Andrey Kozlov's article on corporate disputes was published in an authoritative scientific journal "Law and Economics"

The year 2009 brought a novelty to the Russian corporate legislation - in contrast to foreign law - which became a structural element in building a sustainable corporate governance system for a significant number of large Russian companies. This is a mechanism of contractual regulation of relations between participants (shareholders) of business companies, known in foreign legal orders as “shareholders' agreement”.

Perhaps the most important component of the updated corporate law landscape was the legalization of the right of corporate participants to agree to coordinate their actions at the level of management bodies, obliging each other to vote in solidarity on any issues on the agenda of general meetings¹. The enrichment of corporate law with the “tied voting” regime created an opportunity to fine-tune the management of the corporation at the level of shareholders (participants), strengthen internal stability and increase the capitalization of companies². Thus, the condition of the shareholders' agreement was not only an important component of the corporate law, but also an important component of the corporate governance system.

It is noteworthy that the novelty was simultaneously introduced both in respect of joint-stock companies - an organizational and legal form more intended for large businesses and complex corporate formations used for holding or capital market purposes, and limited liability companies - a less sophisticated corporate form chosen for a light business structure and/or a narrow circle of participants. The above suggests that the legislator sought to provide the widest possible opportunity to build corporate relations by any of its participants, developing the fundamental principles of private law - freedom of contract and autonomy of will.

By introducing Article 67.2 (“shareholders' agreement”) into the Civil Code in 2014, the legislator took another step towards strengthening the effect of this contractual mechanism of corporate law by adding to its regulatory component a crucial element - from the point of view of judicial protection of the right - the possibility to challenge corporate decisions taken in violation of the voting procedure established by the shareholders' agreementt (provided, however, that it is concluded by all participants).³ Given the integral content of the above article, there is a clear will of the lawmaker to legalize this institution, combined with a large-scale package of reforms introduced by the Concept for the Development of Civil Legislation.⁴

The legalization of this institution, coupled with a large-scale package of reforms brought by the Concept for the Development of Civil Legislation, has had a positive impact on the market participants' perception of national legislation as a legal order capable of flexible regulation of corporate relations. Thus, if a decade ago the practice of structuring shareholder agreements between shareholders of large Russian companies was based exclusively on foreign law and foreign jurisdictions - the harbors of holding companies of Russian assets, nowadays regulation of relations on participation in the capital of business companies by the instruments of Russian law has become a market practice. Undoubtedly, not only the innovation under consideration, but also geopolitical events of the last decade served to form the national trend. At the same time, the reform of civil legislation created the basis for a systematic and quite harmonious transition from mechanisms regulated by foreign law to Russian alternative constructions.

There is reason to believe that the dynamics of the use of the shareholders' agreement by corporate participants will grow in the coming years at a multiple rate, revealing its highest potential to protect direct investments and the stability of corporate governance from “internal threats” in the form of disagreements between the owners of companies and the resulting corporate disputes and conflicts.⁵

In light of the above, it is time to state the triumph of Russian corporate law, however, a deeper study of the institution in question raises at least one serious question that casts doubt on its effectiveness, namely: will the protective framework of the shareholders' agreement withstand the stress test in the form of evasion of one of the signatories of the shareholders' agreement from the agreed solidarity vote in the supreme governing body of the company?

The basic legislative toolkit of legal protection against unfair actions of a shareholder is essentially limited to two options: recovery of damages and challenging a corporate decision made in violation of the shareholders' agreement. In our opinion, the effectiveness of each of the options in order to restore the right of the injured party is close to zero.⁶

In science there is an opinion that the legislative possibility to recover damages under the shareholders' agreement indicates the prevailing importance of the compensatory function of liability in corporate legal relations.⁷ It is also noted that the construction of damages in relation to the shareholders' agreement, although not without flaws, but requires further development as the main remedy for violation of “voting in a certain way”.⁸

Such views, which relate to that part of the substantive core of the shareholders' agreement that determines voting procedures, deserve rethinking. Losses, being a measure of liability economically linked to the “cost” of the harm caused, are not applicable to the absolute majority of scenarios of violation of voting obligations arising from a shareholders' agreement.⁹ The reason lies in the organizational, i.e. non-economic nature of such obligations, which does not allow considering the fact of their non-fulfillment from the position of material harm.¹⁰ The disruption by a dishonest party to a shareholders' agreement, for example, the election of an agreed candidate for the role of a new general secretary, does not form the composition of losses For example, an unexpected refusal (abstention) of the second participant to approve at the general meeting of participants the conclusion by the company of an agreement on opening a credit line may entail direct property consequences in the form of losses (for example, a shortage of working capital for the purchase of raw materials and a subsequent drop in sales). However, such consequences, if they arise, will take place on the side of the company and in no way on the side of the injured party to the shareholders' agreement, thereby excluding the possibility of a claim for recovery of losses under the violated agreement.

