The Supreme Court examined a dispute concerning the transfer of 100% of the shares in VLK LLC from the company VL to several individuals and entities. The claimant argued that it had not carried out any actions to dispose of the shares, and that the transactions had been executed without its involvement — including on the basis of a power of attorney that did not grant authority to dispose of assets. A forensic examination established that the signatures on the key documents had been made by another person, and no evidence of payment for the shares was provided.

The court of first instance restored the claimant’s corporate control, finding that the shares had been transferred unlawfully and in fact without any consideration. The appellate and cassation courts overturned that decision, but the Supreme Court disagreed, holding that the loss of corporate rights against the participant’s will is, by itself, grounds for restoring them. The Court also emphasised that a power of attorney cannot be interpreted broadly, and that purchasers cannot be deemed bona fide if the shares were transferred without payment or on the basis of documents that merely created the appearance of legitimacy.

Given these circumstances, the Supreme Court overturned the rulings of the appellate and cassation courts and upheld the conclusions of the first instance, restoring VL’s corporate control over VLK LLC.

Ekaterina Schmitt, attorney at Timofeev, Vahrenwald & Partners, commented for Advokatskaya Gazeta that the Supreme Court clarified two important issues: the limits of representatives’ authority and the nature of the remedy in the form of restoring corporate control. She noted that special powers of an attorney cannot be inferred from general wording in a power of attorney: the authority to conclude ordinary business transactions does not imply the right to dispose of the company’s assets. According to her, restoring corporate rights is a special remedy that must provide full and effective reinstatement of the injured participant’s interests.

“Advokatskaya Gazeta” (Russian Advocacy Newspaper) is the official body of the Russian Federal Bar Association (published since 2007). The Newspaper’s publications are devoted to the most important legal topics, case law, as well as legal practice and issues of advocacy.

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