What the service includes
Subsidiary liability of controlling persons under Article 61.11 of the Insolvency Law applies not only to asset stripping or loss of documents. In practice, one of the most frequent grounds for such a claim today is purely tax-related: arrears assessed against the company following a field or desk tax audit and then recovered from the director or beneficiary personally under Article 45 of the Tax Code, which provides for recovering a tax payable by an organisation from another person.
This is a separate topic from our page on the general subsidiary liability of a director, which examines the ground as a whole: transactions detrimental to the company, failure to hand over documents, asset stripping and other reasons for liability. Here we deal precisely with the case where the sole or main trigger for the claim is a tax authority decision following an audit, and the whole subsequent chain, from bankruptcy to subsidiary liability, is built around the amount of the assessment.
The law presumes the fault of a controlling person if the claims for tax arrears exceed 50% of the total claims of third-priority creditors included in the register. In practice this means that, with a large assessment, the burden of proving the good faith and reasonableness of one’s decisions falls on the director or beneficiary, and without a defence prepared in advance the presumption becomes the decisive factor in the case.
The Federal Tax Service is one of the most active and systematic initiators of subsidiary liability claims in Russia. Recovering the assessed debt from the company itself is often no longer possible because it has no assets, so the tax authority naturally turns to the personal assets of the director or beneficiary. The typical chain of events is similar in most such cases: a field tax audit, an additional assessment, the company cannot pay the budget, bankruptcy (often initiated by the FTS itself) and a subsidiary liability claim against the controlling persons. Among our cases is the defence of a director against a claim for subsidiary liability of RUB 120 million based precisely on assessments following a tax audit: more about this case.
The most effective moment for defence is not the subsidiary liability hearing but an earlier stage: contesting the assessment itself before the superior tax authority and in court, while the decision has not yet taken effect and become a ready-made evidential basis for a future claim. If that moment has been missed, the defence is built on proving that the person was not in fact a controlling person, or that they acted in good faith and reasonably, on the basis of the documents and circumstances at the time the decisions were taken.
What the service includes:
Who it is for
The situations clients most often bring to us on this topic.
How we work
A fixed fee and a clear plan of action, agreed before work begins. The timeframes below are indicative and depend on the complexity of the case.
Analysis of the situation
We study the audit report and the decision following the tax audit, and the stage of the matter: before bankruptcy, in bankruptcy proceedings, or already within a subsidiary liability claim. Timeframe: 2-5 days.
Contesting the assessment
At the earliest and most effective stage of the defence, we appeal the tax authority’s decision to the superior authority and in court, before it forms the basis of a future subsidiary liability claim. Timeframe: 1-3 months.
Defence against subsidiary liability
If the assessment could not be contested early or the claim has already been filed, we prove the absence of actual control over the company, or the good faith and reasonableness of the decisions. Timeframe: 3-12 months.
Appeal if necessary
If the court’s ruling is unfavourable, we prepare an appeal or a cassation appeal. Timeframe: 1-2 months.
What you will need at the start
We confirm the exact list for your situation at the consultation. This is a guide so that you arrive at the first meeting prepared.
Key figures
Experience in this practice area specifically, not in practice as a whole.
Common mistakes
Betting on bankruptcy instead of contesting the assessment. The director does not appeal the tax authority’s decision on the merits at the audit stage or in court, expecting the company’s bankruptcy to make the problem go away. As a result, the arrears remain uncontested and become a ready-made, legally effective basis for a later subsidiary liability claim.
Underestimating one’s status as a controlling person. A beneficiary who formally held no position in the company does not join the defence at an early stage, assuming that because he was never listed as director, liability will not touch him. The court may nonetheless recognise him as a controlling person on the basis of his actual involvement in management.
Passivity after the FTS itself has initiated the bankruptcy. The director does not start building a defence immediately after bankruptcy proceedings are opened on the tax authority’s application, regarding subsidiary liability as a distant prospect. Yet it is at this stage that the body of evidence is formed which will later be hard to challenge.
What you get
A contested or reduced assessment. A result that removes the very basis for a subsequent subsidiary liability claim. It is possible if the challenge begins at the audit stage, before the company’s bankruptcy.
Refusal to impose subsidiary liability. A court act recording that there are no grounds to recover personal funds from the director or beneficiary towards the company’s tax debt.
A rebutted presumption of fault. Proven good faith and reasonableness of management decisions, or confirmed absence of actual control over the company.
Personal assets protected. An understanding of which property is protected from recovery, and no hasty actions that could themselves become an additional ground for liability.
Frequently asked questions
How does this situation differ from a director’s general subsidiary liability in bankruptcy?+
On the page about a director’s subsidiary liability we look at this ground in general terms: transactions detrimental to the company, failure to hand over documents, asset stripping. Here we deal with a specific but especially common case, where the sole or main basis of the claim is tax arrears assessed by the tax authority following an audit and then recovered under Article 45 of the Russian Tax Code.
When does the presumption of the director’s fault arise in respect of additional tax assessments?+
Under Article 61.11 of the Insolvency Law, the fault of a controlling person is presumed if the claims for tax arrears assessed following an audit exceed 50% of the total claims of third-priority creditors included in the register. In that case the burden of proving good faith shifts to the director or beneficiary.
Why is it usually the FTS that initiates subsidiary liability claims?+
Recovering the assessed debt from the company itself is often no longer possible: there are no assets and the accounts are empty. The tax authority systematically turns to the personal assets of the director and beneficiary through the subsidiary liability mechanism and, in practice, is the applicant in such claims more often than ordinary creditors.
Can the amount of the assessment be challenged if the subsidiary liability case has already begun?+
Formally, yes, but it is considerably harder: by then the tax authority’s decision has often already taken effect and been upheld by a court. The most effective moment for defence is the tax audit itself and the appeal against its results, before the matter reaches bankruptcy and a subsidiary liability claim.
How can you prove that a person is not in fact a controlling person?+
By reconstructing the real picture of how the company was run: who took the key decisions, signed documents, managed the accounts and negotiated with counterparties. A formal position or a share in the charter capital does not in itself make a person a controlling person if they did not influence the decisions that led to the assessment and the subsequent bankruptcy.
What happens if the company’s bankruptcy over a tax debt is initiated by the FTS itself?+
The typical sequence is as follows: a field tax audit, an additional assessment, the company cannot pay, bankruptcy (often initiated by the tax authority itself) and a subsidiary liability claim against the controlling persons. Preparation for the defence should begin at the audit stage, rather than waiting for the subsidiary liability claim.