Upgrading of Penalties for Intentional Bankruptcy

Over the past 2 years, the volume of court cases on recognizing debtors as insolvent (bankrupt) has sharply increased, however, the number of bankruptcy procedures, in the process of which creditors' claims were settled, is inexorably decreasing.

According to the Legislator, this is due to the fact that many bankruptcies are initiated deliberately by the bankrupt itself or their beneficiaries. Therefore, the legislator proposes to additionally regulate criminal liability in this area. In this regard, on June 9, 2021, the State Duma approved in the third reading the amendments to Art. 195 of the Criminal Code of the Russian Federation (illegal actions in bankruptcy) and Art. 196 of the Criminal Code of the Russian Federation (deliberate bankruptcy), providing for tougher liability of the participants in the process.

1. Beneficiaries (business beneficiaries) – Like in the Bankruptcy Law, liability is established in relation to "controlling persons" who, 3 years before and 3 years after bankruptcy, could determine the actions of the debtor, including the execution of transactions and the determination of their conditions. For intentional bankruptcy, the beneficiaries (as well as the heads of the legal entity) are now fined from 3 to 5 million rubles or might be sentenced to imprisonment for up to 7 years with a fine of up to 5 million rubles. The same liability is provided for those who used their official position, as well as for a group of persons in collusion or conspiracy. For illegal actions in bankruptcy (concealment, alienation of property, information about it, if this caused large damage, for unlawful obstruction of the activities of an arbitration manager or the temporary administration of a bank or financial organization) - a fine from 500 thousand to 2 million rubles or imprisonment for up to 4 years with a fine of up to 500 thousand rubles. If a crime is committed by a group of persons in collusion or conspiracy, they will shall be punished with a fine from 1 to 2 million rubles or imprisonment for up to 5 years with a fine of up to 1 million rubles.
2. Arbitration managers and representatives of the liquidation commission – For illegal actions in bankruptcy, they may face a fine from 500 thousand to 2 million rubles, or forced labor for up to 4 years, or imprisonment for up to 4 years together with a fine of up to 500 thousand rubles. Disqualification for up to 3 years is also possible.
3. Nominee directors – For those who committed a crime for the first time and voluntarily provided information, which might help solving the crime, and help compensating the damage caused by the crime.

It seems that the legal introductions are aimed at expanding the circle of persons who can be prosecuted and increasing the motivation for other participants in the process to comply with the law, but the question of the actual use of new opportunities by law enforcement agencies remains open, since they mostly successfully and more actively use other, more understandable for them, structures for the investigation of crimes committed during the period of bankruptcy.

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