Damage, bankruptcy, debts: what CEO is responsible for

Russian legislation contains many norms on the basis of which the head of a company can be brought to responsibility. This possibility is prescribed in the Civil Code, the Code of Administrative Offences, the Criminal Code.

CEO is responsible for the management decisions made, for the actions of employees and business reputation of the company. In case of incorrect actions that have caused losses or damage to the organization, the shareholders, counterparties or government agencies can initiate bringing to responsibility. In some cases, the head of an organization is brought to responsibility even after leaving the post.

TYPES OF RESPONSIBILITY

CEO's personal responsibility can be internal and external.

One of the examples of internal responsibility: CEO is responsible to the shareholder for losses incurred as a result of incorrect management decisions. As a result of his or her actions, disciplinary or financial responsibility may follow.

External types of responsibility may include subsidiary, administrative and criminal one. The main reason for their occurrence are:

• violation of the legislation of the Russian Federation;
• bankruptcy;
• damage to creditors;
• submission of false information;
• unfair performance of obligations.

CONSEQUENCES

Bringing CEO to responsibility negatively affects the reliability of all legal entities under his or her management. Interaction with unreliable organizations may attract attention from the Federal Tax Service of Russia. The regulator may regard such transactions as fictitious and apply penalties in the form of additional taxes, criminal proceedings and even removal of the company from the Unified State Register of Legal Entities. Responsibility in such cases falls on CEO or the decision-making person.

CHECK IN GLOBAS

To avoid such a scenario, it is necessary to exercise commercial due diligence. The Information and Analytical system Globas helps to identify signs of shell companies and unreliable organizations, including negative factors concerning the company's CEO.

Let's consider cases when Globas will help to identify the personal responsibility of CEOs.

Case 1

Identification of facts of violations of the legislation of the Russian Federation

In the compliance requirements of many enterprises, there is a clause on the inadmissibility of cooperation with companies related to violations of the laws of the Russian Federation. In case of interaction with the violator, a large fine or criminal liability may be imposed.

Signing a fictitious contract, for instance, for the purpose of understating the tax base provides for a fine of up to 1 million RUB or imprisonment for up to 10 years.

For non-payment of taxes, CEO faces a fine of 500 thousand RUB and imprisonment for up to 6 years.

For giving bribes, liability is provided in the form of a fine of 2,5 million RUB and imprisonment for up to 8 years.

When analyzing a business partner in Globas, information about bringing to administrative and criminal responsibility, participation in court proceedings, inclusion in the lists of official authorities is displayed automatically. It is also available to request information about the arrears, fines or penalties, search for enforcement proceedings and suspicion of committing crimes. All information is displayed in the "one window" mode.

Case 2

Bankruptcy and damage to creditors

Irrational decisions and unreasonable contracts can lead to premature liquidation of the company due to insolvency. However, after the bankruptcy procedure begins, an audit will be conducted against CEO and all persons controlling the debtor. The official receiver will check for signs of intentional or fictitious bankruptcy and determine the persons responsible for causing damage to the company. If the fault is proved, the persons controlling the debtor will be brought to subsidiary responsibility or compensation for damages.

Globas contains all information about a person's entrepreneurial activity and their participation in business. Moreover, information from related sources is analyzed and compared. Globas will show a warning marker about bringing a person to responsibility in a bankruptcy case, calculate the amount of joint responsibility, show notifications from the Unified Federal Bankruptcy Register and the arbitration case related to this event.

In the Information and Analytical system Globas, you can check which of your business partners are already undergoing bankruptcy proceedings, as well as which of them have unstable financial position.

Case 3

False information, unfair or untimely fulfillment of obligations

Liquidation of companies in the presence of false information and debts to the budget may be resulted in the future refusal to register information about the shareholder or CEO for 3 years.

Such a refusal to make state registration to an individual may affect his or her business in the future. The individual cannot:

• become CEO or establish a new legal entity;
• make changes to the Unified State Register of Legal Entities related to his or her name until 3 years have passed since the entry was made;
• re-register the pledge of the share in the authorized capital.

Checking for timely fulfillment of obligations is also an integral part of the due diligence. The presence of a large number of arbitration cases on economic disputes may, for instance, characterize a partner as unfairly related to payment discipline. In the future, the growth of obligations may affect the financial position of the counterparty and lead to bankruptcy.

In Globas, the entire business history of an entrepreneur is comprehensively analyzed. In case of detection of violations of the law in any of the related companies, a note about the risk of refusal of state registration will be displayed. Counterparties unfairly related to the payment discipline can be identified using the Arbitration and Enforcement Proceedings sections. Cases with the category of improper performance of obligations will help to identify the overdue accounts payable.

Globas helps to analyze business partners, minimize commercial, tax, and sanctions risks, relieve the experts conducting inspections from routine, and uses only reliable information from official sources. If you are not yet Globas subscriber, apply for trial access and check if there are unreliable counterparties in your portfolio who are not going to fulfill their obligations. GET TRIAL ACCESS