On the Subordination of Creditors’ Claims for Suspicious Transactions of the Debtor (Bankrupt)

Introduction: challenging the transactions of a bankrupt debtor is one of the most important legal instruments to counteract the illegal withdrawal of the debtor’s assets by his controlling persons. The consequences of the invalidity of such transactions of the debtor in insolvency (bankruptcy) procedures have their own characteristics, consisting in the return by the counterparty of the received under the transaction and the restoration of his right of claim to the debtor. The legislator has provided for a special sanction in relation to counterparties whose dishonesty in making a transaction is established by the court, namely, lowering the priority of restored claims – subordination. Purpose: to analyze the mechanism of subordination of restored creditor claims. Methods: the dialectical method of cognition, systematic approach, comparative approach, deduction, induction, logical and legal analysis, and synthesis. Results: the general civil and special bankruptcy regulations on the consequences of invalidity of transactions are analyzed, and a comparative analysis of the grounds for invalidity of transactions is carried out in accordance with clauses 1 and 2 of Article 61.2 of Bankruptcy Law. Conclusions: the imperfection of the legislative technique and the practice of applying rules on the invalidity of transactions lead to the fact that the mechanism of subordination of restored claims can potentially be applied to creditors whose dishonesty is only established on the basis of formal and indirect signs, which creates a threat of violation of the rights of actually bona fide purchasers.