The matter in brief
How it went
The situation. A minority partner removed part of an operating company’s assets through a chain of transactions with affiliated parties, taking advantage of the majority owner’s temporary absence from day-to-day management.
What we did. We reconstructed the chain of transactions, proved that the counterparties were affiliated and that the transactions had no economic rationale, challenged them in court and obtained interim measures over the assets.
The result. The transactions were declared invalid, the assets were returned to the company and the majority partner regained operational control.
A similar situation? Let us discuss the details at a consultation.
The legal framework for defence against asset stripping
Disputes over assets removed from a company through transactions with affiliated parties sit at the intersection of corporate and civil law. Choosing the right ground for the challenge directly affects the limitation period and the evidence that has to be gathered.
Derivative claim by a participant (Article 65.2 of the Russian Civil Code). A participant or shareholder may, on behalf of the legal entity itself, challenge transactions made by its management bodies to the company’s detriment and claim compensation for the losses caused to it.
Interested-party transactions (Article 45 of Federal Law No. 14-FZ on Limited Liability Companies; Articles 81-84 of Federal Law No. 208-FZ on Joint-Stock Companies). Where the counterparty is affiliated with the director or one of the partners, the law requires that connection to be disclosed and, in some cases, the prior consent of the other participants.
General civil-law grounds (Articles 10, 168 and 170 of the Russian Civil Code). A transaction that masks asset stripping can also be challenged as a sham or feigned transaction, or as an abuse of rights. These provisions are often applied alongside the special corporate rules.
Director’s liability (Article 53.1 of the Russian Civil Code). If transactions were approved or concluded by a director acting in bad faith, the company may recover its losses from them, whatever the outcome of the dispute over the invalidity of the transaction itself.
Who these disputes concern
The situations in which partners and company participants most often encounter asset stripping through affiliated transactions.
How defence against asset stripping usually proceeds
The general sequence of steps in this category of disputes. Timeframes in a specific case depend on its complexity and the other side’s position.
Reconstructing the chain of transactions
We pull the corporate and accounting documents, establish the full list of transactions and the links between counterparties.
Interim measures
We ask the court as early as possible to freeze the disputed assets, so that they cannot be resold to a bona fide purchaser.
Challenging the transactions in court
We prove the affiliation of the parties and the lack of economic rationale in the transactions, and seek to have them declared invalid.
Return of assets and control
Once the court ruling takes effect, we work for the actual return of the assets to the company and the restoration of corporate control.
Common mistakes and misconceptions
“If the director signed the transaction, it is all lawful.” The director’s signature does not remove the requirement to approve an interested-party transaction or a major transaction. If these requirements are breached, the transaction can be challenged regardless of the formal validity of the signing.
“It is enough to prove that the transaction is unfavourable to the company.” The court also assesses whether the counterparty knew of the harm to the company and of the signs of interest. Without that, unfavourable terms alone do not always lead to invalidity.
“Control can only be restored by replacing the director.” Replacing the director is only one tool. A combination of interim measures and challenges to specific transactions often works faster and more reliably.
“Too much time has passed, it is too late to challenge.” The limitation period is more often counted not from the date of the transaction but from the moment the injured party learned, or should have learned, of the breach. These are different dates.
Statutory time limits and thresholds
General benchmarks from corporate and civil legislation, not indicators for any particular case.
Frequently asked questions
How can you prove that transactions with affiliated parties were aimed at asset stripping?+
The court weighs a combination of signs: unequal consideration, a transaction concluded during a corporate conflict, no economic rationale for the company itself and affiliation of the parties. None of these alone proves bad faith, but together they are a standard ground for challenging a transaction in court.
Can an asset stripping transaction be challenged if several years have already passed?+
The limitation period for such disputes is usually 3 years from the date the injured party learned of the violation, and the exact period depends on the circumstances of the case.
Is this a real case or a generalised example?+
It is a real matter from the firm’s practice. We publish it without company names or the names of the participants, as every client agreement includes a non-disclosure clause.