In general, the Review reflects the positions previously set out in the clarifications of the Higher Arbitrazh Court of the Russian FederationInformation letter of the Presidium of the Higher Arbitrazh Court of the Russian Federation No. 144 “On certain issues of the practice of consideration by arbitrazh courts of disputes on the provision of information to participants of business entities” dated 18 January 2011.
Nevertheless, the Review analyses the court practice on issues that are not directly regulated at the legislative level with respect to relations between participants/shareholders and other persons, on the one hand, and companies, on the other hand. In particular, the Review considers the issue of providing information to persons controlling companies, touches upon the criteria of good faith of participants/shareholders when requesting documents and information from a company, and assesses the provisions of confidentiality agreements.
The following is a description of the most key issues considered by the Russian Supreme Court.
Issues related to determining the circle of persons entitled to receive information on the activities of a company
When resolving disputes regarding the provision of information to participants/shareholders of companies, it is necessary to first determine whether the requesting person has the appropriate status.Persons who, on the date of the request, are participants of a limited liability company
Courts assume that, as a rule, to determine whether a person is a participant of a limited liability company (“LLC”), one must first look at the list of LLC participants. If a person is listed on the list of LLC participants, then the LLC’s requirements that the requesting person confirm his or her participant status and the LLC’s refusal to provide information to such person are unlawful. If a person is not on the list of LLC participants, the person may provide as evidence an extract from the Unified State Register of Legal Entities (“USRLE”) or another document confirming his/her status as a participant of the LLC (e.g., an agreement, an effective court decision on the person’s status as a participant).
If there are any discrepancies between the information in the USRLE and the information from the list of LLC participants, according to the current court practice, the information in the USRLE will prevailResolution of the Arbitrazh Court of the Far Eastern District No. F03-3441/2020 dated 18 September 2020 in case No. А73-24769/2019.
Persons who are shareholders of the joint stock company as of the date of requesting the information
A person’s status as a shareholder of a joint stock company (“JSC”) must be confirmed by an extract from the register of shareholders of the JSC or an extract from a securities account. If a person fails to provide these documents, the refusal of the JSC to provide the documents is considered by the courts as lawful.
The legislation does not expressly define the moment at which the relevant extracts should confirm the ownership of shares. Nevertheless, as the analysis of court practice has shown, if there are doubts as to the reliability of the provided information on a shareholder, arbitrazh courts usually imposeRuling of the Arbitrazh Court of the Volga District
Former LLC participants and JSC shareholders
Courts take an unambiguous position that an LLC or JSC is not obliged to provide any information or documents at the request of former participants or shareholders, except for those cases when the relevant information and documents are necessary to determine the actual value of the withdrawn participant’s participation interest or the price of repurchased shares on the grounds stipulated by the legislation. However, the request may be deniedResolution of the Arbitrazh Court of the Moscow District
Heirs of participants
When deciding whether an heir of an LLC participant has the right to receive documents and information, the courts note that it is necessary to be guided by the provisions of the LLC charter, which establishes the procedure for heirs to join as participants.
If the LLC charter does not contain a requirement to obtain the consent of other LLC participants for the heir to join the LLC, the person who has accepted the inheritance becomes a participant of the LLC and acquires the corresponding information right. Nevertheless, the heir is entitled to exercise his/her rights as a participant of the LLCResolution of the Tenth Arbitrazh Court of Appeal
If, under the LLC charter, the acceptance of an heir into the LLC requires the consent of all LLC participants, the deceased participant’s participation interest is transferred to the LLC, and the heir is entitled to claim payment of the actual value of such participation interest. Therefore, as in the case of former LLC participants, the heir is entitled to demand only those documents and information that are necessary to determine the actual value of the participation interest.
