Unlawful actions in bankruptcy (Article 195 of the Criminal Code of the Russian Federation)
This article covers a whole range of criminal acts, which are divided into three groups.
- The first group (part 1) includes: concealment of the property itself (property rights) or information about it, i.e. their complete or partial concealment, transfer of property for temporary possession to other persons, its alienation or destruction, as well as destruction or falsification of accounting or other accounting documents. For example, transfer of debt on accounts receivable to a friendly company; transfer of property to pay off debts under imaginary transactions; filing a police report about the theft of expensive property that the debtor is actually hiding.
- The second group (Part 2) covers actions performed by the debtor in the interests of individual creditors to the detriment of other creditors. For example, the order of creditors provided for by the Civil Code of the Russian Federation is violated; in violation of the debt repayment schedule during financial recovery, the debtor makes payments to individual creditors to the detriment of others.
- In the third group (Part 3), the legislator includes the actions of the debtor aimed at creating conditions that do not allow the arbitration manager to fully exercise his functions. For example, restricting access to the premises, to documentation and other information media, evasion or refusal to transfer documents or property.
This article provides for criminal liability for actions that interfere with the correct conduct of the bankruptcy procedure and the full satisfaction of the interests of creditors. Persons who may be held liable under this article include: citizens, including individual entrepreneurs, heads of organizations, founders, members of the board of directors, as well as the arbitration manager himself.
Evidence of misconduct
In order to bring the general director to criminal liability in bankruptcy under Article 195 of the Criminal Code of the Russian Federation, evidence of guilt, intent and the establishment of a cause-and-effect relationship between his actions (inaction) and the damage caused to the interests of creditors is required.
Various steps taken by the debtor may be considered as evidence of the debtor’s unlawful actions. A number of crimes under Parts 1 and 2 of Article 195 of the Criminal Code of the Russian Federation are committed even before filing a bankruptcy petition in court. For example, withdrawal of assets for the purpose of subsequent bankruptcy.
Criminal acts will also include providing false information or deliberately concealing information about existing property and other assets that the debtor indicates in the response to the creditor’s application for bankruptcy. The following actions of the debtor may serve as grounds for initiating a criminal case within the framework of bankruptcy:
- conclusion and execution of contracts concluded on conditions that are clearly unfavorable for the debtor;
- concluding contracts with obviously insolvent organizations and paying for them;
- writing off funds for undocumented expenses;
- retroactive registration of loan agreements; issuance of powers of attorney for re-registration of rights to the debtor’s property.
Usually, in practice, unreliability of information and facts of falsification are revealed by the arbitration manager in the process of analyzing primary documentation.
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How to attract?
To bring a controlling person to criminal liability, during bankruptcy you need to file a corresponding application with the court. In the vast majority of situations, this is done by the bankruptcy trustee accompanying the bankruptcy.
The creditor must be the first to initiate bankruptcy and receive the support of an arbitration manager. otherwise, a financially interested arbitrator may take the side of the debtor and in every possible way prevent a fair punishment.
Investigators from a special unit of the Ministry of Internal Affairs are investigating the criminal bankruptcy. In close cooperation with the arbitration court and the tax service.
SIGNS OF ILLEGAL ACTIONS OF THE TOP PERSONS OF THE DEBTOR COMPANY ARE USUALLY IDENTIFIED BY THE ARBITRATION MANAGER
Intentional bankruptcy (Article 196 of the Criminal Code of the Russian Federation)
Criminal liability for deliberate bankruptcy of a legal entity is the most common occurrence. These are cases when an entrepreneur deliberately brought his company to bankruptcy.
Signs of deliberate bankruptcy
Intentional bankruptcy consists of actions (inaction) aimed at artificially creating the inability of a debtor (legal entity, citizen, individual entrepreneur) to fully satisfy the demands of creditors for monetary obligations and (or) to fulfill obligations to pay mandatory payments. The reasons for the deterioration of the financial situation are the commission of certain transactions and actions (inaction) of the management bodies of a legal entity or individual entrepreneur. For example:
1) Conclusion of transactions on conditions that do not correspond to market and business customs:
- on alienation of property;
- aimed at replacing or acquiring less liquid property;
- purchase and sale of property, without which the main activity is impossible;
- related to the occurrence of obligations not secured by property;
- to replace one obligation with another, concluded on obviously unfavorable terms.
2) Failure to take measures to collect receivables.
The creation or increase of insolvency should entail the inability to fully satisfy the claims of creditors for monetary obligations and (or) fulfill the obligation to make mandatory payments.
Thus, within the framework of initiated enforcement proceedings, a bailiff may establish that the head of the debtor organization, using his powers, entered into obviously unprofitable transactions. Thus, he increased accounts payable and created the insolvency of the organization with the aim of bankruptcy.
