In a period when foreign creditors holding claims against Kazakhstani oil and gas companies have grown increasingly attentive to the question of who, beyond the insolvent entity itself, may bear liability for corporate losses, a line of decisions from Kazakhstani courts has clarified — and in several respects tightened — the conditions under which controlling persons face secondary liability. For foreign investors and trade creditors seeking recovery in Kazakhstan oil and gas insolvency proceedings, the practical implications of this judicial trend are material: the threshold for establishing a controlling relationship has been interpreted broadly, the grounds for imposing personal liability have expanded, and the procedural tools available to creditors in insolvency have been reinforced.
Kazakhstan's rehabilitation and bankruptcy legislation has long provided for subsidiary liability of persons whose decisions or instructions materially contributed to an enterprise's insolvency. In the oil and gas sector, this framework intersects with a regulatory environment defined by the Subsoil Use Code, which imposes specific obligations on subsoil users and creates a web of corporate structures — operating companies, licence-holding entities, and project companies — through which foreign investors typically participate. The controlling person concept in Kazakhstani insolvency law encompasses not only majority shareholders but also persons who, by virtue of contractual arrangements, operational authority, or de facto direction, were in a position to determine the debtor's conduct. In oil and gas matters, this has encompassed parent-level foreign entities that held operational control over a Kazakhstani project company, even where formal shareholding was held through intermediate vehicles. The legal question before the courts has generally been whether a given entity or individual, through the exercise of actual authority over the debtor, caused or materially aggravated the insolvency — and whether that causal link is sufficiently established to ground a claim under the subsidiary liability provisions.
In a line of proceedings resolved before the Kazakhstani courts in the period leading up to 2027, the courts addressed the liability of controlling persons in several oil and gas insolvency matters where foreign-affiliated structures were involved. The courts' approach has crystallised around several consistent principles. First, the threshold of "control" is assessed functionally rather than formally: a foreign parent company that directed the Kazakhstani operating entity's cash flows, approved major contracts, or determined capital expenditure decisions has, in the courts' analysis, exercised the degree of influence sufficient to engage the controlling person provisions — regardless of the formal corporate distance between the entities. Second, the courts have treated the approval of extractive transactions at disadvantageous terms, particularly intra-group transfers of oil revenues or equipment, as conduct capable of establishing the causal link between controlling-person instructions and the deterioration of the debtor's financial position. Third, and perhaps most consequentially for foreign creditors pursuing recovery, the courts have accepted that the burden of rebuttal lies with the controlling person: once a creditor or insolvency administrator has adduced evidence of functional control and financial deterioration, the controlling person must demonstrate that its conduct did not cause or aggravate the insolvency. This reversal of the evidential burden has materially altered the procedural dynamics of claims against foreign-affiliated controlling persons in Kazakhstan oil and gas proceedings.
"The Kazakhstani courts' functional approach to control — looking through formal structure to actual decision-making authority — creates real exposure for foreign parent entities that exercised operational oversight over insolvent Kazakhstani subsidiaries in the oil and gas sector." — Daniyar Abenov, Contributing Regional Analyst — Kazakhstan, Vetrov & Partners
For foreign creditors, this development is significant precisely because it opens a recovery avenue that extends beyond the assets of the insolvent operating entity. Where the Kazakhstani project company holds diminished or encumbered assets — a common feature of distressed oil and gas structures — the ability to pursue the foreign controlling entity through subsidiary liability proceedings substantially expands the pool available for recovery.
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The judicial trend described above carries several practical consequences for foreign investors and creditors with exposure to Kazakhstani oil and gas entities. For creditors, the key insight is procedural and temporal: claims against controlling persons under Kazakhstan insolvency legislation must be initiated within the insolvency proceedings — and the window for doing so is defined by the rehabilitation or bankruptcy timetable, not by general limitation periods. Creditors who delay in assessing whether a controlling person claim is available — and whether the foreign parent entity's conduct meets the functional control threshold — risk that the proceedings will move to a stage where such claims are no longer actionable. This is the single most consequential risk management point arising from the current judicial practice.
