition to loans, this approach is extended to other types of claims of owners to their business. Delivery of goods, claims from surety agreements, etc. Everything is subordinated.

If a participant (shareholder) transferred money or property to his company not personally, but through his other companies or companies that belong to his relatives, the belonging of all participants in the relationship to the same group of companies is all a direct way to subordination of requirements.

At the same time, as a rule, the bankrupt's property is not enough to satisfy the requirements of the corporation's participants (not included in the register of creditors' claims). Otherwise, he would not have been declared bankrupt.

Therefore, carefully monitor the financial condition of the company in order to understand in time how much you can say goodbye to.

4. Organization loans issued to a director / member and not returned by them: tax and property consequences

We are talking about cases when the company issued a loan to a director, other employee or business owner. If the loans are not repaid, the loan amounts may be recovered in the course of bankruptcy. With interest and penalties for late return.

At the same time, money received by employees under the report, on the targeted spending of which there are no documents, can also be recovered.

Another case is when there are loans, but there is no bankruptcy of the company. But not everything is simple here either. Such situations may have tax implications for both the firm and its borrower.

Option 1. If the official salary is small, but the employee is regularly given loans. None of the loans is returned by the employee, and the company does not require. Tax authorities may regard such loans as payment of wages.and fees or premiums issued as a loan to avoid paying personal income tax and insurance premiums. The consequence is the additional charge of this personal income tax and insurance premiums. It makes no sense to remind about fines and penalties for violation of tax laws.

Option 2. The company has money to issue loans, and according to the balance sheet, there is a profit. However, dividends are not paid to the participant, and loans are issued. Just as in the first case, neither the borrower nor the lender is eager to fulfill the loan agreements and return the money to the firm.

Such loans can be reclassified as dividend payments, which entails additional personal income tax, penalties and fines.

Variant 3. Loans have been issued that no one has repaid. The statute of limitations has expired and the company has incurred losses. If such losses are accepted for the purpose of reducing corporate income tax, then during the audit, the tax authorities can recalculate the tax and increase it by the amount of the “written off” receivables for loans. The consequence is additional accrual of income tax, penalties and fines.

In general, the company's money does not belong to the owners of such a company and cannot be withdrawn from the company free of charge and without consequences.

5. Withdrawal of money from an organization under agreements in favor of affiliated persons: tax and property consequences

We are not talking about transactions for the withdrawal of property, they are contested on bankruptcy and general civil grounds. This is a long established practice.

But a new trend is the approach of the tax authorities to the payment of money under lease agreements, contracts, and the provision of services.

For example, a firm leases property from its director or member (shareholder). If for this the company sold its property to this director or participant, then such transactions have long been disputed as harmful both in bankruptcy and without bankruptcy on the basis of Art. 10 of the Civil Code of the Russian Federation.

If the recipient of money is on a special regime (simplification, UTII), and there is no unconditional evidence of the fulfillment of the contract, then the tax authorities may not accept the costs of such transactions and charge additional corporate income tax, penalties, fines.

Similarly, when the director first received a salary, and then quit, registered as an individual entrepreneur and began to receive payments as a manager of a legal entity. Here, not only income tax can be charged additionally, payments to the manager can be regarded as an illegal optimization scheme, the individual entrepreneur actually does not conduct business, but receives wages. Then additional personal income tax, insurance premiums, penalties, fines will be charged.

However, interest in payments is not limited to payments to directors or members (shareholders). In bankruptcy, payments to other affiliated persons are also studied: companies that are members of a group of companies, relatives of managers, etc.

In the course of bankruptcy, tax authorities and other creditors will prove that payments to affiliates were made without reasonable justification, documents were signed without the actual execution of contracts, which means that such transactions are subject to challenge, money - to be returned to the bankrupt's accounts.

In such a situation, creditors have a choice: to challenge the transactions and collect money from the recipients of payments, or to hold the company's management to subsidiary liability for the removal of assets.

In general, the judges themselves admit that all bankruptcy procedures have become more complicated, judicial practice is constantly changing. What was normal yesterday may become an additional risk tomorrow. It makes no sense to have a tax lawyer or a bankrupt lawyer on staff, but finding such a specialist on the side and periodically consulting with him will not hurt anyone.

Author

Denis Vasilievich Smotrin

Head of Bankruptcy, Taxes, Corporate Law Practice