Bankruptcy Fraud: types, liability
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The bankruptcy process is the only legal way to liquidate a company in a difficult financial situation. It allows to fully or partially pay off debts to creditors. Bankruptcy of a company is a complicated and uneasy process during which not only the debtor suffers, but, first of all, the company's creditors. The risk of non-repayment of funds increases many times over.
As a rule, insolvency may occur as a result of circumstances or unsuccessful business activities. In this case, the circumstances may be different: financial or global crisis, sanctions, natural disasters, pandemic, etc. But sometimes, such circumstances are created intentionally in order to avoid the legitimate satisfaction of creditors' claims. For example, fictitious transactions are concluded, property is alienated, documents are forged, or a number of deliberate actions or omissions are carried out on key issues that negatively affect the company's solvency. The main goal is to illegally obtain the company's assets, avoid tax payments and defraud creditors.
According to the signs, there are two types of bankruptcy fraud: fictitious bankruptcy and premeditated bankruptcy. Official receivers are responsible for identification of the fraud signs. They analyze decisions made by the company's management, as well as determine the nature of transactions and assess performed actions. The results of investigations are recorded in the reports of official receiver.
Fictitious bankruptcy is a deliberately false announcement by the CEO or shareholder of the insolvency of the company. In truth, the company has assets level necessary to fulfill the obligations.
Premeditated bankruptcy is a deliberate commission by the CEO or shareholder of actions, as a result of which the company cannot fulfill the payment obligations and satisfy the claims of creditors.


According to the Russian laws, the following consequences occur in case of detecting the signs of fictitious or premeditated bankruptcy:
  • administrative liability in the form of fine;
  • disqualification of management for the period from 6 months up to 3 years (Art. 14.12 of the Code of the Russian Federation on Administrative Offenses)
  • initiation of a criminal case with a fine in the amount of 100 thousand to 300 thousand rubles;
  • imprisonment for up to 6 years (Art. 196 of the Criminal Code of the Russian Federation “Deliberate bankruptcy”, Art. 197 of the Criminal Code of the Russian Federation “Fictitious bankruptcy”).
If the debtor-legal entity is unable to meet its obligations to creditors, the controlling persons will have to pay within the framework of subsidiary liability or indemnification.
In addition, counterparties may also be subject to disciplinary measures. For example, recognition of completed transactions as invalid, prosecution in the form of fines, disqualification, exclusion from the Unified State Register of Legal Entities and criminal liability. Also, it is essential to recall that the main risk for counterparties of a company declared insolvent, is the loss of funds.
It is important to provide Customer Due Diligence check to avoid negative consequences. Information and Analytical system Globas helps to detect signs of shell and unreliable companies.
Let's examine the cases when Globas will help to identify a future bankrupt, detect signs of premeditated or fictitious bankruptcy, as well as determine the personal liability of the company, CEO, shareholder in a bankruptcy case.

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

Availability of facts of violation of the legislation may change the opinion on a counterparty and the strategy of interaction in contractual liabilities. There is a risk of repeated breaching the law by a person previously brought to liability for violation. Corporate regulations of many companies contains a clause on inadmissibility of cooperation with companies associated with violations of the laws of the Russian Federation.
When analyzing a business partner in Globas, information on bringing to administrative or criminal liability and participation in legal proceedings is automatically displayed on the main page or in the sections in the single-window mode.

Background for future bankruptcies

Combination of the following factors may point at the problems with solvency of a legal entity. After a while they can become a catalyst for bankruptcy.
  • decrease in the company's liquidity;
  • worsening the financial conditions based on the analysis of ratios;
  • increase of the number of arbitration cases on disputes related to the fulfillment of obligations;
  • emergence of active writs of execution on overdue debts, taxes and payroll;
  • reduction of tax burden;
  • liabilities exceeding assets;
  • losses of previous years;
  • increase in debt load.
Globas check a counterparty for availability of these factors in an automated mode. Globas indexes allow to determine the current liquidity level and general financial condition of a company. "Signs of a shell company" index helps to reveal the degree of proximity of the analyzed company to an unreliable one. Counterparties having problems with the payment discipline can be identified using the Arbitration and Enforcement proceedings section. Cases with the category of improper performance of obligations will help to identify the overdue accounts payable. The Analytical Financial Report will show the results of financial and economic analysis and inform on the presence of losses of previous years, decrease in solvency and increase in the company's debt load.

Bankruptcy and damage to creditors

Irrational decisions and unreasonable contracts can lead to premature liquidation of the company due to insolvency. However, after the commencement of bankruptcy proceedings, an inspection will be carried out in relation to the management, all persons controlling the debtor and counterparties with whom contracts were concluded. The official receiver will check for signs of premeditated 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 liability or compensation for damages. Moreover, in case of detection of unreasonable transactions, part of the liability may pass to counterparties.
Globas contains the entire information on entrepreneural activities of a person and involvement in business. In addition, information from related sources is analyzed and compared. Globas will show a warning marker about bringing a person to liability in a bankruptcy case, calculate the amount of joint liability, show notifications from the Unified Federal Bankruptcy Register and the arbitration case related to this event.
Also, if signs of premeditated or fictitious bankruptcy are detected, Globas will show information in the form of factors requiring attention and a report of the official receiver in the form of a notification from the Unified Federal Bankruptcy Register.


Check of counterparties in Russia and around the globe

Globas helps to analyze business partners, minimize commercial, tax, sanctions risks, removes routine work from specialists conducting verification, 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.

Secondary sanctions: examples and risks
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Sanctions are a tool that is used by the initiator of restrictive measures to put pressure on geopolitical rivals, individual states or certain territories. States and organizations impose sanctions and create liabilities for their violation at the legislative level.
However, direct sanctions do not always lead to the desired political result for their initiator. Countries under sanctions look for and successfully find new ways of development, new business partners, open up new markets and often even take advantage of the current situation.

The 50% Rule

The beneficiaries of the expansion of the scope of sanctions measures are the United States. A division of the United States Department of the Treasury, the Office of Foreign Assets Control, commonly known as OFAC, is the originator of the 50% Rule.
For the first time OFAC applied the 50% Rule in 2008 as part of its Iran containment program. Subsequently, the Rule was extended to other sanctions programs.
According to the 50% Rule, any entity that is 50% or more owned, directly or indirectly, by one or more sanctioned entities is also treated as a sanctioned entity, even if it is not on the list.
The purpose of the Rule was to extend sanctions to all entities that may be directly or indirectly associated with individuals and companies under sanctions.
Let's take a look at the application of the 50% Rule with a few examples.
Example 1:
Person X is sanctioned and owns 60% of Company A. Company A owns 50% of Company B. At the same time companies A and B are not on the sanctions list.
Picture 1. Understanding the 50% Rule
According to the 50% Rule both companies A and B are subject to sanctions restrictions.
Example 2:
Person X is sanctioned and owns 40% of Company A. Company A owns 80% of Company B. At the same time companies A and B are not on the sanctions list.
Picture 2. Understanding the 50% Rule
According to the 50% Rule companies A and B will not be subject to sanctions restrictions.
Example 3:
Person X and Company are under sanctions. Person X owns 4% and Company owns 47% of Company A. At the same time company A is not on the sanctions list.