Subsidiary liability for company debts remains one of the primary risks for directors and controlling persons of a debtor (CPD) in 2026. Arbitrazh managers recover a weighted average of approximately RUB 8-12 million from CPDs, and judicial practice indicates a 23% increase in the approval rate of such claims over the past two years.
Who Is Held Liable for Subsidiary Liability in 2026
Controlling persons of a debtor (CPD) include directors, founders with a stake exceeding 50%, and de facto executives (Article 61.10 of Federal Law No. 127-FZ on Insolvency). A critical development: since 2024, courts have increasingly held chief accountants liable if they exercised sole control over bank accounts.
Under Paragraph 4, Article 61.11 of Federal Law No. 127-FZ on Insolvency, a CPD bears joint and several liability for all of the debtor's obligations if their fault in the bankruptcy is proven. The minimum threshold for initiating bankruptcy proceedings is RUB 300,000, but in practice, petitions are typically filed for debts starting from RUB 3-5 million.
A common misconception is that changing the director prior to bankruptcy provides immunity from liability. Courts analyze the period up to three years before the filing of the bankruptcy petition (Paragraph 1, Article 61.2 of Federal Law No. 127-FZ on Insolvency).
Grounds for Imposing Subsidiary Liability
An arbitrazh manager files a claim based on three primary grounds: causing the bankruptcy (Paragraph 2, Article 61.11), failure to file a bankruptcy petition within the statutory timeframe (Paragraph 4, Article 61.11), and failure to provide documentation (Paragraph 5, Article 61.11). If any of these are proven, the CPD is liable with all their personal assets.
Under Paragraph 2, Article 9 of Federal Law No. 127-FZ on Insolvency, a director is obligated to file a bankruptcy petition within 30 days after the emergence of insolvency indicators. Violating this deadline automatically creates a presumption of guilt—the CPD must then prove that bankruptcy would have occurred regardless of their actions.
Arbitrazh practice in 2025-2026 demonstrates that courts rigorously scrutinize transactions executed within six months prior to the petition filing. Paying an executive a salary exceeding three times the average rate or transferring assets to relatives almost invariably leads to subsidiary liability.
How to Protect Personal Assets Before Company Bankruptcy
The primary defense lies in maintaining accurate documentation and recording the rationale behind managerial decisions. All resolutions regarding major transactions, loans, and restructuring must be accompanied by economic justifications and corporate minutes (Articles 78-79 of the Federal Law on Joint-Stock Companies, Articles 45-46 of the Federal Law on Limited Liability Companies).
It is important to note: assets acquired prior to the suspect period (three years) generally remain protected. The exception is when it can be proven that such assets were purchased using funds siphoned from the company.
Recent practice highlights the effectiveness of Directors and Officers (D&O) liability insurance. A coverage limit starting at RUB 50 million costs approximately 1-3% of the insured sum annually. However, such insurance does not cover intentional violations or fictitious bankruptcy.
Procedure for Reviewing a Subsidiary Liability Claim
The arbitrazh manager or a bankruptcy creditor files a claim with the arbitrazh court where the bankruptcy case is being heard. The CPD receives the claim and has 30 days to prepare a statement of defense containing objections (Part 1, Article 131 of the Russian Arbitrazh Procedure Code).
The state fee for reviewing a subsidiary liability claim is RUB 6,000 (Subparagraph 3, Paragraph 1, Article 333.21 of the Russian Tax Code). If the claim is satisfied, the fee is recovered from the CPD in addition to the principal debt.
The court reviews the case within three months. Under Paragraph 9, Article 61.14 of Federal Law No. 127-FZ on Insolvency, the CPD may file a motion for an installment plan of up to three years. However, this does not release them from liability; it merely extends the payment schedule.
Defense Strategies in Court During Case Review
The core defense strategy involves proving the absence of a causal link between the CPD's actions and the bankruptcy. According to Paragraph 24 of the Russian Supreme Court Plenum Resolution No. 53 of December 21, 2017, it is necessary to demonstrate that insolvency would have occurred under any circumstances.
