A non-major deal may require the shareholders’ approval. Many are familiar with the basic criteria that classify a transaction as major, requiring approval from shareholders:
Quantitative (value-based) — the transaction involves property worth 25% or more of the company's balance sheet asset value;
Qualitative — the transaction falls outside the scope of ordinary business activities.
According to the Russian Supreme Court, one should consider the essence of a transaction but not only its price. A transaction may be deemed major even if it does not formally exceed the 25% threshold, provided the divested asset has been critical to the company. In other words, its loss prevents the company from conducting its current or future operations, either entirely or in part. NB: top managers should take extra precautions and seek shareholders’ approval for such transactions to prevent personal liability risk. Ruling of the Judicial Board for Economic Disputes of the Russian Supreme Court dated 06.09.2024 No. 308-ES24-3124 in case No. A53-16963/2022
An unfair shareholder can be expelled from the company. When a deadlock arises and all alternative dispute resolution methods have been exhausted, the last resort is to expel a shareholder from a company through court and continue operations. However, before resorting to litigation, ensure that:
the conflict is not merely due to differing commercial approaches to business;
the shareholder systematically blocks decisions on critical company matters without proposing reasonable alternatives, demonstrating no interest in the joint business;
the shareholder’s behavior causes or may cause significant harm to the business or even lead to the company’s dissolution;
the shareholder seeking to expel his partner holds at least 10% of the company’s shares.
Exercising corporate rights requires considering spousal interests. Notarized spousal consent is required not only for disposing of a stake in a company (e.g., selling it) but also for actions that may reduce income from the stake. Otherwise, such decisions may be invalidated at the spouse’s request. Example: After a divorce and before the final division of family assets, the shareholder, who owned 100% of an LLC, was subject to alimony obligations. To artificially reduce dividend income, the shareholder arranged with a relative to increase the company’s charter capital, diluting his stake to 10% while the relative acquired 90%. The court deemed this transaction invalid. Ruling of the Judicial Board for Economic Disputes of the Russian Supreme Court dated 05.09.2024 No. 302-ES24-6555 in case No. A19-24434/2022
Foreign sanctions should not hinder access to litigation. Since 2020, the special rule applies to disputes involving listed Russian companies: it has been permitted to bypass the contractual arbitration clause and to consider a case in the Russian courts. For instance, if a contract stipulates that disputes are to be resolved in the English courts but sanctions prevent the Russian company from defending its rights in an "unfriendly" jurisdiction or impose unreasonable costs, the company may file the case in its local court or transfer an existing dispute to Russian jurisdiction. NB: regardless of the jurisdiction, enforcement challenges remain. If a foreign party has no assets in Russia, recovery becomes highly unlikely. Resolution of the Tenth Arbitration Court of Appeal dated 24.04.2025 in case No. A41-62478/2024
Beware of shares subject to option agreements. If purchased shares are subject to a pre-existing option agreement, there is a high risk of having to return them. For instance, if the seller is obligated to sell the shares to another party upon request (option), selling them to a third party will violate the option holder’s rights and the transaction may be invalidated. This poses significant risks to bona fide buyers unaware of such encumbrances. Unfortunately, no centralized register exists to verify executed option agreements, leaving buyers reliant on the seller’s honesty. NB: warranties in the SpA about the absence of encumbrances do not protect against invalidation but may aid in claiming damages from the seller for breach of obligations. Resolution of the Arbitration Court of the Moscow District dated 13.11.2023 No. F05-22043/2023 in case No. A40-149995/2022 Resolution of the Arbitration Court of the Ural District dated 09.01.2024 No. F09-8468/23 in case No. A60-53969/2022
Recovering debts from a foreign company’s Russian subsidiary is not straightforward. Recently, the business community discussed a high-profile case where courts at three levels ruled that Russian Citibank could be held jointly liable for the $24 million debt owed by its U.S. parent, Citibank N.A., to Sovcombank. Although the Russian subsidiary was not a party to the transaction, the courts sided with creditors who, due to sanctions, could not reach the U.S. parent but found it easier and faster to target the Russian "daughter." It was not the only decision. The Russian Supreme Court, however, clarified in the Citibank case: a Russian subsidiary may be liable for its foreign parent’s debts, but not by default — case-specific circumstances must be examined. Courts should consider the subsidiary’s actions in good faith (e.g., whether it was used to evade obligations) and the source of its assets (whether they were derived from the parent’s resources). NB: the trend of shifting liability from parent companies to subsidiaries contradicts with the fundamental principle of legal entity independence and poses financial risks for Russian businesses. Yet, in some cases, it remains the only tool for creditors to recover anything under sanctions. Ruling of the Judicial Board for Economic Disputes of the Russian Supreme Court dated 12.05.2025 No. 305-ES24-12635 in case No. A40-167352/2023