Transactions Detrimental to the Creditors beyond the Insolvency Proceedings (Out-of-Court Challenge)

The paper discusses problems related to out-of-court challenge of a debtor’s transactions. In particular, the author explores the current position of the Supreme Court of the Russian Federation on questions of challenging debtor’s transactions before the insolvency proceedings, the procedure for distributing the burden of proof, legal grounds for challenging. Based on the results of the study, the author concludes that out-of-court challenge has a number of undeniable advantages similar to one within the insolvency proceedings. It may as well aim at preventing the withdrawal of assets of the debtor, protecting the creditor from abuse of the right by the debtor. The out-of-court challenge provides for additional guarantees to creditors even before the initiation of the insolvency proceedings. However, to claw back transaction made by the debtor in anticipation of bankruptcy based on Art. 10, 168 of the Civil Code of the Russian Federation, it is necessary to provide the court with strong evidence of the abuse of the right aiming at harming creditors both from the debtor and the counterparty’s side. In addition, out-ofcourt challenge requires careful study at the legislative level in order to prevent abuse by creditors, in particular in order to minimize the possibility of double challenge (first, out-of-court, then within the insolvency proceedings).