Heirs of shareholders
The courts note that by virtue of a direct indication of the law, the heir of a deceased shareholder is the owner of sharesParagraph 3 of article 1176 of the Civil Code of the Russian Federation by way of inheritance, as well as a participant in a JSC, and, therefore, after accepting the inheritance and obtaining a certificate of a right to inheritance, such person is entitledResolution of the Arbitrazh Court of the Volga-Vyatka District No. F01-11007/2020 dated 22 June 2020 in case No. А17-1025/2018 to request information on the activities of the JSC.
Members of collegial governing bodies of JSCs and LLCs
In resolving the issue of providing information to members of a JSC’s collegial governing body, the courts apply by analogy article 91 of Federal Law No. 208-FZ “On Joint Stock Companies” dated 26 December 1995 (“JSC Law”), which establishesResolution of the Arbitrazh Court of the Volga-Vyatka District
The Russian Supreme Court suggests using a similar approach with respect to members of the collegial governing body of an LLC, since the status of members of collegial governing bodies of companies does not differ significantly.
Beneficial owners of a company
Beneficial owners are not formally participants/shareholders of a company, therefore, as a rule, they are not entitled to request information on the activities of a company of which they are not participants/shareholders.
The analysis of current court practice showsResolution of the Arbitrazh Court of the Moscow District dated 6 June 2022 in case
Scope of information to be provided to a participant of an LLC
Guided by the provisions of corporate lawParagraph 3 of clause 1 of article 8 of the LLC Law, the courts conclude that it does not contain any norms establishing any restrictions on the list of documentation relating to the internal activities of a company, with which a participant has the right to familiarise itself and receive certified copies.However, the courts agreeResolution of the Arbitrazh Court of the Moscow District
Scope of information provided to a shareholder of a JSC
In a JSC, the procedure for providing information to shareholders differs significantly from the procedure provided for LLCs.Firstly, the list of information provided to shareholders is, as a rule, of a closed nature, and the information itself is provided in a strictly documentary form.
Secondly, the scope of shareholders’ rights to receive information upon request expands as the number of their voting shares increases and is based on the principle “the more shares, the more information rights”.
Thirdly, the charter of a JSC may provide for a lower or higher threshold value of the number of voting shares, in the presence of which a shareholder has the right to request access to accounting and other documents specified in clause 5 of article 91.5 of the JSC Law. A non-public JSC in its charter may establishParagraph 6 and 13 of article 91 of the JCS Law other conditions and/or procedure for providing access to information, including the terms and minimum number of shares required to obtain all or a certain category of documents.
Nevertheless, paragraph 5 of article 91 of the JSC Law does not defineRulings of the Judicial Board for Economic Disputes of the Supreme Court of the Russian Federation
Therefore, a shareholder who does not hold 25% or more of the voting shares, as a rule, is not entitledResolution of the Arbitrazh Court of the Far Eastern District
On similar grounds, the courts refuseResolution of the Arbitrazh Court of the North-Western District
Confidentiality of, and access to, the documents and information provided
The right to information correspondsParagraph 3 of clause 4 of article 65.2 of the Russian Civil Code to the obligation of the participants/shareholders of a company not to make public confidential information about its activities. To regulateClause 12 of article 91 of the JSC Law and clause 5 of article 50 of the LLC Law such legal relationship, a non-disclosure agreement is signed between the participant/shareholder and the company. However, the Russian Supreme Court points outResolution of the Arbitrazh Court of the West-Siberian District dated 9 March 2023In some instances, courts assess the provision of confidentiality agreements (non-disclosure undertakings) which companies invite their shareholders/participants to conclude as a condition for the exercise of their rights to receive information, noting that such agreements (NDAs) should be in compliance with the civil laws setting limits of the freedom of contract.
For example, in one of the cases, the arbitrazh court heldResolution of the Arbitrazh Court of Appeal dated 13 March 2019
Form of information provided
The general rule is that the choice of a particular form or method of providing information and documents is determined by the participant/shareholder, except where a certain form of providing information is expressly prescribed by law.Information on the company’s activities may be providedClause 3 of article 50 of the LLC Law, clause 11 of article 91 of the JSC Law to a participant/shareholder by making the relevant documents available for review in the company’s executive offices or providing copies of such documents, and where necessary in the form of an exhaustive summary of a document.
