Corporate dispute is a dispute, connected with the incorporation of a legal entity, its management and participation in it.

We are most often addressed in connection with disputes on:

  • challenging the decisions of the bodies of a legal entity (closed joint-stock company (CJSC)), limited liability company (LLC), additional liability company (ADL)) by the participant/shareholder;
  • recovery of dividends/profit by the participant/shareholder;
  • transfer of the rights and obligations of the buyer of stake/ shares to another person;
  • claims of shareholders to appeal against the refusal of JSCto repurchase shares;
  • recovery of the value of a part of the LLC’s (ALC’s) property, or recovery property in kind;
  • related to the exclusion of the LLC (ALC) participant, the quit of the participant from the LLC (ALC);
  • on the recognition of a major transaction or a transaction, in which there is an interest of an affiliated person, as invalid;
  • on claims for the award of the obligation to perform the necessary actions in order to amend the articles of association and submit it for state registration (due to changes in the composition of participants);
  • on obtaining of information on the activities of the company and acquaintance with the company documentation.

 

Below you can find brief information on the main kind of corporate disputes.

Disputes over Challenging the Decisions of the Company’s Bodies by the Participant/Shareholder

The decision of the company’s general meeting of participants, adopted in violation with the legislation of Belarus or the company’s articles of association, which violates the rights and (or) legal interests of a participant/shareholder (former participant/shareholder) of the company, may be challenged in court.

The legislation of Belarus stipulates shortened periods of limitation for this type of disputes. The participants of the JSC can appeal against the decision of the company within 3 months, and the participants of the LLC or ALC – within 2 months from the day they found out or should have found out[1] about the adoption of such decision.

For such claims the plaintiff may be::

  • participant of a company (including the participant – heir, successor of the participant);
  • quitted /excluded member of a company if the decision is related to the exercise of his rights and legitimate interests, related to his participation in the company.

If the claim is going to be submitted by the participant – heir or successor of the participant (for example, the reorganized company), he/she should take into account the following: the fact of the transfer of rights and obligations to the heir or successor does not entail a change in the limitation period and the procedure for calculating it. In other words, the limitation period continues to flow from the moment, when the testator or legal predecessor (the company that was reorganized) found out or should have found about the adoption of such decision[2].

Disputes over the Recovery of Dividends/Profit by the Participant/Shareholder

In case of non-payment to the shareholder/participant of dividends/profit, which are to be paid to him/her in accordance with the decision of the general meeting of shareholders (participants of the LLC (ALC)), the participant/shareholder has the right to apply to the economic court with a suit against JSC (LLC (ALC)). In addition to the actual dividend/profit, belonging to the shareholder participant, the shareholder/participant has the right to demand interest out of this amount, because of the delay in payment (determined by the refinancing rate of the National Bank of Belarus).

Disputes on Transferring the Rights and Obligations of the Buyer of Stake/Shares to Another Person

Any shareholder of a closed joint stock company (CJSC) or a participant of an LLC (ALC) has the pre-emptive right to purchase stake/shares, which are going to be sold by other shareholders of the CJSC or members of the LLC (ALC). The right of pre-emption is also possessed by the company itself: CJSC or LLC (ALC)). If this right has been violated, any authorized person has the right to demand in court the transfer of the rights and obligations of the buyer to him[3].

For such kinds of disputes, there is an shortened period of limitation: 3 months from the moment when the shareholder/participant/company found out, or should have found out about the violation of the pre-emption right.

The request to transfer the rights and obligations of the buyer may be claimed in connection with the conclusion of a share purchase/ stake sale agreement (including from a tender), regardless of the factual performance (non-performance) of the contract. The request may also be claimed in relation to the barter contract (in the case of CJSC), as well as in connection with the conclusion of other contracts (for example, gift contract), if the contract is feigned and is in fact concluded only to cover the sale agreement.

Disputes over the Claims of Shareholders to Appeal Against the Refusal of JSC to Repurchase Shares

If a JSC unreasonably refused to the shareholder in the shares redemption, the shareholder has the right to appeal against the refusal of the JSC buy back shares in court. Appeal is allowed if the claim is filed within 6 months from the date of receipt of the refusal.

The repurchase of JSC shares is carried out at the request of its shareholder in the following cases:

  • reorganization of the JSC, if the shareholder, requesting the repurchase of his/her shares voted against the decision on its reorganization or was not properly notified of the general meeting of shareholders;
  • introduction of amendments to the company’s articles of association with regard to the rights of shareholders, which entailed the restriction of these rights, if shareholder, who requested the repurchase of his/her shares, voted against the adoption of the relevant decision or did not participate in the general meeting of shareholders;
  • if the shareholder, requesting the repurchase of their shares, voted against the decision to conclude a major transaction or was not properly notified of the general meeting of shareholders.

Disputes on the Recovery of the Value of a part of the Property of LLC (ALC) or on the the Recovery of Property in Kind

A part of the net assets of the company (in proportion to the size of stake), as well as the portion of profit, received by the company from the moment of exit of this participant until the date of calculation (determined in accordance with the decision) must be paid out to the exiting (excluded) member of the company. In accordance with the agreement between the exiting (excluded) participant with the remaining participants of the LLC (ADL), the payment of the actual value of the stake in the statutory fund of the company may be replaced by giving property to him in kind that corresponds to such value.

In case of failure to pay the value of a part of the LLC’s property (ACL) or non-giving the property in kind, the exiting (excluded) participant, his/her heir or successor is entitled to apply to the court with a claim against LLC (ALC). In case of recovery of the value of a part of the property of an LLC (ALC), the exiting (excluded) participant, his/her heir or successor has also the right to demand the interest for delay in payment (determined by the refinancing rate of the National Bank of Belarus).

Disputes related to the Exclusion of the Participant LLC (ALC), the exit of the participant from LLC (ALC)

The exclusion of a participant of LLC may be carried out only via court. The relevant claim can be submitted at the request of LLC members (ADL), whose stakes together constitute at least 10 percent of the statutory fund.

A claim can be filed if the participant grossly violated his corporate obligations (for example, did not make a contribution to the company’s fund), or his actions (inaction) hinders the activities of the company (for example, he repeatedly sabotaged the general meetings of the company, which makes it difficult to make important decisions for the company).

 


[1] The moment, when the participant/shareholder, should find out about the decision is largely determined by the company’s articles of association. For example, supposed that, in accordance with the articles of association, copies of the protocols with the results of the general meeting of participants are sent to the participants of the company by e-mail. In this case, the moment, when the participant should find out about the taken decision (and, accordingly, the moment when the limitation period began to expire) is determined by the moment, when the corresponding letter was received by the mail server.

[2] In any case, the expiry of the period of limitation does not prevent the court from initiating a case. However, the court will reject the suit if the respondent requests the court to apply the limitation period before the court makes a decision. This is, obviously, reduces the chances of appealing the decision by an order of magnitude.

[3] In other words, a breach of the preemptive right to purchase stake/shares does not in itself lead to the recognition of the stake/share sale agreement as invalid. But in this case the participant/shareholder/company, whose purchase right was violated has the right to request the court to “replace” the buyer’s side with the buyer in the contract of sale.