Investors assessed the risks of the court of Rosneft with Sistema for the market
Rosneft's victory in court with Sistema about Bashneft's losses could jeopardize the practice of buying shares from minority shareholders and paralyze the voting of boards of directors on business reorganization, investors from IPA
On Monday, AFK Sistema submitted to the Eighteenth Arbitration Appeals Court of Chelyabinsk, which reviews the dispute between Rosneft and AFK Sysment about damages caused to Bashneft by 170.6 billion rubles, a letter from the executive director of the Association of Professional Investors Shevchuk. This is the IPA response to a request from one of the lawyers of Sistema, Maxim Muzyka. RBC has a copy of the letter, Shevchuk and AFC representative confirmed his authenticity.
"We responded to a lawyer's request, in which systemic questions were raised without mentioning any companies," said Alexander Shevchuk. IPAs are important principles, and not a dispute between the two companies, which we deliberately do not interfere with, because we do not know all the details, besides, IPA members have shareholders of both Rosneft and Sistema, he added.
Dispute at 170.6 billion rubles.
In May, Rosneft filed a lawsuit against AFK Sistema about causing damage to Bashneft for 106.6 billion rubles. in 2014 during its reorganization: 57.2 billion rubles. - a loss from the loss of 49.4% of the shares of ZAO Sistema-Invest, transferred to AFK Sistema in exchange for shares of Bashneft and other assets, 37 billion rubles. - loss from writing off the debt of ZAO Sistema- Invest before Bashneft, 12.5 billion rubles. - a loss from the repayment of 3.9% stake in Bashneft,which the oil company bought from minority shareholders who disagreed with the terms of thedeal, considered Rosneft. Subsequently, the company increased the demand by 64 billion rubles. (up to 170.6 billion rubles.) because of the revaluation of the ruble against the dollar. The Arbitration Court of Bashkiria satisfied the claim on August 23, partially, having decided to recover from Sistema "136.3 billion rubles. Both companies filed appeals. On November 13, the appellate court adjourned the hearing until 4 December.
At the request of AFK Sistema, the IPA commented on the likelihood of losses from the company in the event of the repurchase of shares from minority shareholders and their further repayment.The law obliges the company to send an offer for the repurchase of shares to the dissenting minority shareholders (in the case of Bashneft minority shareholders disagreeing with the reorganization terms), the shareholder's rights can not be violated in the event of the law's enforcement, Shevchuk points out in the letter. In his opinion, the losses in this case do not arise, since, having bought out shares from minority shareholders, the company receives "equivalent invalue property". The shares can be sold, and then the company will receive equivalent money, and it can be paid back, then the value of the securities will be "balanced" by reducing liabilities to shareholders (it will have to pay less dividends - RBC ), and the share of the remaining shareholders in profits will increase, the letter says.
The possible recognition by the court of a loss due to the repurchase of shares from dissenting minority shareholders will lead to negative consequences for the market, the IPA says in a letter. The majority shareholders will get an excuse to shy away from buying shares, and members of the board of directors, under any option of voting on the issue of minority shareholders, will be in a situation of "a hypothetical risk of committing an offense," he notes. Voting "for" may lead to an action for prosecution for causing damage to the company, voting "against" - a claim by minority shareholders dissatisfied with the law violation, the IPA head concludes, warning that such a situation could have a negative impact on the capitalization of Russian companies. The existing system of share buyback allows dissenting minority shareholders to exit at the price specified by law, and companies to withhold quotes if some shareholders do not agree with the corporate decision. If dissenting investors lose share repurchase guarantees, any reorganization or other corporate decision will entail a massive sale of shares on the market by disgruntled shareholders, and in some cases, a collapse [of quotations], Shevchuk points out in the letter.
"Rosneft" versus "Sistema": what threatens to increase the amount of the claim
Minorities will not suffer
"IPA is an authoritative organization that unites professionals. It was important for us to bring to court not only the conclusions of leading scientific institutions in the field of law and economics,but also the opinion of practicing investors, in this case represented by their association, "Sergei Kopytov of Sistema told RBC.
The representative of Rosneft declined to comment on the IPA letter. In the suit, Rosneft pointed out that Bashneft's loss was not due to the repurchase of shares from minority shareholders, but because of the redemption of the securities received. "The controlling persons deprived Bashneft of the right to sell the shares to third parties and to compensate their expenses for the redemptionof shares," the suit says (RBC has a copy). If the court recognizes the redemption of redeemed shares as a loss, this is unlikely to undermine the very institution of redemption, says Olga Samtserova, head of corporate practice at Sameta. If shareholders consolidate the company and reach the thresholds under which a minority buy-back is announced, this should be done, the court's decision will not affect this commitment in any way, agrees A2 lawyer Mikhail Alexandrov. If the court recognizes losses as the redemption of shares from minority shareholders, AFK Sistema will have the opportunity to collect this money from investors in court, the lawyer argues.
The court's decision to recognize the repayment of treasury shares by the company directly at the cost of Russian companies will have a weak effect, said ACRA analyst Vasily Tanurkov. In itself, repayment of shares after redemption does not affect the value of the business and the value of he ompany's shares, since it is not associated with any real cash outflows for the company, he explains.
But the decision of the court in favor of Rosneft could negatively affect the investment climate in general, Alexandrov said: if a foreign investor buys a business, reorganizes, and then wants to sell it, he can be presented and recovered. The decision of the first instance does not affect Russian corporate practice, but this case will become a precedent if the Economic Chamber of the upreme Court decides on it, the lawyer adds.
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