On 8 August 2024, the Arbitration Court of the Moscow Region satisfied the claim of the Russian Ministry of Industry and Trade against foreign company – Besloten Vennootschap Megapolis Distribution B.V. (distributor of Japan Tobacco, Phillip Morris, Red Bull, Durex and other brands) for suspension of its corporate rights in an economically significant organization (hereinafter – “ESO”) JSC “Megapolis Trade Company”.
The grounds and procedure for the suspension of the corporate rights in ESO by foreign “unfriendly” entities were set in August 2023 by adoption of the Federal Law No. 470 dated 04.08.2023 “On the specifics of regulating corporate relations in business entities that are economically significant organizations” (hereinafter – “Law No. 470”). Read more about this in our updates as of 4 August and 31 October 2023.
According to the Law No. 470, suspension of corporate rights of a foreign “unfriendly” company in ESO is possible if such a company:
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evades or refuses to exercise its rights;
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commits actions that create obstacles to the management of the ESO, continuation of its activities or may lead to bankruptcy or liquidation of the ESO.
The following consequences occur from the date of the court’s decision to suspend the corporate rights of a foreign “unfriendly” company:
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the foreign company has no right to vote at general meetings of shareholders;
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the foreign company has no right to dispose of its shares (stocks);
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the payment of dividends to the foreign company ceases;
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shares (stocks) previously owned by the foreign company are transferred to the ESO.
Due to decision of the Arbitration Court of the Moscow Region, the shares of the JSC “Megapolis Trade Company” are to be transferred to the direct ownership of the Russian beneficiaries (or transferred to other persons at their discretion). However, as of today the suspension of corporate rights may last until 31 December 2024.