An effective argument relies on force majeure circumstances: pandemics, sanctions, or changes in currency legislation. Courts readily accept such arguments if they are supported by documentation evidencing an industry-wide revenue decline of 30% or more.
A common error in the statement of defense is referencing general economic difficulties without specific figures. Required evidence includes Rosstat certificates, industry reviews, and documentation of terminated key contracts, specifying amounts and dates.
Enforcement of a Subsidiary Liability Judgment
Once the judgment enters into legal force, the arbitrazh manager applies to the bailiffs to initiate enforcement proceedings. Foreclosure is levied on all of the CPD's assets, excluding their sole residential premises and property specified in Article 446 of the Russian Civil Procedure Code.
A critical distinction: the assets of the CPD's spouse are subject to foreclosure in the portion corresponding to the debtor's share if acquired during the marriage (Article 34 of the Russian Family Code). The exception is property received through inheritance or as a gift, which must be documented.
Under Article 213.1 of Federal Law No. 127-FZ on Insolvency, an individual CPD may file for personal bankruptcy if their debt exceeds RUB 500,000. This allows for the discharge of remaining debts, but the procedure lasts 6-12 months and costs approximately RUB 75,000 (state fee plus the financial manager's remuneration).
Current Changes in Legislation and Practice in 2026
Effective January 1, 2026, an expanded interpretation of controlling persons applies: it includes nominal ('technical') directors when de facto management of the company is proven. A presumption of control arises if there is a power of attorney to execute transactions exceeding 10% of the book value of assets.
The Russian Supreme Court, in its Judicial Practice Review for the fourth quarter of 2025, indicated that actions involving the payment of salaries not exceeding five times the minimum wage (approximately RUB 100,000 in 2026) do not constitute grounds for subsidiary liability, provided the statutory priority of payments is observed.
Practice reveals a tightening of approaches to evaluating related-party transactions. Courts presume the inequivalence of transactions between a CPD and the debtor if the price deviates from the market rate by more than 20% without economic justification.
Frequently Asked Questions
1. Within what timeframe can subsidiary liability be imposed?
The statute of limitations is three years from the date of opening bankruptcy proceedings (Paragraph 7, Article 61.14 of Federal Law No. 127-FZ on Insolvency). Expiration of this period serves as an unconditional ground for dismissing the claim.
2. Is it possible to avoid liability by transferring assets to relatives?
Transactions involving the alienation of assets within three years prior to bankruptcy may be challenged as suspicious (Articles 61.2-61.3 of Federal Law No. 127-FZ on Insolvency). Courts invalidate transactions with relatives executed at prices below 70% of the market value.
3. What is the minimum recovery amount for subsidiary liability?
There is no minimum amount—the CPD is liable for all of the debtor's obligations. In practice, recoveries range from RUB 1-2 million to over RUB 500 million. The average recovery amount in 2025-2026 is RUB 8-12 million.
4. Does changing the director before bankruptcy protect against subsidiary liability?
No. Courts analyze the actions of the CPD over the entire period up to three years before the filing of the bankruptcy petition (Paragraph 1, Article 61.2 of Federal Law No. 127-FZ on Insolvency). A formal change of executive does not sever liability for prior decisions.
5. Can the payment of subsidiary liability be made in installments?
Yes, the court may grant an installment plan of up to three years if there are valid reasons and the debt has been partially repaid (Paragraph 9, Article 61.14 of Federal Law No. 127-FZ on Insolvency). The size of the initial installment is determined by the court on an individual basis, typically ranging from 10% to 30% of the debt amount.
Conclusion
Protection against subsidiary liability requires a proactive approach: maintaining accurate documentation, justifying managerial decisions, and seeking professional assistance promptly at the first signs of corporate financial distress.