Why are management organizations and homeowners associations subject to criminal liability?

Working with debtors is a legal requirement

Conducting work with debtors is a mandatory requirement for the activities of HOAs (clause 4 of the Rules for the implementation of activities for the management of apartment buildings, approved by Decree of the Government of the Russian Federation of May 15, 2013 No. 416).

There is an opinion among the chairmen of partnerships that the specified Rules 416 do not apply to HOAs, and therefore HOAs should not comply with all the requirements of Rules 416. This opinion does not correspond to the law, since Rules 416 establish standards and procedures for managing apartment buildings, including for HOAs, housing cooperatives (subparagraph b, paragraph 1 of Rules 416).

“Bad” debts of residents to the HOA

Traditionally, articles addressed to commercial organizations on the topic of bad and doubtful debts focus on tax accounting. It is known that the Tax Code of the Russian Federation allows you to reduce taxable profit by the amount of such receivables, the only question is in the details (which debts are recognized as doubtful and bad, in what order they are included in expenses). For HOAs, this problem is irrelevant, since in most cases payments by premises owners are not included in income, and accordingly, expenses (in particular, in the form of bad debts and provisions for doubtful debts) are not formed. However, debts that cannot be collected are the reality of the practice of any HOA. What are the requirements of accounting legislation for organizations that have debt that is unrecoverable, as well as doubtful debt? How should they be implemented by partnerships?

Accounting legislation requirements

Uncollectible debts

The obligation of an organization (we emphasize: any organization, not just a commercial one) to write off receivables for which the statute of limitations has expired, as well as other debts that are unrealistic for collection, is established by clause 77 of the Regulations on accounting and financial reporting in the Russian Federation [1] . Reasons for write-off - data from the inventory, written justification, order (instruction) of the head of the organization. Amounts of debts are credited to the reserve for doubtful debts or to the financial results of a commercial organization, if in the period preceding the reporting period, the amounts of these debts were not reserved, or to an increase in expenses of a non-profit organization. Further, the above rule states: writing off a debt at a loss due to the insolvency of the debtor does not constitute cancellation of the debt. This debt must be reflected on the balance sheet for five years from the date of write-off in order to monitor the possibility of its collection in the event of a change in the debtor's property status.

As we see, a non-profit organization, including a homeowners association, will not be able to avoid writing off debts that are unrealistic for collection (if only because non-profit organizations are directly mentioned in paragraph 77 of this document). Accounts receivable in the amount of obligatory payments and (or) contributions of members of the HOA, as well as fees for the maintenance and repair of common property and fees for utilities paid by the owners of premises who have not joined the HOA, are formed monthly in the accounting records of the partnership by posting Debit 76 Credit 86[ 2]. The reflection of specifically the debt for targeted financing (as opposed to accounting for targeted financing using the cash method) is determined by the legal status of the HOA:

in the event of failure by the owners of premises in an apartment building to fulfill their obligations to participate in the implementation of general expenses, the HOA in court has the right to demand forced compensation for mandatory payments and contributions ( clause 3 of Article 137 of the Housing Code of the Russian Federation );
the partnership may demand in court full compensation for losses caused to it as a result of the failure of the owners of premises in the apartment building to fulfill their obligations to pay mandatory payments and contributions and pay other general expenses ( clause 4 of article 137 of the Housing Code of the Russian Federation );
The HOA is obliged to ensure that all owners of premises in the apartment building fulfill their responsibilities for the maintenance and repair of common property in the house in accordance with their shares in the right of common ownership of this property ( clause 5 of Article 138 of the Housing Code of the Russian Federation ).

Clause 77 of the Regulations on Accounting and Financial Reporting in the Russian Federation refers to any receivables, and not just debts arising in connection with the sale of goods, works, and services.
Consequently, the debt of residents can be considered as unrealistic for collection and must be written off even in a situation where the HOA does not regard its statutory activities as the implementation of works and services. The criteria for recognizing a debt as unrealistic for collection have not been established (with the exception of the expiration of the statute of limitations). They must be contained in a written justification, which is necessary for writing off the debt[3].