For foreign investors operating Kazakhstani oil and gas structures, the implications run in the other direction. A foreign parent entity that exercises operational oversight — through seconded management, group treasury arrangements, or formal approval rights over significant transactions — should now approach that oversight with explicit awareness of the subsidiary liability exposure. The [Restructuring & Insolvency](/jurisdictions/kazakhstan/insolvency/) practice context in Kazakhstan requires that group governance arrangements be reviewed for the degree of functional control they confer, particularly in periods of financial stress at the project-company level.
For foreign law firms instructing local counsel on cross-border Kazakhstan-Russia matters or multi-jurisdictional recovery mandates, it is worth noting that the controlling person liability claim in Kazakhstani proceedings is a distinct procedural instrument from asset tracing or enforcement of foreign judgments. Coordinating these tools — particularly in structures where assets are held across Kazakhstan, Cyprus, and intermediate jurisdictions — is a common feature of [asset recovery in Kazakhstan](/jurisdictions/kazakhstan/asset-recovery/) engagements and requires early-stage strategic alignment. The AIFC Court, as a common-law forum operating in Astana, offers a parallel procedural route in some circumstances that merits evaluation alongside the state court insolvency track.
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Q: What does this ruling change?
A: The decisions discussed here consolidate a functional approach to identifying controlling persons in Kazakhstani insolvency proceedings — an approach that looks past formal shareholding structures to actual decision-making authority. For oil and gas matters, this means that foreign parent entities exercising operational control over a Kazakhstani project company are now on clearer notice that such control may be sufficient to engage subsidiary liability provisions, even where formal legal ownership is held through an intermediate vehicle. The practical change is that the combination of a functional control test and a reversed evidential burden has made controlling person claims more accessible to insolvency administrators and creditors than was previously the case under a more formal, equity-based analysis of control.
Q: What should foreign companies do in light of this decision?
A: Foreign companies with existing or prospective interests in Kazakhstani oil and gas entities should take two immediate steps. First, any creditor or investor who suspects that the insolvency of a Kazakhstani project company was influenced by the conduct of a controlling person — whether a foreign parent, a majority shareholder, or an entity exercising de facto authority — should obtain an early assessment of whether a subsidiary liability claim is viable within the current or anticipated insolvency proceedings. Second, foreign entities that exercise operational oversight over Kazakhstani subsidiaries should review their governance arrangements in light of the functional control test now applied by the courts, to understand and, where appropriate, to limit their liability exposure. Legal advice on Kazakhstan insolvency law and oil and gas regulatory matters from qualified local counsel — coordinated with cross-border counsel where international structures are involved — is the appropriate first step.
Vetrov & Partners is a Russian boutique law firm established in 2009. The firm is recognised by Pravo-300 — Russia's principal legal directory — for eight consecutive years and is listed as a trusted adviser by the German Consulate General in Novosibirsk.
The firm's Restructuring & Insolvency practice advises foreign trade creditors, institutional investors, and distressed-asset acquirers on recovery proceedings across Russian and CIS jurisdictions, including Kazakhstan. On Kazakhstani matters, the firm works in collaboration with qualified local counsel, coordinating cross-border strategy from instruction through to enforcement. With over 1,000 matters handled since inception, the team brings direct partner involvement to every engagement.
We are a Russian-qualified law firm. For matters governed by Kazakhstani or other foreign law, we collaborate with trusted qualified counsel in the relevant jurisdiction.
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This publication is provided for informational purposes only and does not constitute legal advice under Russian or any other applicable law. The information herein should not be relied upon as a substitute for professional legal counsel tailored to your specific circumstances. Vetrov & Partners is a Russian-qualified law firm. For matters governed by foreign law or requiring local admission in another jurisdiction, we collaborate with trusted counsel in the relevant jurisdiction. For advice regarding your particular situation, please contact info@vetrovpartners.com.
— Daniyar Abenov Contributing Regional Analyst — Kazakhstan, Vetrov & Partners vetrovpartners.com/contributions/