Challenging Transactions in Russian Bankruptcy

In a Russian bankruptcy, the trustee or a creditor can ask the court to set aside deals the debtor made before insolvency. The main grounds are in Articles 61.2 and 61.3 of the Bankruptcy Law: transactions at an undervalue, deals intended to harm creditors, and preferences given to one creditor over others. If a deal is voided, the counterparty returns what it received and the asset goes back into the estate.

Attorney Elena Petrova represents creditors, trustees' opponents and counterparties in these disputes, including foreign businesses based in California.

Grounds Under Articles 61.2 and 61.3

Article 61.2 covers two situations. The first is a transaction with unequal consideration, such as selling property well below market value. The second is a deal made to harm creditors, where the counterparty knew or should have known of that goal.

Article 61.3 targets preferences. Paying one creditor ahead of others, or granting security for an old debt, can be voided if it changed the order of satisfaction. The Plenum of the Supreme Arbitrazh Court explained these rules in a 2010 resolution that courts still apply.

Suspicion Periods

Each ground has its own look-back window, counted from the date the court accepted the bankruptcy petition.

Deals outside these windows may still be attacked under general Civil Code rules on abuse of rights and sham transactions.

Who Files and Within What Time

The trustee files most claims. Creditors holding a significant share of claims can also apply. The limitation period is one year and usually runs from the moment the trustee learned or should have learned of the grounds. For a new trustee, that often means the date of appointment.

Claims are heard within the bankruptcy case by the same arbitrazh court. The counterparty becomes a party to a separate dispute inside that case and can appeal the ruling.

Deals With Related Parties

Courts look hardest at transactions with the debtor's owners, managers and group companies. Such a counterparty is presumed to know about the debtor's difficulties and harmful intent. The burden then shifts, and the related party must prove the deal was fair and made for a real business purpose.

Defences for the Counterparty

The counterparty can prove that the price matched the market, supported by an appraisal. For harm-based claims, it can show that it did not know of the debtor's financial trouble and that the relationship was independent.

Ordinary course transactions below a set percentage of the debtor's asset value are protected from preference claims, provided the terms match earlier dealings. Payments on market loans and supplies made in normal business may fall under this safe harbour.

Recovering Assets for the Estate

When a deal is voided, the counterparty must return the property. If the property has already been resold, the court orders payment of its value. A buyer who later acquired the asset in good faith may be protected, which moves the fight toward the first counterparty.

The counterparty's own claim to repay what it gave the debtor is then placed in the creditors' list. Its priority depends on the ground for voidance.

Choosing a Strategy

For creditors, the first task is to obtain the debtor's bank statements and registry data for the past three years. Suspicious transfers to related parties usually appear quickly.

For counterparties, early evidence matters most. Appraisals, correspondence and proof of real performance should be collected before the claim is heard. A settlement returning part of the value can reduce exposure where the defence is weak.

The main channel of communication with the attorney is email: attorneypetrova1@gmail.com.