Features of the consideration of corporate disputes. How to resolve disagreements in pre-trial and judicial proceedings?

Jun, 02 2022

Contents:

A corporate dispute is a disagreement arising within a certain company and related to its creation, management, reorganization, profit distribution or liquidation. A conflict may arise between shareholders, legal entities, sole proprietors, commercial and non-profit organizations, as well as affect the interests of small firms and large-scale corporations. 

Due to the fact that corporate dispute is a common phenomenon in Russian practice, the number of appeals to the court for consideration of such cases does not decrease from year to year. 

What are the features of the consideration of cases on corporate disputes?

Corporate disagreements differ in the subject composition and nature of the disputed relations. Legal practice shows that every year legal disputes between participants become more complicated and confusing. For example, the most common types of conflicts are as follows: 

• The appearance of losses due to obviously unprofitable transactions of the director. 

According to Article 53.1 of the Civil Code of the Russian Federation, compensation can be collected from the management if the decisions taken have led to financial losses. In this case, it will be necessary to prove the director’s dishonest behavior, the fact of monetary losses incurred, as well as the causal relationship between these two events. 

Examples of judicial practice in this case include the distortion of information by the director and the provision of false information to the founders about the transaction, as well as the conclusion of an agreement without the consent of the supervisory board. 

• Exclusion of the founder from the membership of the legal entity. 

The provision is contained in article 10 of the Law “On Limited Liability Companies”. The grounds for exclusion may be a gross violation of the rights of other participants or the inaction of the founder, which significantly complicates the company’s activities. Also, the reasons for exclusion may be the approval of obviously unprofitable transactions, systematic absence at general meetings. 

Such a claim can be filed with the Arbitration Court from a participant (group of participants) of a company whose total share in the authorized capital is more than 10%. 

• Recognition of the transaction as invalid. 

According to the Civil Code of the Russian Federation, it is possible to invalidate a transaction due to the following circumstances: its obviously unfavorable conditions, the counterparty’s awareness of the interest in the transaction, the lack of consent among the management bodies.

• Disagreements over the distribution of dividends. 

Such disputes often arise when the amount of dividends paid is lower than the proportional number of securities of the participants. In this case, the person receives the right to enforce his rights. 

Features of pre-trial consideration of corporate disputes

As a rule, the settlement of disputes in a pre-trial procedure does not require a mandatory claim regulation for conflict resolution. However, at their own request, the parties can try to resolve the issue before going to court. This will help to avoid unnecessary costs and save time. 

When it comes to resolving a corporate conflict, the services of a third party mediator are often resorted to for help. His task is to listen to the two parties to the dispute and offer different solutions that would best meet the interests of both sides. 

As a rule, the basic principles of mediation include:

  • voluntary nature, which means the consent of two participants to involve a negotiator;
  • active participation of the two sides in the dialogue; 
  • the parties should make an independent decision, the mediator only helps to show ways out of the crisis; 
  • the negotiator must take a neutral position and not take sides; 
  • negotiations are confidential at all stages.

There are many situations when a qualified mediator’s help may be needed. As a rule, they are all united by the inability of the two sides to agree and difficulties in finding the optimal way out of the crisis. In general, legal assistance is mandatory if:

  • only one party to the conflict is willing to settle differences; 
  • it is necessary to objectively assess the conflict and its causes from the outside; 
  • there is a need to develop a legal position for future legal proceedings;
  • it is necessary to draw up the text of the arbitration agreement on dispute resolution with the participation of arbitration proceedings.

Resolution of corporate disputes in court

Corporate conflicts are considered by the arbitration court. Most often, at the very beginning of the process, the judge suggests that the parties resolve the dispute by concluding a settlement agreement. If the participants fail to resolve the conflict in such a way that the case will be considered on its merits. 

At the trial, the shareholder must be ready to provide indisputable evidence of violation of his rights, call witnesses, apply for the appointment of an expert examination and examination of documents. 

It is important to know that disputes in the corporate sphere, as a rule, are considered for a very long time and the trial can last for months or even years. In this case, it is important to hire a competent lawyer who will provide full legal support of the process and take on certain work, for example:  

  • preparation of edits to the texts of constituent documents for the presentation of evidence in court;
  • request for official papers from state authorities proving illegal actions of the founders or the director; 
  • calculation of financial losses received by the client due to illegal actions of founders or managers; 
  • legal audit of contracts concluded contrary to the interests of the company.

It is worth being prepared for possible interim measures that often accompany the judicial process. This applies to the prohibition of certain actions, the seizure of assets. 

VALEN lawyers have extensive experience in protecting the corporate interests of business participants (shareholders) and are ready to provide legal assistance both at the negotiation stage and during the trial.

Author of the article
Features of the consideration of corporate disputes. How to resolve disagreements in pre-trial and judicial proceedings?
Valentina Khlavich
Managing Partner
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