Corporate conflicts: current causes and future implications
In recent years, the nature of corporate conflicts within companies has undergone a significant transformation. Many transactions involving the exit of foreign investors include provisions for the potential return of assets to Russia. However, when foreign companies choose to repatriate, not all of these processes will proceed smoothly.
Some asset owners may resist the return of their assets, while others may dispute the terms of the return or the amount of compensation due. These disputes may lead to new legal proceedings in the courts, creating additional corporate disputes.
At present, several types of corporate disputes are currently being addressed in court:
- Disputes regarding the exclusion of members from limited liability companies (LLCs).Currently, Russian LLC participants are increasingly seeking to exclude passive foreign shareholders who hinder the normal operations of companies. This is because, due to the presence of “frozen” shareholders, it is difficult to convene and conduct general meetings, approve transactions, and coordinate senior management candidacies. An increase in such proceedings in court is anticipated in the near future.
- Additionally, there has been an emergence of a new type of dispute in judicial practice involving the suspension of the exercise of corporate rights by foreign holding companies in relation to economically significant enterprises. We can expect to see cases in which the ownership of shares in these companies is “straightened out” in the near future.
- Over the past two years, the number of deprivation claims brought by the prosecutor’s office has increased. One of the first cases was the dispute over the sanatoriums belonging to the Federation of Independent Trade Unions of Russia. This case involved over a hundred defendants from various regions. Some of these defendants became involved simply because they had acquired a building that had passed through several owners over a period of two decades and, in the 1990s, belonged to a sanatorium. The first instance court fully satisfied the claim. However, following fifty hearings, this decision was reversed by the Moscow City Court.
Not all such disputes are governed by clear rules. In some cases, the courts have retroactively applied rules on liability that did not exist at the time of the disputed relationship. They have also incorrectly determined the burden of proof and circumstances for applying the rules on invalidity of transactions and termination of ownership. New disputes lead to new law enforcement practices, and this will only continue to grow in the years to come.