Now let us turn to the second option - to challenge the decision of the general meeting of shareholders (participants) that violates the terms of the shareholders' agreement (Clause 6 of Article 67.2 of the Civil Code of the Russian Federation). From the point of view of the protective potential of the injured member of the corporation, the proposed option looks more attractive than the first one, due to its direct focus on the invalidation of the corporate act, which is based on the unlawful behavior of the conflicting participant (shareholder). However, such preclusive effect is applicable only to exotic cases of corporate disagreements in management bodies and leaves out the main scenarios of unlawful actions on realization of voting rights. Thus, a lawsuit to invalidate a resolution of the meeting is possible in one case - when the general meeting adopted a positive decision on the agenda item on which the parties to the shareholders' agreement agreed to vote unanimously or jointly “against”. This means that the party (or group of parties) violating the terms of the shareholders' agreement had the necessary majority at the general meeting, which made it possible to adopt the decision despite the “discordant” vote of the aggrieved party. Thus, para. 6 of Article 67.2 of the Civil Code of the Russian Federation is available only to minority participants (shareholders) to suppress the will of the majority owner of the corporation (or owners accumulating the majority of votes) limited by the contract. Such an option could be suitable for investors with a minority stake in the capital who, through an active negotiating position, have managed to limit the limits of the will of the majority owner(s) of the business by establishing a procedure for unanimous decision-making on key issues of the company's activities, or for credit institutions that are parties to a shareholders' agreement concluded with the shareholders of the borrower company, which establishes quasi-shareholders' agreement of the bank over the borrower's activities in connection with the provided financing These cases are rare not only because of the specific facts, but also, first of all, because such professional market participants as investors or credit institutions have the opportunity to provide for a much stronger framework of relations with shareholders using a comprehensive approach covering both changes in the voting rules at the charter level and the introduction of additional contractual liability measures: high penalties, compulsory redemption of shares or early repayment of loan funds.

Out of the reach of this claim remain the most important scenarios - when a general meeting, as a result of inaction of a participant (shareholder), fails to make a decision on an issue, the positive resolution of which the parties agreed on in the shareholders' agreement. Thus, the owners of a joint venture can do a great deal of work to fine-tune the corporation's management system for years to come by fixing them in a binding agreement, which, however, does not prevent one of them from sabotaging the assumed obligations in the event of a conflict and de facto not bearing commensurate responsibility.

Additionally, the threshold introduced by the legislator minimizes the space for application of the above-mentioned article - the right to challenge the decision of the management body of the corporation may be brought on condition that the unexecuted shareholders' agreement was concluded by all participants of the corporation.¹¹ In practice, this requirement is difficult to fulfill. A company whose shares in the authorized capital are distributed among three or more owners may not be able to consolidate all 100 percent of the votes (both due to internal disagreements accumulated over the years and the common problem of “sleeping shareholders”). The unity achieved among shareholders who have a majority of votes at a general shareholders' meeting but who do not achieve absolute unanimity is, in our view, unfairly left without effective judicial protection.

In the above example, the most adequate from the point of view of restoration of the violated right, from the point of view of the violator's unlawful behavior, could be a claim of a participant (shareholder) to fulfill the obligation in kind on the basis of Articles 308.3 and 396 of the Civil Code of the Russian Federation, through imposing on him the obligation to vote in the manner provided for by the shareholders' agreement, supplementing it with a sanction in the form of a judicial penalty in case of evasion of execution of the court decision. However, being not expressly provided for in Article 67.2 of the Civil Code of the Russian Federation as a special instrument of protection, it can be assumed that the legislator did not seek to give the shareholders' agreement the character of a direct action on the procedure of expression of will in the governing bodies of the company or, at least, to give an unambiguous answer to this.¹² Such claims have not yet reached the consideration of the highest courts, so the position of the law enforcer on the possibility of filing a lawsuit on the obligation to execute the shareholders' agreement remains open. At the same time, hope for the formation of a positive practice is given by the approach chosen in the case of the Perm Metalworking Centers Plant, where the court defended a minority shareholder who was deprived of the opportunity to have a guaranteed presence on the Board of Directors and Audit Commission of the plant as a result of the controlling shareholder's breach of its obligations under the shareholders' agreement: to ensure the inclusion of candidates from the plaintiff in the membership of the said bodies.¹³

