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KIAP Lawyers Successfully Defended Its Clients in Corporate Conflict Related to the Dismissal of an "Irreplaceable" Director and Defined a New Legal Position

Date: 17.01.2025

KIAP was contacted by the majority members of a company, who found themselves in a seemingly hopeless situation. Fraud committed by the CEO and, at the same time, minority member resulted in the company's losses amounting to tens of millions of RUB. However, the members could not dismiss the CEO as the Articles of Association provided for a unanimous resolution on early termination of his powers. Any attempt to replace the manager would be unsuccessful, since he could block such resolutions as a minority shareholder.

KIAP lawyers analyzed the company's constituent documents and developed a strategy allowing the members to dismiss the unscrupulous manager. Supported by the lawyers, the Clients initiated and held an extraordinary general meeting of the company's members, where they resolved, by a majority vote, to adopt standard Articles of Association and dismiss the CEO under the standard Articles of Association. 

The former CEO (a minority member) filed a claim to invalidate the meeting's resolution. As there was no relevant case law, the trial court granted the claim on a technicality. 

However, KIAP lawyers managed to gain the courts of appeal and cassation over. The courts acknowledged that the previous version of the company's Articles of Association allowed for an adoption of standard Articles of Association by ¾ of the votes of its members, and the position of the Constitutional Court of the Russian Federation provided that the new Articles of Association were effective from the date of the members' resolution. Thus, the restrictions provided by the previous version of the Articles of Association did not apply to all future resolutions. 

The Supreme Court agreed with the judgements and refused to submit the Claimant's claim to the panel. 

Thus, KIAP lawyers created a new legal position allowing the adoption of standard Articles of Association without a unanimous resolution of the members, despite the applicable restriction on unanimous replacement of the CEO provided by the Articles of Association. 

You can read the cassation court order here

The project was completed by Ilya Ischuk, Partner, Daniil Zherdev, Senior Associate, Anna Andreyeva, Associate, and Tamara Fillinykh, Junior Associate.