“Cassation: Director Liable for Incompetent Contracts and Debt Collection Failures” — Ekaterina Mikhalskaya for PRObankrotstvo
A director cannot deny responsibility for bankruptcy without evaluation of their actions, emphasized the district court.
SpetsStroyKom LLC (debtor) and StroyConsulting LLC (client) entered into general contracting agreements. The debtor performed work exceeding contract fixed prices without client approval. Subsequently, StroyConsulting LLC never received payment and went bankrupt. Its director Sergey Chokin faced subsidiary liability claims. Lower courts denied the claims, stating bankruptcy resulted from the client's non-payment rather than Chokin's actions. StroyConsulting LLC appealed, arguing courts failed to assess Chokin's unreasonable conduct and the debtor's objective insolvency since 2017. The Volgo-Vyatka District Commercial Court overturned the rulings and remanded the case (No. A43-28416/2020).
Why This Matters
Ekaterina Mikhalskaya, Attorney and Managing Partner at Prime Advice Law Offices, notes this cassation appeal fundamentally concerns evaluating director's reasonable/good-faith actions to determine whether they exceeded normal business risks.
Essentially, this involves the "business judgment rule" — a specific protection mechanism for management/owners against unjustified subsidiary liability claims. It assesses managerial decisions through prisms of (un)reasonableness and (bad) faith, regardless of how contradictory they appear to third parties.
While crucial in bankruptcy practice, this rule proves complex since evaluative concepts require case-specific analysis. Supreme Court Plenum Resolutions №62 and 53 provide only general guidance without establishing universal assessment criteria,
— she explained.