Disputes between participants and shareholders

What is happening

Two partners with a fifty-fifty split worked on trust for years, and now every general meeting ends in nothing. The budget is not approved, the director can be neither replaced nor properly empowered, and the company runs on momentum while each month of stalemate costs money.

A minority participant notices key customers moving across to a new firm set up by the director or the other participant. Requests for company records go unanswered or are met with a couple of pages, and he has no clear picture of what is happening to his stake.

A shareholder in a non-public company wants out, but there is no outside buyer for the shares and the majority is offering a price with no connection to what the business is worth. The conversation about price has turned heated, and the sides are now exchanging lawyers' letters.

What the law says

• The rights of an LLC participant are set by the Civil Code and by Federal Law No. 14-FZ of 8 February 1998 "On Limited Liability Companies" (the LLC Law): taking part in management, access to information, sharing in profits, and withdrawing or disposing of a stake to the extent the charter allows.
• For shareholders, equivalent rules are found in Federal Law No. 208-FZ of 26 December 1995 "On Joint-Stock Companies" (the JSC Law), including access to company documents and the cases in which a shareholder may require the company to buy back its shares.
• Corporate disputes are heard by the commercial (arbitrazh) courts under Chapter 28.1 of the Commercial Procedure Code (APK), usually at the company's registered location, even where the parties are individuals rather than companies.
• In a corporate dispute the court may grant interim measures: barring company bodies from taking certain decisions, or prohibiting dealings in shares or registration changes. In practice this is often more important than the claim itself, because it freezes the position while the dispute runs.
• A dispute can be ended by a settlement agreement at any stage, including one under which one side buys out the other. Mediation is also available under Federal Law No. 193-FZ of 27 July 2010 "On the Alternative Procedure for Dispute Resolution with the Participation of a Mediator (Mediation Procedure)".
• Where a participant is causing the company substantial harm, the Civil Code allows a court claim for his exclusion; where the harm was done by the director, losses can be recovered from him. These are separate tools with different things to prove.

What we do

• We rebuild the timeline of the conflict from the documents: versions of the charter, meeting resolutions, register extracts, correspondence and money flows with the main counterparties.
• We request company records on behalf of the participant or shareholder and, if they are refused, pursue disclosure through the court.
• We assess the leverage on each side: who controls the director, the bank accounts and the key contracts, where the weak points lie, which scenarios are realistic and how long each would take.
• We prepare and conduct negotiations over a buy-out, a division of assets or a new governance model, and record what is agreed in a shareholders agreement or a settlement.
• We file claims and applications for interim measures and represent the client in the commercial court at first instance, on appeal and in cassation.
• While the dispute is under way, we monitor the state register and corporate procedures so that the other side cannot change the director or the membership unilaterally.

What we will need from you

• The current charter and any earlier versions you can find.
• Resolutions and minutes of general meetings, the list of participants or an extract from the shareholder register.
• Any shareholders agreement and any contracts for the sale of stakes or shares.
• Correspondence with the other participant and with the director on the disputed issues, including messenger chats.
• Whatever you know about the company's finances: accounts, bank statements, major contracts, details of any firms the business may be moving to.
• Your objective: to keep the business, to exit for value, to change management or to split the assets.