Category: Russia

The Moscow office of Dentons has advised the Puratos Group on its acquisition of 100% of the shares of Rushleb Research, a Russian manufacturer of biotechnological products for the baking industry.

“Puratos is acquiring Rushleb to extend its offering of local sourdoughs and allow more bakers in Russia to capitalize on the growing consumer demand for sourdough breads,” said Natalia Petrenko, CEO of Puratos Russia.

Puratos is an international provider of products, raw materials, and application expertise to the bakery, patisserie, and chocolate sectors. The company’s products and services are available in more than 100 countries around the world.

The Dentons team included Partner Florian Schneider and Counsel Anton Kunashov. The firm did not reply to an inquiry about the deal.

Dentons has advised GEM Capital Holdings on its all-cash offer for the entire issued and to-be-issued ordinary share capital of Volga Gas. Mayer Brown reportedly advised the issuer.

Volga Gas is a UK-based AIM-listed oil and gas exploration and production group operating in the Volga region of Russia.

GEM is a Cyprus-based investor in specialized chemicals, nano-materials, and technology companies.

According to Dentons, “The takeover was noteworthy in that it was not recommended by Volga Gas’ board but was structured such that the offer was not opposed by the Volga Gas board either.”

The Dentons team included London-based Partner Neil Nicholson, Senior Associate Simon Mitchell, Associates Joe Collingwood and Charlotte Uden, and Trainee Andrew Gallagher.

The Moscow office of Dentons has advised Sberbank on its acquisition of 100% of shares in Yo-Engineering, the Russian developer of the Yo-mobile hybrid electric car, from Belarus-based KG Impex. Dentons was supported on Belarusian aspects of the deal by Stepanovski Papakul and Partners.

According to Dentons, Yo-Engineering’s team will become part of Sberbank subsidiary SberAutoTech, which focuses on the development of automotive digital platforms. Yo-Engineering’s team will develop SberAutoTech’s lines related to creating a platform for autonomous vehicles as well as automobile operating systems and technologies.

The Dentons team included Partner Glenn Kolleeny, Senior Associate Oleg Khlestov, and Associates Tatiana Shadrina and Oxana Pishvanova. They were supported on Belarusian aspects of the project by Stepanovski Papakul and Partners, a member of Dentons Nextlaw Referral Network.

Debevoise & Plimpton has advised Ozon Holdings PLC, a Russian e-commerce platform, on the issue of USD 750 million senior unsecured bonds due 2026, convertible into American depositary shares, representing ordinary shares of Ozon.

The bonds carry a coupon of 1.875% per annum. The initial conversion price of the bonds was set at USD 86.6480, representing a 42.5% premium above the reference ADS price of USD 60.8056, being the volume-weighted average price of one ADS on the Nasdaq Global Select Market between opening and closing of trading on February 17, 2021. The bonds were offered and sold outside the United States in reliance on Regulation S of the U.S. Securities Act of 1933, as amended.

Debevoise’s team was led by London Partner James Scoville and Moscow Partner Alan Kartashkin, and included Partner Richard Ward, Counsels Vera Losonci and Dmitry Karamyslov, and Associates Evgenii Lebedev, Timur Ochkhaev, Milo Gordon-Brown, and Paul Eastham.

Acting on behalf of firm client CD Land Contact LLC, Russia’s Intellectual Capital law firm has initiated bankruptcy proceedings against Fortes LLC.

According to Intellectual Capital, Fortes illegally sold products in its Red Cube chain of stores using the image of a character owned by CD Land Contact LLC. According to the firm, “CD Land Contact LLC, a company that manages copyright and related rights, and also holds a license to use the work of fine art Homunculus loxodontus, known in Russia as ZHDUN.”

Intellectual Capital reported that a dispute ensued last year over Fortes’s illegal use of ZHDUN’s IP and that a court in Russia decided in favor of CD Land Contact and ordered Fortes to pay RUB 5 million in damages. The execution of that decision, the firm reported, became impossible due to Fortes’s insolvency, and as a result, Intellectual Capital initiated the bankruptcy procedure for Fortes LLC.

Intellectual Capital’s team was led by Lawyer Emma Kalamkaryan.

