Subsidiary Liability for Obligations of Inactive Legal Entities: Key Findings of a New Supreme Court Review

The regulation of corporate relations continues to rapidly evolve, and courts are increasingly focusing on cases where a legal entity effectively ceases operations without paying off its creditors. The problem is compounded by the fact that deleting a company from the Unified State Register of Legal Entities (USRLE) does not end its obligations—they remain, but there is no one to fulfill them.

In practice, this leads to numerous disputes over the subsidiary liability of controlling persons: participants, managers, beneficiaries, nominee directors, and sometimes even minority shareholders. The Supreme Court prepared a comprehensive review that systematized approaches to resolving such conflicts and provided clear guidelines for law enforcement.

The Supreme Court’s position demonstrates a clear approach: deleting a legal entity from the Unified State Register of Legal Entities does not sever the link between the actions of controlling persons and the consequences for creditors. Even after an organization formally ceases to exist, the courts evaluate who actually managed its activities, made decisions, and possessed information that impacted the fate of its liabilities.

1. Grounds for involving controlling persons

The Supreme Court emphasizes that persons whose actions led to the impossibility of fulfilling obligations may be held liable for subsidiary liability. This applies to situations where the following is identified:

• concealment of documents or absence of business documentation;
• failure to fulfill obligations despite availability of funds;
• ignoring creditors’ demands;
• use of assets for personal purposes;
• artificial cessation of activity or creation of the appearance of absence of activity.

Formal exclusion from the Unified State Register of Legal Entities does not relieve such persons from liability—the court evaluates their actual role and actual behavior.

2. Burden of proof: information asymmetry

Since the creditor does not have full information about the debtor’s activities, the Supreme Court emphasizes the separation of duties:

The creditor must prove:

• fact of debt;
• amount of the obligation;
• signs of termination of activity (inactive legal entity);
• the presence of control on the part of the defendants.

The controlling person must:

• submit documents confirming good faith;
• explain the reasons for the termination of payments;
• disclose financial data;
• rebut the presumption of bad faith.

Failure to disclose information is interpreted in favor of the creditor.

3. The court’s position on the creditor’s behavior when excluding the debtor

The court clearly stated:

• the absence of objections from a creditor at the stage of excluding a legal entity from the Unified State Register of Legal Entities does not deprive it of the right to subsequently demand that controlling persons be held accountable;
• The creditor is not obligated to intervene in or monitor the exclusion procedure.

4. Use of property for personal purposes

If controlling persons actually withdraw assets—for example, by using company assets for personal expenses—the court will consider such actions to be:

• abuse of rights,
• bad faith,
• direct basis for subsidiary liability.

5. The sole participant is not the controlling one

The Supreme Court pointed out an important nuance:

• the combination of the roles of participant and manager does not mean the automatic qualification of a person as a controller;
• The court must assess real influence —whether the participant made decisions, determined strategy, or disposed of property.

6. Time limits and statute of limitations

The creditor may file a claim:

• before the exclusion of a legal entity from the Unified State Register of Legal Entities;
• after his exclusion.

The commencement of the limitation period is connected with the moment when the creditor learned or should have learned:

1. that the company has effectively ceased operations,
2. and that the termination of settlements was caused by the behavior of the controlling persons.

The court emphasized that controlling persons have the right to raise all objections available to the debtor:

• about the expiration of the limitation period,
• on reducing the penalty (Article 333 of the Civil Code),
• on termination of the obligation by offset,
• and other substantive legal arguments.

Interest under Article 395 of the Civil Code accrues from the moment a legal entity is excluded from the Unified State Register of Legal Entities and continues until the actual repayment of the debt by the controlling person.

Situations involving “nominee” directors deserve special attention. Transferring control to a formal director does not relieve either the nominee or the beneficiary of their responsibilities if:

• information about real control was hidden,
• access to documentation was limited,
• actions were taken that impeded the fulfillment of obligations.

In such cases, liability remains in full.

Minority shareholders can also be recognized as controlling shareholders, but only if there is evidence of their actual influence. Examples include transactions concluded for personal gain and at the expense of the company’s assets. In these cases, the burden of proof traditionally falls on the creditor.

An important right is also retained by former participants in the company: if they left the company during the normal period of its operations, but were not paid the actual value of their share, they can demand that the controlling persons be held accountable even after the company has been removed from the Unified State Register of Legal Entities.

However, the mere existence of debts does not invalidate the entry regarding the termination of a legal entity. The entry can only be challenged if there are procedural violations by the registering authority.