Supreme Court to Clarify Ordinary Business Activity Criteria When Challenging Payments

PRObankrotstvo states that the Supreme Court is set to determine whether the mere fact that a payment was made a month prior to bankruptcy is sufficient grounds to challenge it, provided that equivalent consideration was received (Case No. A40-242109/2022).

Anna Aktanaeva, FBK Legal Practice Head, comments:

The court's position in the case essentially revolves around the classic tension between the formal criterion of the ‘suspect period’ and a substantive analysis of the transaction's economic nature.

If the lower courts proceed from the premise that a payment made within one month prior to the filing of a bankruptcy petition itself creates a presumption of preferential treatment, such an approach overly formalises Paragraph 1 of Article 61.3 of the Bankruptcy Law. The presence of equivalent consideration and the absence of asset disposition without equivalent fundamentally alter the qualification of the transaction.

The key matter to be resolved by the Supreme Court is whether the temporal criterion alone is sufficient, or whether it is necessary to examine whether economic value has left the bankruptcy estate and whether the pari passu principle has been violated. If an obligation was performed in the course of ordinary business activities on standard terms and without early fulfilment, it is difficult to speak of ‘preference’ in the material sense, even if it falls within the one-month period.

The potential impact on practice is significant. If the Supreme Court confirms the need to analyse the economic substance of a transaction, this will limit the ability of bankruptcy officers to automatically challenge virtually any payments made during the ‘critical month’. It will also increase the importance of proving the criteria for ordinary business activities: regularity, typicality, compliance with contractual deadlines, absence of affiliation, and extraordinary conditions. Otherwise, practice will continue to shift toward a formal approach, where the temporal criterion effectively replaces analysis of damage to the bankruptcy estate. For businesses, this means increased legal uncertainty and risks of retrospective challenges to standard payments. This is precisely why the Supreme Court's position has the potential to establish clearer guidelines for balancing creditor protection and transactional stability.