Questions arise for courts when considering cases involving the provision of information in the electronic form. The Russian Supreme Court upheld the position of lower courtsResolution of the Arbitrazh Court of the Urals District dated 27 January 2022
Participant/shareholder to act in good faith when requesting information
The Russian Supreme Court notes that one should correlate the participant’s/shareholder’s rights to information with the principle of good faith and the prohibition of abuse of rights.In determining whether a participant/shareholder is abusing their right to information, courts will take into account the essence of the claimant’s interest in obtaining information (i.e. the purpose of its intended use). The fact that a participant/shareholder has a legitimate interest in obtaining information may be evidenced by such acts by the participant/shareholder as the claimant planning to sell its participation interest/shares, preparing to file a court claim challenging a resolution of the company’s governing body or an agreement concluded by the company and seeking to hold the company’s governing bodies liable, and preparing to participate in a general meeting of shareholders.
The following circumstances may suggest that there is an abuse of the right to information by a participant/shareholder:
- the participant/shareholderResolution of the Arbitrazh Court of the Central District dated 9 June 2023
No. F10-2624/2023 in caseNo. A35-3721/2021 , Resolution of the Arbitrazh Court of the Moscow District dated 11 September 2023No. F05-21652/2023 in caseNo. А40-152831/2022 is an actual competitor or affiliate of the company and the requested information is confidential, having a competitive value and, if made public, may prejudice the commercial interests and business reputation of the company; - the request for information is not relatedResolution of the Arbitrazh Court of the Moscow District dated 16 February 2023
No. F05-560/2023 in caseNo. A40-113533/2022 to the intention of the participant/shareholder to take part in managing the company’s operations, protect the company’s rights and lawful interests, and is actually driven by the intention to do harm to the companyResolution of the Arbitrazh Court of the Moscow District dated 16 February 2023No. F05-560/2023 in caseNo. A40-113533/2022 , create obstaclesResolution of the Arbitrazh Court of the Urals District dated 26 June 2023No. F09-3835/23 in caseNo. A07-5707/2022 to the ordinary course of its business, for example, if the participant/shareholder repeatedly requestsResolution of the Arbitrazh Court of the North-Western District dated 24 August 2022No. F07-9243/2022 in caseNo. A21-7648/2021 , Resolution of the Arbitrazh Court of the Far-Eastern District dated 28 April 2021No. F03-2117/2021 in caseNo. A73-12878/2019 the same documents (the list of which practically does not change, except for the date of issue); - the participant/shareholder creates obstacles to the company’s manufacturing activities (i.e., where the claimant restricts access of the company’s general director to the place where documents are kept); requests documents for a period during which the participant[/shareholder] acted as the company’s general director but did not hand over the documents to the new CEO after his own powers had been terminatedResolution of the Fourteenth Arbitration Court of Appeal dated 9 September 2019 in case
No. A19-32103/2018 , Resolution of the Eleventh Arbitrazh Court of Appeal dated 2 June 2022No. 11AP-5142/2022 in caseNo. A55-25153/2021 ; and/or - the participant/shareholder changesResolution of the Arbitrazh Court of the Moscow District dated 24 July 2020
No. F05-10675/2020 in caseNo. A40-83380/2019 , on a systematic basis, its claims (makes additions to the list of documents) or failsResolution of the Arbitrazh Court of the Moscow District dated 20 April 2016No. F05-4298/2016 in caseNo. A41-34922/2015 to set a deadline for the company to fulfil the requirement and voluntarily provide the documents.
