The Supreme Court Differentiated Between the Debtor’s Losses and Harm to Creditors in the Withdrawal of Financing
The Supreme Court of the Russian Federation clarified that the repayment of a loan to a company participant shortly before bankruptcy does not, in itself, constitute losses of the debtor and cannot serve as grounds for their recovery. The relevant position was set out in a ruling of the Economic Chamber in case No. A07‑8518/2015, by which the judicial acts of the appellate and cassation instances were set aside.
The dispute arose in bankruptcy proceedings in which the bankruptcy trustee and creditors sought to recover from a company participant the amount of a repaid loan, characterizing it as the withdrawal of compensatory financing. The lower courts proceeded on the assumption that the repayment of funds had caused damage to the bankruptcy estate and therefore qualified as recoverable losses.
The Supreme Court pointed out that, upon repayment of a loan, the debtor’s assets and liabilities are reduced by the same amount, and therefore no property damage is caused to the debtor itself. In such a situation, negative consequences arise for the creditors, whose interests are to be protected through the mechanism of challenging suspicious transactions, rather than through claims for the recovery of losses.
The Supreme Court also emphasized that the lapse of the limitation period for challenging a transaction cannot be compensated by filing a claim for damages, since these remedies have different legal nature and are not interchangeable.
