Delimitation of Subsidiary Liability of the Debtor’s Controlling Persons by means of Application of Civil Penalties

Subsidiary liability of the debtor’s controlling persons does not constitute a separate category or subtype of civil liability, as the scope of its application cannot serve as a sufficient basis for classification. There are no other distinctive features in the manifestation of subsidiary liability that could justify it differentiation from civil liability. In this regard, it appears that the norms governing the liability of controlling persons of a debtor and of legal entities not in a state of bankruptcy share a common nature and should form a cohesive framework or, at the very least, be consistent with one another. The author attempts to delineate the subsidiary liability of controlling persons of a debtor by using other measures of civil liability. The paper provides a comparative analysis of the categories of liable parties and the conditions for liability under Article 53.1 of the Civil Code of the Russian Federation and the subsidiary liability of controlling persons of a debtor in bankruptcy proceedings under Article 61.11 of the Bankruptcy Law. The author concludes that, although Article 53.1 of the Civil Code serves as a general provision stipulating the compensation for damages by controlling persons, it does not fully encompass the specific provision regarding subsidiary liability in bankruptcy cases. According to legal drafting principles, the general provision should contain overarching rules that encompass the specific ones. The paper makes recommendations for the legal regulation of the institution in question. The development of the institution of subsidiary liability for controlling persons of a debtor should proceed towards the harmonization of the legal norms that establish it. Furthermore, it is essential to define unified rules for subsidiary liability based on the provisions regarding subsidiary liability in insolvency proceedings and Article 53.1 of the Civil Code, which should be unified by common principles and conditions for liability.

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