As for the application of the limitation period, it is three years and is counted from the moment when the right of the HOA was violated by the debtor, that is, when the debtor did not make payment on time (clause 2 of Article 200 of the Civil Code of the Russian Federation ), namely (in the general case, according to Clause 1 of Article 155 of the Housing Code of the Russian Federation ) from the 10th day of the month following the billing month. The limitation period is applied by the court upon the application of a party to the dispute. If the debtor does not declare its expiration, the dispute will be considered on its merits ( Clause 2 of Article 199 of the Civil Code of the Russian Federation ). In other words, you can file a lawsuit to collect a debt from a tenant in any case. It should be taken into account that the limitation period may be interrupted, in particular, by the filing of a claim and the debtor taking actions indicating recognition of the debt. After the break, the period begins to run again ( Article 203 of the Civil Code of the Russian Federation ). Actions indicating recognition of the debt, taking into account the explanations presented in paragraph 20 of the Resolution of the Plenum of the Supreme Arbitration Court of the Russian Federation dated November 12, 2001 No. 15, the Plenum of the Supreme Arbitration Court of the Russian Federation dated November 15, 2001 No. 18 , may include the tenant’s request for an installment plan or deferred payment, the conclusion of an agreement about installment or deferment, partial payment of the debt. Meanwhile, you need to understand that payments by property owners are periodic (monthly) in nature and actions indicating recognition of debt in relation to certain payments are not grounds for interrupting the statute of limitations for other payments.

So, accounting legislation obliges HOAs to monitor accounts receivable at least from the point of view of the limitation period, and also to write off the debt when such a period has expired. In this regard, we believe that the HOA has the right to consider debts that are unrealistic for collection only those for which the statute of limitations has expired (and other debts that a commercial organization usually writes off should not be considered as such [4]). In practice, there are situations when partnerships write off such debts only after the court applies the statute of limitations at the request of the debtor (these HOAs have established debt collection efforts, including in court).

Provision for doubtful debts

The obligation to create reserves for doubtful debts for all organizations is established by clause 70 of the Regulations on accounting and financial reporting in the Russian Federation , and also follows from PBU 21/2008 “Changing estimated values” (approved by Order of the Ministry of Finance of the Russian Federation dated October 6, 2008 No. 106n ). Thus, the organization creates reserves for doubtful debts in the event that receivables are recognized as doubtful. In turn, an organization’s receivables are considered doubtful if they have not been repaid or with a high degree of probability will not be repaid within the time limits established by the agreement and are not provided with appropriate guarantees. For the purposes of applying PBU 21/2008, a change in the estimated value (which, in particular, is the amount of the reserve for doubtful debts) is recognized as an adjustment to the value of an asset (accounts receivable), which is due to the emergence of new information, is made based on an assessment of the current state of affairs in the organization, expected future benefits and obligations and does not constitute a correction of an error in the financial statements ( clauses 2 , 3 of PBU 21/2008 ). In the financial statements, the reserve for doubtful debts is not shown separately, but reduces the amount of “receivables” in the balance sheet asset ( clause 35 of PBU 4/99 “Accounting statements of an organization” [5] ). As you can see, the issue of recognizing debt as doubtful and determining the amount of the reserve is decided in each situation separately; accounting standards do not establish clear criteria.

The purpose of creating a reserve for doubtful debts (by the way, it is created for each debt in an amount depending on the solvency of the debtor and the assessment of the likelihood of repaying the debt in whole or in part) is to show reliable information about receivables in the reporting. However, writing off debts that are unrealistic for collection pursues the same goal. Therefore, paragraph 77 of the Regulations on accounting and financial reporting in the Russian Federation states that such debts are written off as expenses only if their amounts were not reserved in the previous reporting year.