DLA Piper has advised Elektrozavod Group, a Russian manufacturer of transformer equipment, on the RUB 30.5 billion sale of a 94.01% stake in JSC Elektrozavod and 100% in LLC Elektrokombinat to LLC Megapolis Invest, a joint venture between Sistema and Sberbank Investments. Cleary Gottlieb Steen & Hamilton advised the buyers on the deal.

Sistema and Sberbank Investments provided equity financing to Megapolis Invest in the amount of RUB 11 billion and RUB 3.5 billion, respectively. Additionally, Sberbank Investments provided the purchaser with debt financing of RUB10.2 billion.

According to DLA Piper, the aim of the transaction is to create “Russia’s leading manufacturer of transformer equipment and implement a real estate development project on Elektrozavod Group’s land plots totaling 19 hectares near the Elektrozavodskaya metro station in Moscow.”

DLA Piper’s Moscow-based team was led by Partners Constantine Lusignan and Igor Venediktov and Counsel Alexey Kolegov and included Legal Director Maria Shevchenko, Senior Associates Zaurbek Timaev and Julia Zenova, and Associate Artem Pravdin.

Cleary Gottlieb Steen & Hamilton’s team included Partner Yulia Solomakhina and Associates Vladislav Miroshnichenko and Irina Bratishkina.

Several years ago, certain amendments concerning the status of a CEO in Russia (in Russian corporate law, as a rule, this position is called General Director) were introduced to the Russian Civil Code as a part of a major reform of Russian civil legislation. Among these changes was the introduction of the ability to limit the liability of a CEO for damages he or she inflicted on the company, although this is still not widespread and is untested in practice. In this article, we address certain key issues regarding the civil liability of CEOs in Russia, including its potential limitation.

Russian legislation establishes the obligation of the director to act in the interests of the company, reasonably and in good faith. The concepts are not fully defined in Russian legislation and are only touched upon in guidelines provided by the Highest Court of the Russian Federation.

In particular, the CEO may be held liable if by his/her actions or misconduct the company incurred losses (damages) or if he/she concluded a transaction to the detriment of the interests of the company.

In order to hold a CEO liable, a number of issues need to be established: fault must be proven; the company must have incurred losses/damages, and a cause-effect relationship between the actions/misconduct of the CEO and the incurred losses/damages has to be established. In practice it is often difficult to prove all three factors in court and thus to hold the CEO liable.

Moreover, a CEO shall not be deemed at fault if all measures for the proper performance of duties were taken with such care and diligence as are required by the nature of the obligation and conditions of doing business. Specifically, in ambiguous situations involving entering into a transaction or acting on behalf of the company, a CEO shall collect evidence confirming that he/she has sufficient powers to proceed with the action/transaction and is acting in the interests of the company, reasonably and in good faith. For example, the following evidence may be provided during disputes: unlawful actions of third parties, misconduct of counterparties, the CEO voted against the relevant corporate decision resulting in damages, etc.

In addition, prior to stepping into his/her position, a company’s CEO can execute an agreement with the company (with the exception of public companies) limiting his/her liability with respect to unreasonable actions, although it is not possible to limit the CEO’s liability for actions taken in bad faith or representing willful breaches of his/her obligations, or where the CEO is considered to be controlling the company (with the definition of “controlling” established by Russia’s Insolvency Law). However, based on limited court practice, it appears that it can be difficult to draw a distinction between “unreasonable” actions and actions taken “in bad faith,” as such concepts are interconnected (see, e.g., Resolutions of the Arbitration Court of Western-Siberia of November 22, 2018, case No. A45-8908/2018 and of Eastern-Siberia of December 8, 2014, case No. A10-825/2014). In practice, cases concerning the liability of a CEO are rather complex and courts generally make decisions on a case-by-case basis, taking into account the existence of limited liability agreements as one of the factors.

It should also be noted that Russian law contains no rules on the indemnification of the CEO by the company. It seems that due to the above limitations and the Russian interpretation of “indemnity” the existing legal framework leaves little space for indemnification, though in practice indeed some companies may enter into indemnity agreements with their CEOs.

The concept of limiting the liability of a CEO is not tested and in practice there are still many issues which would require the further attention of legislators and practitioners with respect to the type of agreement, the necessity of corporate approval for releases from liability, accession of the issue of whether the release of the liability “option” is attributed to a specific person or can be in general implemented in the corporate set-up of the company, and so on.

