How to collect debt from a Russian business

This article will be useful to foreign companies expecting a refund from a Russian business, which fails or refuses to pay.

I. PRE-LITIGATION RESOLUTION

a) The first method is to send a DEMAND letter to the debtor.

Why is this necessary?:

→ the demand is an opportunity to understand the official position of the defendant, whether they will pay or not; also, perhaps, you will receive some kind of response with an explanation of why the defendant fails to pay and, depending on it, you will assess the chances of success in court.
→ the demand is REQUIRED for commercial cases, and the judge will deny you if you do not comply with the procedure.

In the claim, you will need to indicate the details of your company and the counterparty's company, describe in detail the essence of the dispute and justify your demands (factual and legal justification), and also clearly formulate what you want to achieve.

In most cases, the claim must be sent in paper form to the address specified in the business register, although if there is an address in the contract, use it; and send the document by registered mail with a list of enclosures. Then the claim is considered received, even if it was not factually delivered to the debtor.

Further, as a general rule, if you have not received a response within 30 calendar days from the date of sending the claim, you can apply to the commercial court.

b) The second method of pre-litigation resolution is the MEDIATION procedure - dispute resolution with the help of an intermediary.

To do this, the parties enter into a mediation agreement. Mediation is conducted within a period of no more than 60 days. All agreements reached during the mediation procedure are spelled out in the settlement agreement.

This agreement has the force of a regular civil contract; however, such an agreement serves as an enforcement document when certified by a notary.

II. JUDICIAL COLLECTION

So, you tried to collect money, nothing worked and you go to court.

Here you need to choose which of the three possible types of legal proceedings you will choose:
→ Order proceedings
→ Simplified proceedings
→ Claim proceedings

Their key differences are in the terms, the procedure for considering cases and the categories of disputes in which they can be considered.

a) Claim proceedings are the usual ones, which are most often encountered in legal disputes: this is the most complete consideration of the case, when court hearings are appointed and the parties are summoned. Disputes last from 3 to 6 months (the maximum term in the first instance is 6 months) or up to several years (taking into account several instances).

The claim proceedings are initiated by the commercial court on the basis of a statement of claim.
After the claim is accepted, the judge appoints a court hearing on the case. They summon the parties and request their explanations. As a rule, at least 2 court hearings are appointed for the case, but there may be 5, 10, and even 20 of them.

Based on the results of the case, the court makes a decision. The outcome largely depends on the evidence presented to the judge. The decision comes into force after the expiration of a month if there is no appeal. If the defendant filed a complaint, then it cannot be executed, and you then prove your case in the appellate court, which takes another 3 to 4 months. Only after this you can receive a writ of execution and begin enforcement through bailiffs. In addition, it is expensive (you need to bear the costs of lawyers and fees, and sometimes for appraisals). The advantage is that once you have gone through this, the decision can no longer be challenged.

b) Simplified proceedings are applied to claims for payment, if the price of the claim does not exceed 1,200,000 rubles for legal entities, and 600,000 rubles for individual entrepreneurs.

And in addition, it is applied regardless of the price of the claim, when the defendant acknowledges monetary obligations, but simply does not fulfill them. In this case, of course, you must submit proof of the debt under the contract and the recognition of the debt by the opposite party.

The case is considered without scheduling a court hearing, but the judge studies the documents provided by the plaintiff and the defendant. The proceedings last up to 2 months.

A decision made in the simplified procedure comes into force within 15 days, unless it has been appealed by one of the parties. If a complaint has been filed, it comes into force on the day of consideration by the court of appeal.

c) Order proceedings. This is carried out without a trial based on an application for a court order, which is considered within just ten days. The issued court order is also a writ of execution. In addition, the fee is only 50% of its usual amount. It sounds quick and simple, but why cannot plaintiffs always use this method? Because it is possible only if the amount exceeds 750,000 rubles, and if INDISPUTABLE evidence of your right to demand money is provided, such as bank statements. Plus, the court order can easily be cancelled at the request of the debtor - then you will need to apply again in the general claim procedure.

III. ALTERNATIVE COLLECTION METHODS

So, you have received a court decision and a writ of execution by going through one of the above procedures, contacted the bailiffs, but the decision has not been executed. What can be done in this case? Consider initiating BANKRUPTCY proceedings against the debtor.

Note that bankruptcy proceedings can be initiated if the claims against the legal entity debtor in total amount to at least 2,000,000 rubles, and against the individual debtor (these also include individual entrepreneurs), at least 500,000 rubles. The debt must be overdue for more than 3 months.

If the debt to you is less than the specified amounts, then, as an option, you can try to find other creditors to combine your claims and receive a total of 2,000,000 or 500,000. This is a long procedure that lasts from 1.5 to several years, depending on the size of the business and how long it has existed on the market.

What happens if the company does not have money to pay back? You can file a claim to hold the head of the debtor business vicariously liable (meaning they will pay the company's debts); in Russia, it is called «subsidiary liability» (субсидиарная ответственность). This is possible if it is proven that the company is unable to fully repay its debts due to the actions and/or inaction of the person controlling it. But do not forget that without bankruptcy proceedings, you will not be able to hold the head of the company liable for subsidiary liability.

Need legal help? Feel free to contact us:
Tel: +7 909 961-19-09
Email: legalsolutions@inbox.ru
Visit us: Moscow, Zubovskiy bulvar, building 4/1, office 308



You might also like the articles:

How does a foreigner file with the Russian court?
Putting a claim to your contractor - Russia
Russian taxes paid by a foreign company not operating in Russia