On March 30, 2007 a round table meeting on “Dealing in large stocks of shares and minority shareholder squeeze-out: risks and opportunities” was held by Vegas-Lex law firm.
The event was attended by over 20 heads and chief legal officers of the following companies: ОАО NGK Slavneft, ОАО GMK Norilsk Nikel, ОАО Wimm-Bill-Dann, ОАО Severstal-metiz, OAO Silovye Mashiny (Power Machines), ZAO Obyedinennaya Metallurgicheskaya Kompaniya (United Metallurgical Company), Philip Morris Sales and Marketing Ltd., Cargill Enterprises Inc., ОАО Mosnefteproduct, ОАО CENTER JUVELIR, ОАО Linde Gas Rus etc.
Within the framework of the first set of issues the problems were discussed related to dealing in large stocks of shares and project management in the context of purchasing large stocks of shares. Ms. Anna Hudanova, Head of Vegas-Lex Corporate Law Practice, specified instances stipulated by the applicable legislation where the possibility exists to evade the obligation of making a public offer with a view of purchasing a large stock of shares by structuring the deal and provided recommendations on estimating extra expenditures in the event the deal does not yet enable evading obligatory offer. Anna also emphasized the problem of receiving a bank guarantee for an offer having said that except that this guarantee would cost 2-5% per annum to its recipient, by no means all banks are willing to work on such deals.
The subject of banking guarantee in the context of consolidation of shares was extended by Mr. Dmitriy Zemtsov, legal advisor at Corporate Law Practice of Vegas-Lex. In his speech he specified ways of consolidation developed with application of BG; defined legal relationship related to BG in the course of consolidation and nature of the legal relationship mentioned; described the procedure of entry of BG into force as well as problems arising from specifying requirements under it. Dmitriy also particularized problems of antimonopoly coordination of deals for voting share acquisition and offered recommendations on their solving relying on practical experience of Vegas-Lex.
Mr. D. Zemtsov then specified main risks of non-obtainment of corporate approvals as applied to consolidation of shares. Inconsistency of the legislator is highlighted in the report having not included deals related to consolidation in the list of deals which the major deal and interested-party deal approval procedure does not extend to; consequences of corporate disapproval in the course of consolidation are outlined; behavior of top management is specified in default of corporate approval; a consolidation planning pattern in the context of all the subjects listed is presented. At the end of the first set of issues numerous questions of the meeting attendees were answered by the spokesmen.
The second set of issues related to minority shareholder squeeze-out and peculiarities of the squeeze-out procedure in a transitional period was covered by Mr. Alexander Chernishev, senior associate at Corporate Law Practice of Vegas-Lex and Ms. Olga Yurievna Shishliannikova, legal advisor to the Center for Stock Market Development, expert of the Federal Service for Financial Markets in Russia.
Mr. Alexander Chernishev stated the essence of the squeeze-out procedure as well as its stages. Special attention was given to mechanisms of obtaining permission for squeeze-out of companies having received 95% of shares after entry of the law into force, the possibility of squeeze-out by shareholders not having the 95% block of shares as well as possible bypass ways for the necessity of squeeze-out pursuant to the transition provisions.
Accordingly, of special interest for all the attendees was the subject “Peculiarities of the squeeze-out procedure in a transition period” presented by Ms. O.Y. Shishliannikova. In her speech Olga Yurievna particularized terms and objects of a transition period, responsibilities and rights of a person possessing of 95% of shares and peculiarities of estimating the repurchase price; she also specified the most complicated problems of a transition period in terms of squeeze-out law drafters.
Moreover, Ms. Shishliannikova reported on prepared amendments to the Law “On joint-stock companies” and specified statistics of case consideration in the Federal Service for Financial Markets of Russia in the period from March 1, 2006 having outlined predominant violations in the context of which decrees were made by the Federal Service for Financial Markets. Inconsistency of a banking guarantee was mentioned as the foremost among the violations, the next are discrepancy of terms provided, deficiency of any conditions necessary, involving conditions not prescribed by the law, false price determination, and non-provision of essential documents (or provisions in an improper form). The comment “from own lips” arose great interest and heated discussion among the attendees.