The HOA may have doubts as to whether the debt of the owners of the premises is really doubtful and subject to reservation. A literal reading of clauses 70 and 77 of the Regulations on accounting and financial reporting in the Russian Federation in general may lead to the idea of a non-profit organization creating a reserve only for debts incurred in connection with economic activities. Thus, the amounts of created reserves (as well as reserves not used at the end of the year) are required to be attributed to the financial results by the agreement is violated (an agreement is not concluded between the HOA and its members, at least in parts of the maintenance and repair of common property), and in paragraph 77 the phrase is constructed in such a way that one can conclude: debts can be attributed to the reserve only from a commercial organization. However, these doubts are unfounded. Firstly, from the current version of clause 70 of the Regulations on accounting and financial reporting in the Russian Federation , formed by Order of the Ministry of Finance of the Russian Federation dated December 24, 2010 No. 186n , the mention is excluded that doubtful debts arise only in connection with payments for products, goods , works and services, which means that in connection with the receipt of targeted funds, doubtful debts may arise (naturally, if the targeted financing is not taken into account on a cash basis). Secondly, in PBU 21/2008 there is no mention that this standard applies only to commercial organizations or non-profit organizations, but only in terms of facts related to business activities (such a clause, by the way, is in many PBUs). Thirdly, by virtue of clause 4 of PBU 21/2008, a change in the estimated value is subject to recognition in accounting by inclusion in the income or expenses of the organization (and this wording no longer excludes its use by non-profit organizations).

Therefore, the HOA, like any non-profit organization, is obliged to create a reserve of doubtful debts. This is also indicated by the Ministry of Finance in the Information on the peculiarities of the formation of financial statements of non-profit organizations (PZ-1/2011) [6] . In this case, a strategic issue is to determine the criteria for doubtful debt. It should be worked out in advance and the selected criteria should be included in the accounting policies for accounting purposes. Formally, since the probability of repaying an overdue debt is assessed individually, nothing prevents the HOA from assessing it as high (especially in the case of a conscientious approach by board members to stimulating payment discipline) and, as a result, not having such an indicator as a reserve for doubtful debts taken into account.

Features of financing HOA expenses

As you know, the necessary expenses for the purposes established by law and the charter of the HOA form the expenditure part of the estimate. On its basis, the income part is determined, which serves as the basis for calculating the amount of payments and contributions of each owner of the premises in the apartment building in accordance with his share in the right of common ownership of common property (see paragraphs 2 , 3, paragraph 1 of Article 137 of the Housing Code of the Russian Federation ) . Let's consider a common situation when an HOA has no income from business activities. The partnership actually cannot influence the amount of budget subsidies as one of the sources of income according to the estimate. The only type of revenue, the determination of the amount of which is controlled by the management bodies of the HOA, namely the general meeting of its members ( clause 4, clause 2, article 145 of the Housing Code of the Russian Federation ), is payments from the owners of the premises.

The estimate of income and expenses provides for the correspondence of receipts and payments to the HOA. It is clear that it is almost impossible to draw up an estimate for a year in advance, the expenditure part of which will be exactly fulfilled, since deviations in the form of savings or overexpenditure on certain items are inevitable. A completely normal practice is to create a contingency fund and establish a procedure for spending it[7].

Key Takeaway:

Creating a contingency fund in accordance with the HOA's financial plan and creating a reserve for doubtful debts in accounting are completely different things. The adoption of a decision by the general meeting of HOA members to create a fund means that the owners of the premises will contribute a certain amount of money as part of the appropriate fee to finance specific types of expenses. This means that the source of their financing has already been determined and formed. For example, using the funds of a special fund, you can write off bad debts, if, of course, the regulations on the fund provide for this type of expenditure. In turn, the creation of a reserve for doubtful debts in accounting does not depend on the will of the HOA members and the willingness of the owners of the premises to cover the “bad” debts of their neighbors at their own expense. The reserve is created by force of law, even if the owners refuse to finance it.

Nevertheless, extraordinary expenses often arise in the economic life of an HOA that are not included in the estimate and are not included in the possible areas of spending from such a fund. We will assume that unforeseen expenses do not depend on the will of the partnership (for example, sanctions from government bodies, payments based on court decisions, etc.). It is quite fair that such forced expenses incurred within the framework of statutory activities should be covered by payments from the owners of the premises (or members of the HOA). If the general meeting of HOA members (namely, it has the last word) does not authorize an increase in contributions to cover unforeseen expenses, you need to understand that this is a direct path to bankruptcy. The fact is that the payments in question will be made regardless of the will of the HOA members (as a rule, amounts not paid voluntarily are forcibly debited from the partnership’s account); as a result, the debt to the HOA’s counterparties, which is provided for in the estimate, will not be repaid. The accumulation of debts above a certain amount is one of the grounds for initiating bankruptcy proceedings[8].

