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Bringing the founders to justice for the company’s debts: myth or reality?

27/ 07/ 2021
  Author: Natalia Ponomarenko, Lawyer of Dynasty Law & Investment Some statistics: as of June 1, 2021, according to the Unified State Register of Enterprises and Organizations of Ukraine, there are 1,414,175 legal entities in our country. Almost half of them - 722,327 - were created in the form of limited liability companies. This popularity of this organizational and legal form is not least due to the fact that the founders of such a company, as a general rule, are not responsible for the debts of the company, their risk is limited to the contribution to the authorized capital, which can be equal to 1 hryvnia. years, the legislation does not contain a lower limit on the authorized capital of limited liability companies. However, this is a rule that is known to confirm the exception. Such an exception is the norm of the Bankruptcy Procedure Code of Ukraine, which gives the liquidator the authority to file a petition to the commercial court to bring the founders to subsidiary liability for the debts of the bankrupt, if they by their actions or instructions brought the legal entity to insolvency. Judicial practice, which is formed after the entry into force of the Bankruptcy Code of Ukraine (from October 21, 2019), has finally begun to protect the violated rights of creditors of the legal entity-debtor. Commercial courts began to satisfy the claims of the liquidators, and to impose debts of the company, which it could not pay due to lack of assets, on the founders. Such court decisions will no longer allow unscrupulous business owners to avoid liability under the guise of imaginary impunity and limitation of liability. Conscientious founders should keep in mind that business is always associated with risk, so even choosing the most safe form of management is no longer a guarantee that you will not have to answer for your own property.

Author: Natalia Ponomarenko, Lawyer of Dynasty Law & Investment

Some statistics: as of June 1, 2021, according to the Unified State Register of Enterprises and Organizations of Ukraine, there are 1,414,175 legal entities in our country. Almost half of them – 722,327 – were created in the form of limited liability companies.

This popularity of this organizational and legal form is not least due to the fact that the founders of such a company, as a general rule, are not responsible for the debts of the company, their risk is limited to the contribution to the authorized capital, which can be equal to 1 hryvnia. years, the legislation does not contain a lower limit on the authorized capital of limited liability companies.

However, this is a rule that is known to confirm the exception. Such an exception is the norm of the Bankruptcy Procedure Code of Ukraine, which gives the liquidator the authority to file a petition to the commercial court to bring the founders to subsidiary liability for the debts of the bankrupt, if they by their actions or instructions brought the legal entity to insolvency.

Judicial practice, which is formed after the entry into force of the Bankruptcy Code of Ukraine (from October 21, 2019), has finally begun to protect the violated rights of creditors of the legal entity-debtor. Commercial courts began to satisfy the claims of the liquidators, and to impose debts of the company, which it could not pay due to lack of assets, on the founders.

Such court decisions will no longer allow unscrupulous business owners to avoid liability under the guise of imaginary impunity and limitation of liability.

Conscientious founders should keep in mind that business is always associated with risk, so even choosing the most “safe” form of management is no longer a guarantee that you will not have to answer for your own property.

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