An individual debtor’s LLC interest enters the bankruptcy estate, but it is not sold like an ordinary asset: the special actual-value and company-member rules of the LLC Act apply first. The Russian Supreme Court has held that Article 25 of Federal Law No. 14-FZ takes priority when the sale procedure for a bankrupt member’s interest is designed.
The LLC does not automatically become bankrupt
The member’s bankruptcy affects the interest, not the company’s own assets and liabilities.
A special corporate route comes first
The company and other members receive the statutory opportunity to pay actual value before a public auction.
The winner may not become a member
If required consent is withheld, the interest transfers to the company and the winner receives actual value.
Quick self-check
- Obtain a current company-register extract and the LLC charter.
- Identify the interest, pledges, restrictions and corporate rights.
- Review accounts supporting actual value.
- Comply with notice and the Article 25 three-month period.
- Test consent to transfer membership rights to the auction winner.
Bankruptcy Estate Treatment
Article 213.25 of Federal Law No. 127-FZ includes the debtor’s property rights, including an LLC interest, in the bankruptcy estate unless a specific exclusion applies. The financial administrator exercises the debtor’s membership rights, including voting, within the procedure.
Actual Value and the Three-Month Period
Article 25 of the LLC Act allows the company to pay creditors the actual value of the interest and, after a unanimous decision, permits other members to do so under the statutory route. If payment is not made within three months, the interest is sold at public auction.
From 2026, Article 25(2.1) clarifies the valuation date for enforcement: actual value is determined as at the date the demand is presented to the company, subject to the special Article 23 rules.
Designing the Sale Procedure
In paragraph 25 of its 2024 bankruptcy review, the Supreme Court held that general Civil Code Article 250 does not replace the LLC Act. Sale terms should reflect Article 25, the charter, interest size, company information, accounting basis for actual value, notice route and consequences of withheld consent.
The initial auction price relies on valuation and approved terms; it cannot be equated mechanically with nominal capital value.
Auction Winner and Member Consent
If the charter requires member consent for transfer to a third party, Article 21(9) and Article 23 apply. Without consent, the winner does not become a member: the interest transfers to the company, which must pay the winner its actual value.
The charter restrictions and economic consequences of withheld consent should therefore be disclosed before bidding.
Sole Member, Director and Pre-Bankruptcy Transfers
Article 25(2) contains a special exclusion for a single-member company, so its route requires separate legal analysis. Director status is also distinct from membership: management authority does not end or continue automatically merely because the interest is sold.
A pre-bankruptcy transfer to a relative or another person is reviewed as a transaction, including price, actual payment, affiliation and creditor prejudice.
- company-register extract and charter;
- acquisition documents;
- financial statements;
- pledge and dispute information;
- corporate resolutions and notices;
- valuation and approved sale terms.
| Stage | Core action | Main risk |
|---|---|---|
| Inventory | Confirm the interest and membership rights | Stale register data or hidden pledge |
| Valuation | Determine actual and market value | Confusing nominal and economic value |
| Demand to company | Start the special Article 25 route | Wrong date or defective notice |
| Three-month period | Company or members may pay actual value | Skipping the corporate stage |
| Public auction | Sell if payment is not made | Ignoring consent requirements |
| After auction | Register transfer or pay the winner | Winner may not become a member |
Frequently Asked Questions
Does the LLC become bankrupt with its member?
No. The individual and the company are separate persons. The individual estate includes the interest, not company assets.
May the interest be auctioned immediately?
The sale terms must reflect Article 25, including the actual-value opportunity and three-month period.
Is actual value the same as nominal value?
No. Nominal value is stated capital; actual value follows accounting information and the special statutory rules.
Does the winner automatically enter the LLC?
Not always. Where charter consent is required and withheld, the interest transfers to the company and the winner receives actual value.
May the debtor remain general director?
Membership and director authority are separate. The answer depends on the charter, corporate decisions and grounds for ending authority.
Official Sources
- Article 213.25 of Federal Law No. 127-FZ.
- Article 21 of Federal Law No. 14-FZ.
- Article 25 of Federal Law No. 14-FZ.
- Supreme Court 2024 bankruptcy review, paragraph 25.
Related guides: asset valuation, group-company bankruptcy and transaction challenges.
Need to Review an LLC Interest and Corporate Records?
An initial consultation can review the charter, value, notices and sale route without promising an outcome.
BOOK AN INITIAL CONSULTATIONThis material is general information as at 28 August 2026. The route depends on the charter, member structure, pledges, court orders and case-specific facts.
A Member’s Bankruptcy Does Not Bankrupt the LLC
| Item | Owner | Treatment |
|---|---|---|
| Share | Citizen | Included in property analysis |
| LLC bank account | Company | Not the member’s personal account |
| LLC real estate | Company | Not sold as citizen property |
| Dividends | Member after resolution | Income or property right |
| Member loan to company | Member as creditor | Valued separately |
Obtain the current charter
Transfer restrictions and member consent affect the route.
Value the share economically
Nominal value differs from market and actual value.
Record claims against the company
Loans and declared dividends are not absorbed into share value.
The Charter Influences Transfer but Does Not Eliminate Enforcement
Article 25 of the LLC Law governs recourse to a share and payment of its actual value by the company or members before public auction. An auction transfer also engages Article 21 and charter rules, including member consent where applicable. The financial manager exercises rights within statute and court orders. The company may continue trading, but member change, voting and information access require an organized corporate process. Collect the company-register extract, charter, members list, shareholder agreements, accounts, meeting resolutions, distribution records and court orders. Build separate timelines for the share, director powers, company transactions and the citizen’s personal liabilities. Do not confuse share value with cash held by the company: company property does not belong directly to a member. Do not replace a director, member or nominee merely to conceal control because courts assess actual influence and conduct. Full disclosure to the financial manager and charter review before sale help preserve other members’ corporate rights without promising that the debtor’s share will be retained.