Let's return to the “bad” debts of tenants. The lack of planned revenues according to the estimate means that the HOA will not be able to pay its obligations, which also entails the risk of bankruptcy. At the same time, the reflection in the balance sheet of the partnership of “receivables”, which are unrealistic for collection, distorts information for users of financial statements and violates the requirements of accounting legislation. The HOA is required by law to write off debts that cannot be collected from its balance sheet, so it is necessary to determine the source of financing for such expenses.

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[1] Approved by Order of the Ministry of Finance of the Russian Federation dated July 29, 1998 No. 34n. [2] See articles by N. N. Shishkoedova “Accounting and tax accounting in HOAs: is there any implementation?” (No. 10, 2011), “Accounting for fees received from owners of premises who are not members of the HOA” (No. 11, 2011). [3] The reason for recognizing the debt of the owner of the premises as unrealistic for collection may be the order of the bailiff to complete the enforcement proceedings and return the writ of execution due to the debtor’s lack of property that can be collected (Article 46 of the Federal Law of October 2, 2007 No. 229 Federal Law “On Enforcement Proceedings”). [4] Thus, the issuance of a resolution by the bailiff to terminate enforcement proceedings due to the impossibility of collection does not prohibit subsequently re-submitting the writ of execution for execution, which indicates the theoretical possibility of collecting the disputed debt. [5] Approved by Order of the Ministry of Finance of the Russian Federation dated July 6, 1999 No. 43n. [6] Read more about this document on page XX. [7] The fact that the contingency fund can be used not for any needs not provided for in the estimate, but only for those established by a special provision on such a fund, was described in the article by G. Yu. Sharikova “Reserve Fund of HOAs” ( No. 4, 2010). [8] See article by M. A. Chistyakova “Bankruptcy of HOAs” (No. 9, 2008)

Principles of working with debtors

Based on our experience of working with debtors and the experience of homeowners associations, we have developed principles for working with defaulters that will help maintain high collection rates.

Timeliness.

The sooner you start reminding about the presence of debt, the greater the likelihood of receiving debt. Every month the debt increases and the larger the amount, the more difficult it is for the debtor to pay off the debt in one payment.

Promises must be kept.

If the debtor promised to pay the next payment and did not do so, and the HOA previously promised to file an application with the court, then the organization should fulfill the promise. Unfortunately, the problem of many HOAs is that chairmen work independently with debtors and very often do not fulfill their promises in response to non-payments (be it a power outage or filing a lawsuit). As a result, debtors simply do not perceive such “threats” from the HOA.

The debtor's promises must be legally formalized.

An oral agreement is possible if the debt is 3-4 months, and you have already had experience working with this person who kept his promises. If the debt is more than 5 months, it is necessary to formalize a written agreement to repay the debt. At the same time, the HOA has the right to provide for payment for the provision of installment plans (for example, according to paragraph 4 of clause 72 of Rules 354, the agreement can provide for the collection of interest, the amount of which cannot be higher than the refinancing rate of the Central Bank of the Russian Federation, increased by 3 percent, in force on the day the installment plan is granted).

The presence of a judicial act does not mean the actual receipt of debt on the account of the HOA.

Unfortunately, the system for executing judicial acts is not ideal, so it is not always possible to receive money with a judicial act.

Procedure for payment of utilities. Legislation

The Housing Code of the Russian Federation (Articles 153-154) establishes the following:

1. The owner is obliged to pay utility bills on time and in full;

About the size of debts

As for the size of the debt, in Russia in general this figure is at the level of one and a half trillion rubles. If you calculate it for each citizen of the Russian Federation, it turns out to be a little, it would seem - about 10 rubles. But, of course, housing and communal services are paid either by the family or by the organization.

At the same time, it is customary to distinguish between simply defaulters and persistent defaulters. The malicious ones are those who have not paid for a long time and, apparently, do not intend to pay. According to data provided by the National Bureau of Credit Histories, for each persistent defaulter there is about 46 thousand rubles of debt for housing and communal services.

How to avoid subsidiary liability of the founder: thinking 2 steps ahead

This guide is suitable for those who are still running a company, but are already wondering what will happen next if debt obligations have become unsustainable and there is barely enough money to cover current expenses.

