Vicarious Liability in Deliberate Bankruptcy

By virtue of subparagraph 7) of Article 1 of the Law of the Republic of Kazakhstan "On Rehabilitation and Bankruptcy" (hereinafter referred to as the Law), the main goal of the bankruptcy procedure is to satisfy the claims of creditors at the expense of the bankrupt's property mass. In this connection, in order to protect the legitimate property interests of creditors, the norms of the Civil Code of the Republic of Kazakhstan (hereinafter referred to as the Civil Code) and the Law provide for subsidiary liability of the founder (participant) and (or) official of the bankrupt, that is, additional liability of these persons for the obligations of the main debtor - bankrupt to creditors for intentional bankruptcy and failure to comply with the requirements of the Law. Thus, according to paragraph 3 of Article 44 of the Civil Code, the founder (participant) and (or) official found guilty of deliberate bankruptcy in the course of proceedings on administrative offenses or criminal proceedings, if the legal entity has insufficient funds as a result of the bankruptcy procedure, is liable to creditors subsidiary liability. Similar grounds for subsidiary liability of the founder (participant) and (or) official of the debtor for intentional bankruptcy are provided for in paragraph 1 of Article 6 of the Law. Also, the norm of paragraph 4 of Article 11 of the Law provides that if the debtor's property is insufficient to satisfy the claims of all creditors, the debtor's officials jointly and severally bear subsidiary liability for failure to comply with the requirements established by paragraph 2 of Article 11 of the Law, namely for: - not applying to the court to declare the debtor bankrupt in cases where a decision is made to liquidate it, and the value of the property is not enough to satisfy the claims of creditors in full; - failure to provide the court and the administrator with information about the financial and economic activities of the debtor; - failure to transfer to the interim manager the constituent documents, accounting documentation, documents of title to the bankrupt's property, material and other valuables belonging to the bankrupt. In accordance with paragraph 2 of Article 6 of the Law, the bankruptcy manager, within ten working days from the date of entry into force of a judicial act on bringing the founder (participant) and (or) official to criminal or administrative responsibility, is obliged to apply to the court with a claim against such person for bringing him to subsidiary liability and collecting amounts in the amount determined in accordance with paragraph 3 of Article 96 of the Law. The creditor is also entitled to apply to the court with a claim in the manner prescribed by this article, if the founder (participant) and (or) official are found guilty of intentional bankruptcy in the order of administrative or criminal proceedings after the completion of the bankruptcy procedure. The amount of claimed claims when bringing a person to subsidiary liability is equal to the amount of damage established by a judicial act, on the basis of which such a person was found guilty of deliberate bankruptcy in administrative or criminal proceedings (paragraph 3 of Article 96 of the Law). It should also be noted that it is not allowed to repay administrative expenses at the expense of money received in the bankrupt's property mass as a result of the execution of a judicial act on bringing the founder (participant) and (or) official to subsidiary liability. Such money is subject to direction to satisfy the requirements of creditors (paragraph 1 of Article 100 of the Law).