Legal Grounds of Director’s Liability within Corporate Relationships: New Trends of Court Practice

The article contains study in the civil liability of a director of a corporation both for inflicting damages and bringing to insolvency and infringement of creditors rights. The basic material for the present research is the most significant decisions of the Constitutional Court of the Russian Federation and the Supreme Court of the Russian Federation of recent years, as well as current court practice on the issues of ascertainment of the grounds for directors liability and qualification of the elements of his offence breachingof his duty to act reasonably and in good faith in the best interests of the corporation. The authors state the same features of illegal behavior in both cases corporate liability for damages and subsidiary liability. Meanwhile the article contains conclusion that the criteria of infringement of creditors rights are de facto isolated from the occasion of bringing the debtor to insolvency. The authors also underline inadmissibility of confusion of such elements of the offence as illegality, guilt, causal relation that can be frequently met in court decisions. Besides it, the research covers the aspects of qualification of unlawful behavior in cases, when decision is taken collegially by directorate and criteria of wrongful influence of a sole director in such situation. The unresolved problem of determination of the notion of guilt in corporate relations is highlighted in details; ideas for the criteria of innocence of the director are proposed. Considerable attention is also paid to evaluation of the notion of good faith in corporate law; the authors point out the increase of the standard of acting in good faith for the director and the uncertainty of legal boundaries of such behavior. Finally the research contains analysis of controversial court practice on the issue of imposing liability for making an unprofitable bargain by the director in case of a favorable conclusion upon such bargain made by the special committee of the corporation. Authors use system analysis, formal legal approach and other methods of exploration.

subsidiary liability, controlling person, director’s liability for inflicting damages, good faith and reasonableness, bringing to insolvency, infringement of the creditors’ rights, standard of proper governance