Director's Liability in Russia

A Russian company director can be held personally liable in three ways. The company or its participants can claim damages. Creditors can seek subsidiary liability for the company's debts in bankruptcy. Prosecutors can bring criminal charges for tax, bankruptcy or abuse-of-power offences. Each track has its own rules of proof, but they often run in parallel and feed each other.

Attorney Elena Petrova advises directors and foreign shareholders, including clients in California, on managing these risks before and during disputes.

Civil Liability to the Company

Article 53.1 of the Civil Code requires a director to act in good faith and reasonably in the company's interests. If a breach causes losses, the company can recover them from the director. A participant may bring the claim on the company's behalf.

The Supreme Arbitrazh Court explained in its 2013 Plenum resolution on directors' damages which conduct counts as bad faith or unreasonable. Examples include an unfavourable deal with a related party or hiding information from participants. Ordinary business risk is not a breach.

Subsidiary Liability in Bankruptcy

This is the most frequent and costly exposure. Under the Bankruptcy Law, a controlling person can be ordered to pay creditors' claims that the company cannot satisfy. Controlling persons include the director and also owners and de facto managers.

The main grounds are bringing the company to insolvency and failing to file for bankruptcy in time. The Supreme Court Plenum resolution of 2017 on subsidiary liability sets out presumptions. The loss of accounting records and serious harm from transactions later declared void are among them.

Criminal Exposure

The Criminal Code contains several articles aimed at managers. Tax evasion by a company, deliberate and fictitious bankruptcy, abuse of powers in a commercial organisation and non-payment of wages are the most common charges. Fraud charges also arise in contract disputes.

A criminal case often supports a civil claim, and a conviction makes later recovery much easier.

Tax Damages Claimed Personally

After a tax audit, the state may seek unpaid company taxes from the director as damages. The Constitutional Court ruled in 2017 that such claims are allowed only after recovery from the company proves impossible. In practice, these claims follow a criminal tax case or a liquidation.

The director can dispute both the amount and the causal link. A tax assessment still under appeal is a weak basis for a personal claim.

Lines of Defence

A director's position rests on documents. Board and meeting approvals of risky deals, memos explaining business reasons, and evidence of due diligence on counterparties all help. Participants who approved a transaction cannot usually later blame the director for it.

In bankruptcy, the defence examines the date when insolvency actually began and shows any steps taken to save the business. Timely handover of records to the trustee closes one of the most dangerous presumptions.

What D&O Insurance Really Covers

Directors' and officers' insurance exists in Russia but remains limited. Policies usually exclude intentional acts, fines and criminal matters. Subsidiary liability coverage is often restricted or absent. The policy wording must be read clause by clause against the actual risks of the business.

An indemnity from the parent company or shareholders can fill some gaps. It works only while the indemnifying party stays solvent.

Leaving the Director's Post Safely

Resignation does not end exposure for past acts. Before leaving, a director should hand over records under a signed act and keep copies of key approvals. The registry entry must be updated promptly, or creditors may still treat the person as the manager.

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