Challenging Pre-Insolvency Transactions: Articles 61.2 and 61.3 in Practice

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Category tag:
Practice Analysis

Byline:
By Stanislav Lastovsky

May 2026

INSIGHTS ARTICLES — pre-insolvency transaction challenges russia

A cross many Russian insolvency proceedings, the question of whether pre-insolvency asset movements can be reversed determines whether the creditor recovers anything meaningful. The debtor's balance sheet at the point of the insolvency filing frequently reflects a fraction of the value it held twelve or eighteen months earlier. The deficit is not always explained by operational losses.

The Legislative Framework

Articles 61.2 and 61.3 of the Federal Insolvency Law provide the primary mechanisms for challenging pre-insolvency transactions. These provisions operate differently and have different evidentiary requirements, but share a common objective: returning to the insolvency estate assets that were extracted before the filing in a manner that was prejudicial to creditors.

Article 61.2 covers transactions at undervalue — transactions in which the debtor transferred assets, assumed obligations, or otherwise acted in a way that did not provide equivalent value in return, and which were made with the purpose or effect of prejudicing creditors. There are two limbs: transactions within one year before the insolvency filing are challengeable on an objective basis (the transaction lacked equivalent value); transactions within three years before the filing are challengeable if the debtor was insolvent at the time or became insolvent as a result, and if the counterparty knew of the debtor's insolvency or creditor-prejudicing intent.

Article 61.3 covers preferential payments — transactions that satisfied claims of specific creditors at a time when other creditors existed, and which were not made in the ordinary course of business. The time windows are shorter: transactions within one month before the filing are challengeable on an objective basis; transactions within six months before the filing are challengeable where the creditor who received payment knew of the debtor's insolvency.

Who Can Challenge and When

Challenge applications under Articles 61.2 and 61.3 can be filed by the insolvency administrator or — subject to a threshold — by individual creditors. The individual creditor threshold is ten per cent of the total claims registered in the creditor register. For a foreign creditor with a significant claim relative to the total register, this threshold may be met; for a trade creditor with a small claim in a proceeding with many creditors, it frequently is not.

The insolvency administrator has the obligation to review the debtor's pre-insolvency transactions as part of their statutory duties. In practice, the vigour with which this obligation is exercised varies significantly depending on the administrator's relationship with the debtor, the complexity of the transactions, and the creditor pressure brought to bear on the administrator to pursue challenges.

A creditor who identifies promising challenge targets and brings them to the administrator's attention — with an analysis of the grounds and the likely recovery — is more likely to see those challenges pursued than a creditor who takes a passive position.

The Evidentiary Requirements

A successful challenge under Article 61.2 requires the applicant to establish: the transaction (its terms, timing, and the parties involved); the absence of equivalent value received by the debtor; and — for the three-year window — the debtor's insolvency at the time or resulting from the transaction, and the counterparty's knowledge of that insolvency.

The evidentiary burden is meaningful. Russian courts require documentary evidence of the transaction's terms, of the market value of the transferred assets at the time of transfer, and — where the challenge relies on the counterparty's knowledge of the debtor's insolvency — of the circumstances from which that knowledge is inferred. Evidence that the counterparty was an affiliate of the debtor, or that the transfer occurred shortly before a significant creditor demand was made, is relevant to the knowledge inference but not conclusive.

For foreign creditors whose claims arise from supply contracts, the most relevant pre-insolvency transactions to challenge are typically: transfers of the debtor's Russian real property or shareholdings in Russian companies to affiliates; cash payments to affiliated companies described as loans or service fees; and the discharge of insider debts in the period before the filing.

The Outcomes

A successful challenge under Article 61.2 or 61.3 returns the transferred asset — or its cash equivalent — to the insolvency estate. The returned value is then distributed to all creditors in the priority order established by the Insolvency Law. For a creditor in the third priority tier (as most trade and financial creditors are), the benefit of a successful challenge is proportional — the returned value is shared pro rata across all third-priority creditors.

This means that the decision to pursue a challenge is partly a decision about the creditor register composition: a challenge that returns significant value to a register dominated by related-party creditors may benefit those related parties more than the challenging foreign creditor.

Practical Approach for Foreign Creditors

The most effective approach for a foreign creditor is to instruct Russian insolvency counsel to conduct a systematic review of the debtor's pre-insolvency transactions at the earliest possible stage — ideally before or immediately after the first creditors' meeting. The review should cover: corporate registry filings for share transfers; property registry filings for real property transfers; the debtor's published financial statements (if available); and the judicial database for related proceedings that may reveal relevant transactions.

This review is conducted primarily through publicly accessible Russian databases and does not require court process. It provides the factual basis for an assessment of challenge prospects before any application is filed.