It should be noted that in the case at hand, the court of first instance satisfied the claim to invalidate the decision of the shareholders' meeting and to compel the holding of a new meeting, but refused the claim to compel the fulfillment of obligations under the shareholders' agreement, leaving the issue of compliance with its terms when holding the next meeting to the “conscience” of the defendant.¹⁴ At the same time, in their reasoning, the first and appellate instances paid great attention to the description of the special role of the shareholders' agreement in corporate governance issues, h The defendant did not appeal the court's decision in cassation instance and, apparently, it was voluntarily executed by the defendant.¹⁵

In conclusion, over the 15 years of existence of the institute of shareholders' agreement in Russian law, we observe its positive regulatory development and active dissemination among participants and shareholders of business companies in order to protect their corporate rights and interests. At the same time, the modeling of scenarios of behavior of dishonest participants of corporations presented in this article demonstrates how vulnerable is the position of a bona fide party to a shareholders' agreementt, which, in fact, is deprived of the possibility of the principle of effective judicial protection declared by the Basic Law.¹⁶

At the current stage, in order to narrow the space for corporate abuses in the sphere of realization of voting rights, the solution is seen in building a system of contractual liability (penalties, compensation for losses, redemption, etc.) by the parties to the shareholders' agreement, and in the future - in improving the legislative regulation of the institution in question, the comprehensive disclosure of which deserves a separate study.

BIBLIOGRAPHIC LIST

1. Civil-law regulation of theshareholders' agreement in Russian law: Monograph (Borodkin V.G.) (Justitsinform, 2017); Gutnikov O.V. Development of corporate responsibility in judicial practice // Journal of Russian Law. 2021. № 6. С. 48-65.

2. Concept of development of civil legislation of the Russian Federation (approved by the decision of the Council under the President of the Russian Federation on codification and improvement of civil legislation of 07.10.2009) // Vestnik HAC RF. 2009. № 11.

3. Draft Law “On Amendments to Part One of the Civil Code of the Russian Federation” // Federal portal of draft regulatory legal acts (date of circulation: 21.09.2024).

4. Draft Law “On Amendments to Article 32.1 of the Federal Law ‘On Joint Stock Companies’ and the Federal Law ‘On Limited Liability Companies’ // Federal Portal of Draft Regulatory Legal Acts (access date: 30.09.2024).

5. Inozemtsev M.I. Joint-stock agreement: responsibility for violation under the law of Russia and foreign countries: Monograph / MGIMO MFA of Russia. Moscow: Statut, 2020. 176 с.

6. On the organizational nature of the shareholders' agreement See, for example: Khokhlov V.A. Shareholders' agreement as an organizational contract of Russian law // Vestnik Volzhsky University named after V.N. Tatishchev. 2014. № 4(81). С. 4-12.

7. Definition of the Constitutional Court of the Russian Federation from 24.10.2013 № 1643-O // JPS “ConsultantPlus” (date of circulation: 01.10.2024).

8. Resolution of the Seventeenth Arbitration Court of Appeal from 07.10.2021 № 17AP9416/2021-GK in case № A50- 227/2021 // Cartoteka arbitration cases (date of address: 19.09.2024).

9. Resolution of FAS West Siberian District of 31.03.2006 № F04- 2109/2005(14105-A75-11), F04- 2109/2005(15210-A75-11), F04- 2109/2005(15015-A75-11), F04- 2109/2005(14744-A75-11), F04- 2109/2005(14785-A75-11) in the case of N A75-3725-G/04-860/2005 // JPS “ConsultantPlus” (access date: 18.09.2024).

10. The decision of Arbitration court of Perm territory from May 28, 2021 Case No. A50- 227/2021 // Cartoteka arbitration cases (date of address: 19.09.2024).

11. Stepanov D.I. New provisions of the Civil Code on legal entities // Law. 2014. № 7. С. 31-55.

12. Shitkina I.S. Property liability in corporate legal relations (by the example of business companies) (lecture within the framework of the training course “Entrepreneurial Law”) // Entrepreneurial Law. Appendix “Law and Business”. 2015. № 2. С. 2-26.

13. Rauterberg, Gabriel. “The Separation of Voting and Control: The Role of Contract in Corporate Governance.” Yale Journal on Regulation 38, no. 4 (2021): p. 1154, 1159.