Director’s liability insurance is an available tool for minimizing the losses of both director and company, already common in many other countries. However, due to legislative uncertainty, such insurance is not widespread in Russia. The terms and conditions of insurance need to be specifically observed.

Though there are uncertainties with respect to legal options for limiting liability under Russian law, it is clear that the limitations of liability begin with understanding it.

By Svetlana Seregina, Partner, and Polina Savvina, Senior Associate, Peterka & Partners

This Article was originally published in Issue 7.12 of the CEE Legal Matters Magazine. If you would like to receive a hard copy of the magazine, you can subscribe here.

Morgan Lewis has advised a consortium of investors led by the Russia-China Investment Fund on the establishment and development of the Binnopharm Group pharmaceutical holding.

According to Morgan Lewis, “as a result, the holding, which also includes Sistema PJFSC, a publicly-traded Russian investment company, and VTB Group … will become one of the three largest pharmaceutical manufacturers in Russia as part of a long-term strategy to consolidate Russian pharmaceutical market and create a leading producer of medicines and innovative pharmaceuticals.” 

RDIF, Sistema PJSFC, and the VTB Group contributed 85.6% of their stake in JSC Alium and Sistema and VTB contributed 56.2% of their stake in OJSC Sintez to Binnopharm Group’s equity. Consequentially, Sistema and VTB will hold 79%, the consortium 15.8%, and minority stakeholders 5.2% of the stake in the Binnopharm Group.

The Moscow team of Morgan Lewis included Partner Artem Tamaev and Associates Emil Shagiakhmetov, Valentina Semenikhina, Philip Korotin, Anastasia Kiseleva, and Andrey Ignatenko.

Integrites has successfully represented the interests of China-based Foshan Vinmay Stainless Steel Co. Ltd in an anti-dumping investigation related to the import of welded stainless pipes, manufactured in China, into the Eurasian Economic Union. The proceedings were initiated by Russian stainless pipes producers.

Foshan Vinmay Stainless Steel is a Chinese producer and exporter of welded stainless pipes and related fittings. The company exports 30,000 tons of products to more than 60 countries worldwide, annually.   

According to Integrites, the firm managed to secure the lowest level of dumping margin for Foshan Vinmany Stainless Steel, in comparison to other companies involved in the investigation.

Integrites’ team included Counsels Sergiy Lakhno and Yevgen Ivanets and Paralegal Ivan Yefimenko.

Russia’s Intellectual Capital law firm has persuaded the Moscow Arbitrazh Court that a requirement that participants in a Rosatom tender for legal counsel be ranked in Legal500 and Chambers & Partners was illegal and violated Russian competition law.

According to Intellectual Capital, “in the summer of 2020, the Russian state atomic energy holding, Rosatom, announced a tender for a contract to help the corporation obtain international patents on the territory of foreign states. One of the mandatory requirements for procurement participants was the presence in the international ratings Legal 500 and Chambers and Partners (section Intellectual Property).” According to the firm, “only one foreign law firm, Gowling WLG, met this criterion. Two other candidates – DLA Piper and Intellectual Capital – were [as a result] not allowed to participate in the competition.”

Intellectual Capital objected to the Moscow department of Russia’s Federal Antimonopoly Service, alleging that Rosatom was holding a non-competitive tender, in violation of Russia’s procurement law. In its complaint, the firm pointed out that “a law firm does not need to have experience in projects of ‘obtaining international patents’ in order to get into the international ratings of Legal 500 and Chambers and Partners. That is, [presence in those ratings] does not in any way confirm qualifications.” According to the firm, “the controversial condition may be part of the evaluation during the tender itself, but it should not prevent participation in it.”

The FAS agreed with Intellectual Capital’s complaint and ordered the applications of law firms reconsidered, without their presence (or absence from) the rankings being taken into account. Rosatom went to court to overturn that decision and order.

The Moscow Arbitrazh Court dismissed Rosatom’s claim and ruled that the requirement that applicants be included in the rankings “in itself cannot guarantee the quality of services and sets an unreasonable barrier” for participation in the tender. Rosatom appealed – but also, in January 2021, signed a contract with Intellectual Capital“

“We have confirmed with all the necessary documents a high level of qualifications for working with such projects,” said Irina Pokatovich, head of the Antimonopoly Law practice at Intellectual Capital.