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Protection of the interests of OJSC MGTS in corporate disputes with minority shareholders.
OJSC MGTS
OJSC Moscow City Telephone Network is one of Europe’s biggest local landline communications companies. MGTS is part of the telecommunications business sphere of AFC Systema and belongs to the KOMSTAR-OTS Group. The operator serves 4.3 million suppliers, including 3.6 million private individuals. The network has 527 telephone exchanges. MGTS base telephones currently account for 77.2% of the Moscow landline market and 97.8% of the market for private users. The tariffs for the main service – local telephone connections – are state-regulated.
The Project:
Protection of the interests of OJSC MGTS in corporate disputes with minority shareholders.
Project term:
March - December 2007
Project description:
The company’s Articles of Association include a provision that could be interpreted to mean that, if the Client has net profits, it is required to pay dividends for a given reporting period. Considering the need for substantial fixed assets investments in a previous period, the company’s management recommended to the shareholders at the Annual General Meeting that dividends not be paid out but be allocated for implementing the investment programme. The shareholders in the company supported the proposal and adopted a relevant resolution. A number of portfolio investors disagreed with this resolution, however, and appealed against it to a court of arbitration by filing dozens of motions seeking to require OJSC MGTS to pay out dividends.
The Project was implemented by a working group consisting of specialists of the “Arbitration. Conflicts. Litigation“ Practice and the Corporate practice of Vegas Lex.
First of all, an extensive opinion was prepared for the Client on the prospects for the litigations from the point of view of both the corporate and the procedural legislation. On the basis of this opinion, the Client decided to have Vegas Lex support the key case in order to create a precedent for the other cases.
The procedure involved furnishing the case files with a maximum evidential base justifying our Client’s position.
The most respected scientific institutions in the area of law and linguistics were engaged to prepare expert legal opinions on the case. The experts assessed the doctrinal issue of equity law and the disputed provisions of the Articles of Association on payment of dividends, as well as their semantic and lexical interpretation of the provisions of the Articles of Association from the point of view of the rules and standards of the Russian language. In addition, financial experts were called into to provide an economic opinion on the institution of dividend payment from the point of view of financial science and practice.
As a result of the work performed on the key case, the cassation instance issued a resolution repealing the rulings of the first and appeal instances, which supported the opponents’ unjustified demands, and issued a new ruling, supported by the Supreme Arbitration Court of the Russian Federation, rejecting in full the suit filed by our Client’s opponents, which fully satisfied our Client’s interests.
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