When delinquencies are about to occur or have recently begun, prepare a bankruptcy petition. A common mistake made by former directors is delaying bankruptcy
. According to the law, managers have 30 days to officially admit insolvency.
If creditors file for bankruptcy first, this is 100% guaranteed subsidiary liability. It will also arise if leaders are inactive and wait by the sea for weather.
If you take out loans - register yourself as a guarantor
. As a rule, this measure acts as protection against subsidiary liability. In case of bankruptcy, creditors turn their claims to the guarantor. The following is the standard procedure:
- forwarding the claim;

If banks have limited themselves to applying for compulsory collection, they can independently declare bankruptcy and write off debt obligations. From the moment the procedure for selling property is introduced, enforcement proceedings are suspended. At the same time, if bankruptcy will save you from loans under surety agreements, then writing off subsidiary liability is impossible.

Make sure that valuable purchases
family members
were transparent
. If, for example, your spouse buys a house, during bankruptcy the company will need to prove that the purchase was NOT made with company money.
If this fact cannot be proven, the property will be at risk. It may be seized to satisfy the claims of creditors.
Follow the documents
. Often the reason for prosecution is a lack of proper documentation. There are not enough additional agreements, transactions were carried out incorrectly, arrears were calculated - these factors do not play in favor of management.
If you understand that bankruptcy cannot be avoided, start minimizing risks. Put your documents in order, find missing contracts, certificates and receipts. It is important.
buy new property
before bankruptcy . Even if you, say, have 2 other sources of income, and the property was purchased with confirmed money, you still need to reduce the risks.

Remember: the arbitration manager will check all transactions concluded over the last 3 years: both your personal and commercial contracts. Transactions of this kind are often regarded as a withdrawal of personal property.

How to avoid subsidiary liability?

If the procedure for liquidating an LLC in court has already begun, the question naturally arises - how to get rid of the impending subsidiary. To put it mildly, this is far from the most joyful event in life, so the steps taken also promise little pleasure. Still, the recommendations will be as follows:

Criminal prosecution
. As a rule, when a subsidiary is threatened, no less risks arise in terms of criminal prosecution. Of course, these are unpleasant consequences, restrictions in the future, questions about how to live with a criminal record, and so on. But in this case, you should choose the lesser of two evils.
Criminal liability will save you from subsidiary liability. The fact is that Russian legislation prohibits double punishment. If, for example, for concluding unprofitable transactions you face Art. 159 of the Criminal Code of the Russian Federation (Fraud), then prosecution for the company’s debts can be appealed.
Cooperation with creditors and arbitration manager
. If you actively interact with stakeholders, this will avoid the transfer of company debts to you. It is important to clearly express agreement to cooperation and assistance.
You need to constantly be in touch, deliver the necessary documentation, and provide important information. Such actions show that a person is ready to meet halfway, that he has honest intentions. If you are a nominee director, concessions in such cases are provided for by law.
Challenging
. Don't be idle if things don't turn out in your favor. You can submit petitions, complaints, protest various actions of the financial manager, decisions of the meeting of creditors.
Challenge every step of the manager. This will help slow down the process and will act as indirect evidence that you are right. In this case, it is better to enlist the support of experienced lawyers.
Expanding the circle of culprits
. If you understand that there is a subsidy, but for some reason the debt obligations are transferred only to you, do not give up. You can significantly reduce the amount of debt if all culprits are held accountable. There may be 2-3 of them or all 20 - it depends on the specific circumstances.
Agree, the transition of 100 million per person is bad. If the same 100 million rubles are transferred to 20 people, then each will owe 5 million, which looks more optimistic.
Read also: How to find out where a person is registered by last name for free

Personal responsibility of the HOA chairman

The chairman is the head of the association. He makes decisions regarding the work of the HOA, and also monitors the implementation of the organization’s budget plan. If there is any suspicion of the integrity of this official, his actions are subject to careful scrutiny.

First of all, signs of deliberate bankruptcy, fraud or theft should be excluded. If they are discovered, the chairman is brought to administrative and even criminal liability.

If the manager’s activities comply with the standards, he is not responsible for the presence of debt. All debts are repaid from the property of the partnership.

Find out what the rights and responsibilities of the HOA chairman are.