How to hold a debtor's controlling person liable

The first method is subsidiary liability within the framework of bankruptcy proceedings. This is the most well-known mechanism: it is governed by Chapter III.2 of the Bankruptcy Law and requires the initiation of formal bankruptcy proceedings against the company, which entails time, costs for funding the process, and the involvement of an insolvency practitioner.

The second method is holding a person liable after the company has been removed from the Unified State Register of Legal Entities (USRLE) as an inactive entity. This is based on Clause 3.1 of Article 3 of the Federal Law "On Limited Liability Companies": if a creditor's claims have already been confirmed by a court at the time the company is removed from the register, controlling persons can be held liable for the company's debts. However, this method requires waiting for the actual removal to occur—a procedure entirely at the discretion of the registration authority that can drag on for a long time.

The third method is holding controlling persons liable before the company is removed from the USRLE, provided it has effectively ceased operations and become an inactive, "abandoned" entity. This path requires neither the initiation of bankruptcy proceedings nor waiting for the registration authority's decision on removal. This is the approach worth examining in more detail.

The legal approach is set out in Clause 7 of the Review of Practice on Corporate Disputes Regarding Subsidiary Liability of Controlling Persons for the Obligations of an Inactive Legal Entity, dated November 19, 2025: it is possible to hold controlling persons liable before a legal entity is removed from the USRLE if it has effectively ceased operations—that is, if it is an inactive, "abandoned" entity.

This fundamentally changes a creditor's strategy. The formal existence of a company in the register is no obstacle to a lawsuit if, in reality, there is no one behind that shell: no financial reporting, no bank transactions, and no actual management. A creditor does not need to wait for the tax authority to initiate the removal procedure on its own—this can take years and only complicate the collection of evidence while the company's directors and assets change or disappear.

According to Clause 1 of Article 64.2 of the Civil Code of the Russian Federation and Clause 1 of Article 21.1 of Federal Law No. 129-FZ, a legal entity is considered inactive if it exhibits any of the following signs:

• it has failed to submit the reports required by tax and fee legislation for 12 months;
• it has not conducted any transactions through any bank account for 12 months.

Additional evidence of the actual cessation of operations is the registration authority's entry regarding the inaccuracy of information about the legal entity—for example, its address. If, more than 6 months after such an entry is made, neither the company nor its executive has confirmed the accurate information, the registration authority decides to proceed with removing the company from the USRLE. However, a creditor is entitled to act sooner—at the stage when all these signs collectively point to the business being "abandoned," without waiting for the final decision of the tax authority.

Filing such a lawsuit requires confirming several interconnected circumstances.

• The existence and amount of the debt—as a rule, confirmed by a final court or arbitration ruling, as well as a writ of execution.
• The actual impossibility of obtaining payment from the company itself—the absence of assets, the termination of enforcement proceedings on these grounds, and the lack of financial reporting or bank transactions.
• The circle of controlling persons throughout the entire period the debt existed—not just the current director, but everyone who held that position sequentially, provided they made decisions significant to the fate of the debt.
• The link between the conduct of these persons and the inability to repay the debt—this specific element determines the outcome of the case.

Of particular importance is the presumption from the Supreme Court of the Russian Federation's Review: it is assumed that it was the inaction of the controlling persons that led to the impossibility of fulfilling obligations, unless proven otherwise based on the actual circumstances of the case. In other words, if controlling persons allowed the company to become an "abandoned" asset instead of liquidating it to settle debts or initiating bankruptcy when funds were insufficient, this in itself may be classified as bad-faith conduct.

In accordance with clauses 1 and 3 of Article 53.1 of the Civil Code of the Russian Federation, controlling persons may be held liable for damages to creditors outside of bankruptcy proceedings if the inability to satisfy a creditor's claims was caused by their actions and their conduct failed to meet the criteria of good faith and reasonableness.

A key feature of such disputes is the burden of proof. Since a creditor generally does not have access to a company's internal business records, a presumption applies: it is assumed that the inaction of the controlling persons led to the inability to fulfill obligations, unless proven otherwise based on the facts. This position is upheld by the Constitutional Court of the Russian Federation and consistently applied by the Supreme Court of the Russian Federation. It is the defendant who must prove that they acted in good faith and made every reasonable effort to fulfill their obligations.

Changing a director or shareholder after a debt has been incurred does not exempt either the new or the former controlling person from liability. Clarifications from the Plenum of the Supreme Court of the Russian Federation explicitly state that a formal director who did not exercise actual management does not lose their status as a controlling person, and both nominal and actual directors bear joint and several subsidiary liability. This is particularly important in situations where, following a demand for debt repayment, management is quickly replaced by a nominal figure; courts view such a change as an attempt to evade liability rather than a basis for exemption.

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C Cases Practice

The Moscow Arbitration Court is currently hearing a case in which the C Cases team is representing a creditor seeking to hold individuals liable for a company that has not yet been removed from the Unified State Register of Legal Entities (EGRUL) but shows all signs of being inactive. Our legal position is based on the proven debt, the combined indicators of an "abandoned" business, and the systematic replacement of controlling persons following the creditor's demands.

Choosing the right strategy for pursuing subsidiary liability directly impacts the speed and outcome of recovery. In cases where bankruptcy is excessive and waiting for removal from the EGRUL could take years, filing a lawsuit before the company is struck from the register allows for the preservation of evidence regarding the bad-faith conduct of controlling persons, leading to a much faster resolution.