The goals of committing this crime are: taking possession of the property of a bankrupt enterprise for next to nothing; failure to fulfill an obligation, since the claims of creditors not satisfied due to the insufficiency of the property of the liquidated legal entity are considered extinguished, etc.
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Arguments against
Then Deputy Chairman of the Duma Committee on Security and Anti-Corruption Anatoly Vyborny called the issue “debatable.”
“Many lawyers with whom we consulted say that, in accordance with the rules of law, a legal entity, as an inspiritual one, cannot have the intention to commit this or that illegal act, and therefore there is no corpus delicti,” the deputy commented on the initiative. In his opinion, administrative legislation is quite sufficient; it is only possible to increase penalties.
Skeptics also said that there was no point in pursuing a company if it could reorganize into another at any moment.
Photo: IZVESTIA/Pavel Bednyakov
A number of lawyers believe that administrative liability of legal entities in Russia is essentially a form of criminal liability that exists in other countries. As part of administrative proceedings, for example, it is possible not only to fine an organization, but also to liquidate it.
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The main concerns of opponents of criminalization are related to another potential problem for law-abiding entrepreneurs.
— The introduction of criminal liability of legal entities in Russia has been discussed for quite some time, and such an idea does not contradict international legal norms. At the same time, the implementation of this proposal could lead to serious problems for business. The fact is that in Russia, entrepreneurs are often subject to forceful influence from law enforcement agencies, and the introduction of criminal liability for legal entities will expand the possibilities for such influence. This only confirms the fact that this proposal is being discussed along with the idea of giving investigators more power to access bank secrets. The result will not be an improvement in criminal law, but the creation of conditions under which it will be even more difficult for business in Russia,” says Alexander Inoyadov, head of the criminal practice of the law firm BMS Law Firm.
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Fictitious bankruptcy (Article 197 of the Criminal Code of the Russian Federation)
This crime consists of actions involving a knowingly false public announcement by the head or founder (participant) of a legal entity of the insolvency of this legal entity, or by an individual entrepreneur of his own insolvency, which subsequently caused major damage. In this case, there are no grounds for bankruptcy, but the entrepreneur announces this procedure in order to avoid any debts, penalties, sanctions, etc.
Signs of fictitious bankruptcy
The person realizes that by publicly declaring his insolvency, he is solvent, foresees the possibility or inevitability of causing major damage to creditors and desires this. Criminal liability for fictitious bankruptcy arises when the purposes of committing this crime are:
- suspension of the procedure for foreclosure of one's property;
- misleading creditors to obtain a deferment;
- installments or discounts on payments due to them, etc.
How to prove? – Necessary conditions of liability
In order to be guaranteed to bring the debtor’s representatives to criminal liability, it is necessary to prove the simultaneous presence of the following conditions:
- Presence of damage. The fact of the existence of losses to the creditor or bankrupt company must be obvious, and the damage must have a specific monetary equivalent.
- Committing actions aimed at causing damage. The controlling person must take certain actions (or consciously refrain from actions) aimed at causing harm. For example, sign an agreement, sell property, etc.
- Cause-and-effect relationship between actions and damage. Losses must be the result of specific actions, and the existence of a connection must be proven. For example, based on accounting documentation or financial analysis data.
- Guilt. Illegal actions must be committed with intent, and intent must be proven.
Opinion for
They started thinking about introducing criminal liability for corporations in the country back in 2009 - prominent scientists Gennady Esakov, Sofya Kelina and Alexey Rarog prepared a corresponding bill; in 2011, Elena Antonova defended her doctoral dissertation, in which she substantiated the need for legal innovation. In the same year, the TFR made its first unsuccessful attempt to pass a bill in parliament.
The main argument in favor of such a rule was the lack of justice tools to effectively suppress criminal activity in the economic sphere. And increasing fines will not help matters.
Civil liability and administrative sanctions are not always comparable to the consequences of a violation. Often, legal entities cause damage the scale of which is many times greater than the damage caused by the activities of criminal groups.
Photo: IZVESTIA/Dmitry Korotaev
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Lawyer Oleg Rozhkov believes that the introduction of this kind of responsibility is vital for Russian business and will be able to take the social responsibility of companies to a new level, as well as harmonize domestic and foreign legislation, writes pravo.ru.
— We propose to include in the General Part of the Criminal Code an article with a list of crimes for which legal entities may be subject to criminal liability. In addition, it will be necessary, first of all, to make changes to the current version of Article 19 of the Criminal Code of the Russian Federation, to revise the provisions on wine,” the publication quotes the words of Anastasia Ragulina, associate professor at Kutafin Moscow State Law University.
