There are not one but three different ways to hold a company's director or member subsidiarily liable — and choosing the right one directly determines how much time and resources a creditor will need to recover the debt.

Three ways to hold a controlling person liable

The first is subsidiary liability within the debtor's bankruptcy proceedings. This is the best-known mechanism: it is governed by Chapter III.2 of the Bankruptcy Law and requires bankruptcy proceedings to be opened against the company, which means time, the cost of funding the proceedings and the involvement of an insolvency practitioner.

The second is subsidiary liability after the company has been struck off the Unified State Register of Legal Entities as a dormant legal entity. The basis is Article 3(3.1) of the Federal Law "On Limited Liability Companies": if the creditor's claims had already been confirmed by a court when the company was struck off, the controlling persons may be held liable for the company's debts. However, this route requires waiting for the striking-off itself — a procedure entirely in the hands of the registration authority, which can take a long time.

The third is holding controlling persons subsidiarily liable before the company is struck off, if it has in fact ceased operating and become dormant, or "abandoned". This route requires neither opening bankruptcy proceedings nor waiting for the registration authority's decision to strike the company off. It deserves a closer look.

The third route: liability before striking-off

The legal approach is set out in paragraph 7 of the Review of the Practice of Arbitrazh Courts in Corporate Disputes on the Subsidiary Liability of Controlling Persons for the Obligations of a Dormant Legal Entity of 19 November 2025: controlling persons may be held subsidiarily liable before the legal entity is struck off the register if it has in fact ceased operating, i.e. is dormant or "abandoned".

This fundamentally changes a creditor's tactics. The company's formal existence in the register is no obstacle to a claim if in reality nobody stands behind the shell any more: no reporting, no account transactions, no real management. The creditor does not need to wait for the tax authority to start striking-off proceedings on its own initiative — that could take years and would only make gathering evidence harder as the company's directors and assets change or disappear.

Signs of a dormant legal entity

Under Article 64.2(1) of the Civil Code and Article 21.1(1) of Federal Law No. 129-FZ, a legal entity is considered dormant if any of the following applies:

• for 12 months it has not filed the reports required by tax legislation;
• for 12 months it has not carried out transactions on any bank account.

Additional evidence that the company has in fact ceased operating is an entry by the registration authority that information about the legal entity — for example, its address — is inaccurate. If more than 6 months pass from the date of such an entry without the company or its director confirming accurate information, the registration authority decides to strike the company off. But the creditor may act earlier — as soon as these signs together indicate that the business has been "abandoned", without waiting for the tax authority's final decision.

What the creditor must prove

Bringing such a claim requires proof of several interrelated circumstances.

• The existence and amount of the debt — usually confirmed by a final court or arbitral decision and a writ of execution.
• The actual impossibility of obtaining performance from the company itself — no assets, enforcement proceedings closed on that ground, no reporting and no account transactions.
• The circle of controlling persons throughout the period the debt existed — not only the current director but everyone who held the position in turn, if they made decisions significant to the fate of the debt.
• The link between these persons' conduct and the inability to repay the debt — this is the element that determines the outcome of the case.

The presumption from the Supreme Court's Review is particularly important: it is presumed that the controlling persons' inaction made it impossible to perform the obligations unless the facts of the case prove otherwise. In other words, if the controlling persons allowed the company to become an "abandoned" asset instead of liquidating it and settling its debts or filing for bankruptcy when funds were insufficient, this in itself may be treated as bad-faith conduct.

Changing the director does not release anyone from liability

Under Article 53.1(1) and (3) of the Civil Code, controlling persons may be held financially liable to creditors outside bankruptcy proceedings if the inability to satisfy the creditor's claims resulted from their will being carried out and their conduct did not meet the standards of good faith and reasonableness.

A feature of such disputes is the allocation of the burden of proof. Since a creditor generally has no access to documents on the company's business, a presumption applies: it is presumed that the controlling persons' inaction made it impossible to perform the obligations unless the facts prove otherwise. This position has been established by the Constitutional Court and is consistently applied by the Supreme Court. It is the defendant who must prove that they acted in good faith and made every reasonable effort to perform the obligations.

Changing the company's director or member after the debt arose does not release either the new or the former controlling person from liability. The guidance of the Plenum of the Supreme Court expressly states that a formal director who did not actually manage the company does not lose the status of a controlling person, and that nominal and de facto directors bear subsidiary liability jointly and severally. This is especially important where management is quickly replaced by a nominee after demands to repay the debt are made — the courts treat such a change as an attempt to evade liability, not as grounds for excluding it.

C Cases practice

The Moscow Arbitrazh Court is currently hearing a case in which the C Cases team represents a creditor seeking to hold liable the controlling persons of a company that has not yet formally been struck off the register but is dormant by every indication. The legal position rests on the proven debt, the combination of signs that the business has been "abandoned" and the successive changes of controlling persons after the creditor's claims were made.

Choosing the right way to impose subsidiary liability directly affects the speed and outcome of recovery. Where bankruptcy is excessive and striking-off could take years, going to court before the company is struck off makes it possible to secure evidence of the controlling persons' bad-faith conduct and obtain a positive result much faster.