Recreation holding’s bankruptcy proceedings

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We rendered legal support to a Creditor of a recreation holding in the Russian South.

The bankruptcy proceedings involved contesting a transaction for sale of 3 cottages at a price 3 times as low as the market price just before initiation of bankruptcy proceedings. The courts in three instances declared the sale of property to the company owner’s daughter as a transaction intended to harm the property rights of the holding company’s creditors.

Meanwhile, the courts had disagreements regarding the further resale of the asset: on the date when the receiver filed a petition to invalidate the first agreement, the Buyer and the company signed purchase agreements providing for the transfer of title to the cottages to another company at a price 4 times as low as the market price. The dispute was escalated to the Supreme Court; the latter established that the last (corporate) buyer of the cottages may not be deemed a bona fide purchaser. Besides, application of the consequences of the transaction invalidity (in the form of property value recovery) should not obstruct vindication thereof. Thus, the court declared it possible to combine vindication with restitution in a single dispute.

In addition, under the recreation holding’s bankruptcy, the Judicial Chamber on Economic Disputes of the Supreme Court (SC) allowed the pledge holder to renounce the secured status of some of its claims.

The Bank was included in the creditors’ list as a secured creditor, but later chose to renounce the pledge holder status as it regarded a part of the debt and interest. The Bank requested the court to register these claims as unsecured by pledge in the list. The Supreme Court justified the option to partly renounce the status of a secured creditor in a bankruptcy case by referring to the freedom in the exercise of rights and non-existence of express prohibitions in the special legislation. The Supreme Court specifically emphasised that once renounced, this status may not be recovered.

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