Subsidiary liability is the personal property liability of an individual for the debts of a legal entity that has been declared bankrupt. The amount of subsidiary liability is defined as the difference between the total amount of the bankrupt's debt recorded in the register of creditors' claims and the bankruptcy estate. According to the latest explanations of the Department of State Revenue, the administrative costs of bankruptcy proceedings can also be brought as part of a claim for subsidiary liability.
Who can be held Subsidiary liable
The founder (participant), an official (Director, member of the Board of Directors, chief accountant), a participant in the reorganization, a temporary or bankrupt Manager may be held subsidiary liable. In addition, the parent organization may be held subsidiary liable if the subsidiary went bankrupt through its fault. Most often, the courts satisfy claims about the responsibility of managers of a bankrupt business. In judicial practice, there are cases of bringing a former Manager to justice.
Several persons may be held subsidiary liable at the same time. Then they will be jointly and severally liable. In other words, each person is fully liable, with the right of recourse (reverse claim) to the other solidary co-borrowers.
In what cases does subsidiary liability occur
- failure to grant access to the temporary Manager
After filing an application for bankruptcy, the court initiates a civil case and appoints a temporary Manager. This is a specialist who analyzes and submits to the court an opinion on the financial position of a potential bankrupt. Within 3 business days of the appointment of the temporary Manager, the company must provide him with access to its documentation. Usually, the temporary Manager himself gives a list of documents and information that he needs to prepare the conclusion.
Most often, the Director is responsible for providing access. Internal documents may assign this duty to another official. For example, if the Director issued an order to immediately grant access to the temporary Manager, and assigned the execution of the order to the chief accountant, since all documentation is at the disposal of the accounting department. Another option is if the Director is on vacation or on sick leave, and another person replaces him. If the responsible employee does not provide access within the specified time limit, they will be held subsidiary liable.
- non-transfer of documents to a temporary or bankruptcy Manager
Within 3 working days from the day the court announces the decision to declare bankruptcy, the responsible bankrupt official must transfer to the temporary manager all primary documents, constituent documents, property, seals, stamps, electronic signatures and keys, 1C accounting department or its equivalent, codes access, safes, etc.
The law does not establish subsidiary liability for failure to fulfill the obligation. However, the courts satisfy the claims and hold liable in case of refusal to transfer documents, base 1C or other objects and information related to the financial and economic activities of the debtor.
- Violation of a 6-month period
The law cites cases in which a company is insolvent. Within 6 months from the date of insolvency, the company must apply to the court with a statement of bankruptcy. If this obligation is not fulfilled within the prescribed period, the responsible person will be held liable for subsidiary liability. The responsible person may be recognized as the head, member of the board of directors, founder (participant).
- invalidation of a transaction
During the conduct of bankruptcy proceedings, the bankruptcy manager verifies all bankruptcy transactions. Having identified the signs of an invalid transaction, he must go to court. The court has the right to invalidate the transaction and, if return of property is not possible, oblige the original purchasers to reimburse the value of the property. If such a refund is not possible, then the person who made the decision to complete the transaction will bear subsidiary liability.
In this case, a temporary or bankruptcy manager may be brought to subsidiary liability if the canceled transaction was agreed and / or completed by one of them.
- deliberate and false bankruptcy
Also, subsidiary liability occurs if there is a fact of intentional or false bankruptcy. However, in this case, you must have a conviction or a guilty plea by the responsible person.
Bankruptcy manager in case of revealing the facts of intentional or false bankruptcy, must file a claim within 1 month. Skipping this period will serve as the basis for rejection of the claim.
Subsidiary liability occurs only if the bankruptcy estate is not sufficient for settlement with all creditors who have submitted claims. For this reason, the bankruptcy manager usually filed a lawsuit after the completion of all activities for the search and sale of assets.
- Who is liable for subsidiary liability
As a general rule, a bankruptcy manager should file a claim for bringing to subsidiary liability. Lenders are not entitled to file independent claims. There are exceptions to this rule. In the event that deliberate and false bankruptcy is established, a lawsuit in a court for bringing to subsidiary liability may be filed by creditors. Such an exception is provided by the legislator, since a guilty verdict on the fact of intentional or false bankruptcy may take place after the completion of the bankruptcy procedure. This means that the bankrupt manager will no longer have his powers, and creditors will be forced to defend their interests on their own.
Also of interest is the possibility of bringing to subsidiary liability a temporary or bankruptcy manager who agreed on a transaction that was deemed invalid in the future (see above). Since the manager will not file a lawsuit against himself, creditors should elect another manager. Then the newly appointed bankruptcy manager will have to file a claim for bringing the suspended colleague to subsidiary liability.
- Consequences of subsidiary liability
If a judicial act has been held against a person to hold him liable, he has the right to execute it voluntarily and pay the full amount. If the decision is not executed voluntarily, the writ of execution will be transferred to a private enforcement agent for enforcement. The bailiff has the right to seize all the property of a person, including bank accounts, to restrict travel outside the Republic of Kazakhstan. A possible measure is a ban on reissuing a driver’s license. The property of the spouse acquired during the marriage can also be enforced. This is possible even if the marriage was dissolved.
Bankruptcy proceedings are limited in time. Therefore, if it was not possible to execute the decision on bringing to subsidiary liability, or it was not fully implemented, the bankruptcy procedure should be completed. Creditors have the right to accept the right of claim from a bankrupt by such a decision. Usually this is formalized by the contract of assignment of the right of claim, or by replacing the claimant in court. After that, each creditor will have the right to submit a claim to the responsible person independently, outside the framework of the bankruptcy procedure.
If the creditors refused to accept the right of claim by the court decision on subsidiary liability, the bankruptcy procedure will be completed and the debt of the person liable will be canceled. After that, lenders will not be able to make any claims against him.