Defence against corporate takeover

What is happening

One morning the owner receives a notice from the bank: the director's powers have been terminated, someone else has been entered in the register and is already trying to operate the account. None of the participants has seen the documents the entry is based on.

A former partner, on leaving the business, kept access to the company seal, the electronic signature and key contracts. Now, through affiliated creditors, he is bringing claims against the company that look like preparation for bankruptcy and a grab for its assets.

The company is growing, it now owns valuable property and holds licences, and the owners want to know in advance where they are exposed: in the charter, the ownership structure, the director's powers or security arrangements.

What the law says

• Changes to the state register are made under Federal Law No. 129-FZ of 8 August 2001 "On State Registration of Legal Entities and Individual Entrepreneurs" (the State Registration Law). It allows interested persons to lodge objections to a forthcoming registration with the registering authority and allows individual participants to declare that no changes may be registered without their personal involvement.
• Disposals of stakes in an LLC are, as a rule, notarised under Federal Law No. 14-FZ of 8 February 1998 "On Limited Liability Companies" (the LLC Law), and general meeting resolutions are certified by a notary unless the charter provides otherwise. This makes forgery harder but does not rule it out.
• The Civil Code allows a participant who has lost his stake against his will through the unlawful acts of others to claim it back. Such claims are heard by the commercial courts as corporate disputes.
• In a corporate dispute the court may grant interim measures at short notice, prohibiting registration changes, dealings in stakes or disposals of company property. Speed of application is critical.
• A registering authority's decision to make an entry in the register can be challenged before the higher tax authority and in the commercial court.
• The charter and a shareholders agreement can restrict disposals of stakes to third parties in advance, require participants' consent to transactions and raise quorum thresholds, reducing the risk of a takeover from within.

What we do

• We audit vulnerabilities: the charter, the ownership structure, the director's powers, powers of attorney, access to the signature and seal, and pledges over stakes and property.
• We propose and implement changes to the charter and corporate documents and set up monitoring of changes in the state register.
• We prepare objections to the registering authority and declarations that no registration may take place without the participants' personal involvement.
• When an attack is under way, we file a claim and an application for interim measures at once and notify the banks and key counterparties.
• We challenge unlawful register entries and pursue the return of the stake and the reinstatement of the lawful director.
• We oppose artificial claims by affiliated creditors where the takeover is being run through debt and bankruptcy.

What we will need from you

• The charter, a register extract, and the list of participants or the shareholder register.
• Documents showing how the participants acquired their stakes or shares, and any shareholders agreement.
• Details of powers of attorney in force and of who holds the electronic signature and the seal.
• Pledge agreements over stakes, shares and property, and major loan agreements.
• If an attack has begun: everything known about the disputed register entry, notices from banks and letters from the new management.