New life for takeovers


There is a certain aura of noble romanticism in corporate raids. Raiders - connoisseurs of loopholes in the law - do not just attack your company and strip its assets; they clean up the market from the weak and make the strong stronger.

‘What is the difference between life and a dick?’ Vladimir Barsukov, one of the most influential criminal leaders in Russia, is quoted in a popular serial, ‘life is tougher.’

Life has got tough for him. A rich man, the owner of a plethora of multi-million companies, he was imprisoned for 14 years for taking-over, or stealing if we call things their proper names, a restaurant that happened to belong to a close friend of the Saint Petersburg governor. He will now have a chance to coin a phrase about the difference between a takeover and a common crime - illegal, brutal and unimaginative.

Corporate raids, the Barsukov’s style, were not sophisticated. First, criminals forged the target company’s documents: changed shareholders and appointed a new director. The company was sold several times and the changes were registered at the Companies’ Registrar. Then, the premises were forced into and new management, and a security team, took control.

While legitimate owners were fighting back, the company was being dragged into pieces and sold to new people who, humph, knew nothing about the crime and were protected by law as bona fide owners. Ripped off their business and finances, the victim’s chances to find justice were, typically, slim.

This could happen, largely, because raids were seen as business for those involved. A sort of a private matter. Authorities did not interfere until, usually, it was too late. Though stealing, and raids are just that - stealing, is obviously a crime and, therefore, a problem of the society as a whole, the steps that lead to it were often perceived as someone’s private affair.

New law which came into force on July 1 outlaws forging company documents, falsifying meetings of shareholders and registering fake information about the company. The change, however minimal it may seem, transforms the situation.

It is now easier to prosecute the crime. Connection between criminals acting at various stages does not need to be proved and, first and foremost, the victim can get the authorities on his side at an earlier stage - before he was actually robbed.

Now, hopefully, you do not need to be a governor’s friend to protect your business against raiders.


July 8, 2010
photo: vectorosaur -





TEXT: Dmitry Chernyakov, managing partner, Muranov, Chernyakov and Partners

The problem of illegal takeovers (“raider attacks”) is currently not as hot as it was just five years ago. The basis for such seizures is not so much the imperfection of the law itself, but the application of existing laws, primarily because of a corrupt element among the judiciary and the law enforcement agencies.

Over the past five years the state has paid a lot of attention to the problem and significantly reduced the number of “strange” judicial decisions, “odd” criminal cases and “irregular” interim measures of courts. The improvement is happening because of amendments to corporate law and the laws of procedure, as well as improved internal control within law enforcement and judicial community.

Amendments to the legislation that establish a special responsibility for illegal actions during corporate conflicts also contribute to the combat against the raider attacks. It would be wrong, though, to assume that before these amendments were introduced the law did not punish dishonest people from both the business world and law enforcement agencies.

On the contrary, existing provisions of the Criminal Code of the Russian Federation provide for prosecution of those who: commit fraud (Article 159 of the Criminal Code), forgery, manufacture or sale of forged documents, stamps, seals or forms (Art. 327 CC RF), falsify evidence (Article 303 CC RF), unlawfully receive or disclose information that constitutes commercial, tax or banking secret (Art. 183 CC RF), makes, knowingly, an unjust verdict, decision or other judicial act (Article 305 CC RF), as well as commit other illegal acts in the course of raider attacks.

Therefore, we believe that the point of the amendments is not to eliminate existing gaps in the law as such, but to send a message: the state is concerned with the problem of raider attacks and intends to fight them.

The underlying reason for the changes in regulation, in our opinion, is as old as the hills: the inefficiency of state enforcement mechanism in its present form. The lawmakers, instead of changing the mechanism, are trying to make it work according to the new rules.

The most effective way for ensuring the rights and freedoms of business would have been to strengthen the role and authority of the judiciary. For that, the courts should be relieved of minor cases by introducing changes in tax laws and charging realistic legal costs payable in full by litigants.

Let's hope that eventually the amendments will achieve the objectives pursued by the legislator: improving the stability of civil turnover and improving the investment climate in Russia.