PRObankrotstvo: Cassation Court Sends Dispute Over Recovery of 1.4 Billion Roubles in Losses from Insolvency Officer Back for Retrial
PRObankrotstvo reports that the Commercial Court of the Moscow District has sent the dispute for a new hearing to determine the actual composition of the bankruptcy estate and to assess allegations concerning abuse of rights by the insolvency officer (Case No. A40-216247/2016).
Vladislav Korneychuk, Head of Practice at FBK Legal, explains why this matters:
The ruling of the Commercial Court of the Moscow District is of considerable interest to bankruptcy practice, as it establishes a more rigorous approach to evaluating the actions of the insolvency administrator in distributing the bankruptcy estate.
Of particular importance is the cassation court's finding that the sufficiency of the bankruptcy estate should be determined based on actually existing and liquid assets, rather than on assumptions about future cash inflows.
Equally noteworthy is the court's stance on reserving funds: although the cassation court did not directly recognise that the officer has a duty to create a reserve, it pointed to the need to verify the existence of disagreements and the objective possibility of satisfying the Fund's claims without breaching the priority of payments. In essence, the court proceeds from the position that the officer's subjective confidence in the sufficiency of assets does not relieve them of accounting for the risks of insufficiency of the bankruptcy estate.
The cassation court's position regarding the standards of conduct for an insolvency officer should also be looked into, as the court repeatedly emphasised the need to evaluate their actions through the lens of good faith and reasonableness. The court, in effect, required that it be established what information the officer had at the time of the payments and whether they could objectively have been aware of the risk of violating the rights of higher-priority creditors. Furthermore, the district court indicated the need to examine the allegations about possible abuse of rights by the officer in conducting settlements, which points to heightened scrutiny of the rationality of their decisions.