Shareholder’s request for information to contain a business purpose
The courts are largely in agreement that if the shareholder’s request to provide documents does not specify the business purpose for which a document is requested, where such purpose is required under the JSC Law, or where such purpose is not reasonable or the composition and content of the requested documents do not clearly correspond to the purpose stated in the request, this may serve as a ground for refusing to grant access to the documents and information requestedSubclause 4 of clause 8 of article 91 of the JSC Law.The Russian Supreme Court upheld the case practice whereby it was deemed lawful for a JSC to refuse to provide documents in a situation where the purpose stated in the request was stated in abstract words (i.e., the request was pointless) and the company’s request to specify the purpose of the request for documents and disclose the shareholder’s business interest in obtaining them was not satisfiedResolution of the Arbitrazh Court of the North-Western District dated 28 February 2020
The Review also states that one should agree with the approach taken by the courts determining whether or not the shareholders have a legitimate interest in obtaining information where there is a corporate conflict within the company and a general meeting of shareholders has not been held for a long time, i.e., the controlling shareholder impermissibly conceals information on the company’s activitiesResolution of the Arbitrazh Court of the Povolzhsky District dated 15 December 2022
Period for which information may be provided
The Russian Supreme Court upheld the position of the lower courtsResolution of the Arbitrazh Court of the Far-Eastern District dated 8 April 2022Judicial penalty
Based on article 308.3(1) of the Civil Code of the Russian Federation (“Russian Civil Code”), a court may, at the request of a creditor, award a sum of money to the creditor if a court order for the performance of an obligation in kind is not complied with (“Astreinte”).Current case law permits the award of an Astreinte on shareholders’/participants’ requests for information and documents to be provided by companies. In determining a fair amount of the Astreinte, courts take into account a wide range of circumstances, including:
- the scope of documents and information requested and the existence of obstacles to such documents and information being provided (i.e., the degree of difficulty in performing the court order). For instance, in one of the cases, a company participant requested copies of documents of nine different categories. The company provided documents of five categories, stating that the relevant documents of two other categories were missing, and failed to provide any explanations in relation to the remaining two categories of documentsResolution of the First Arbitrazh Court of Appeal dated 1 February 2019 in case
No. A79-12650/2017 . In granting the participant’s claim to impose an Astreinte on the company for the failure to provide documents for the remaining two categories, the court pointed out that there was no evidence of any obstacles to the company fulfilling the request within the time period required by the claimant; - whether the amount of the Astreinte is commensurate to the respondent’s financial burdenResolution of the Ninth Arbitrazh Court of Appeal dated 26 June 2023
No. 09AP-12394/2023 in caseNo. A40-266333/2022 (set aside by Resolution of the Arbitrazh Court of the Moscow District dated 12 October 2023No. F05-19098/2023 in caseNo. A40-266333/2022 ). In the case at hand, the court reduced the amount of the Astreinte sought by the claimant from RUB50,000 to RUB500 per day of delay, noting that such amount, on the one hand, would not contribute to the enrichment of the claimant, who is not seeking the recovery of money, and on the other hand, would be a sufficient incentive for the respondent, and represent a commensurate financial burden to execute the court decision within the prescribed time limit; - how important the requested documents and information are for the participant/shareholder; whether part of the documents and information by the respondent is provided before the judgement is renderedResolution of the Arbitrazh Court of the West-Siberian District dated 15 July 2021
No. F04-3477/2021 in caseNo. A45-13725/2020 ; and - the degree to which the respondent resists the voluntary fulfilment of the obligation. In one of the cases, the company did not provide the shareholder with any of the requested documents for a long time (considering that the decision to provide part of the requested documents was made in favour of the shareholder by the court of first instance in the second round of consideration). The cassation court noted that the proportionality of the Astreinte is determined on the basis of the degree of the debtor’s resistance to fulfil the obligation, and the Astreinte is awarded in order to overcome the existing resistance and encourage performance. In awarding an Astreinte of RUB1,000 per day of delay, the court took into account that the court decision had become final and binding and that there was no obstacle for the company to perform such decisionResolution of the Arbitrazh Court of the North Caucasus District dated 17 December 2021
No. F08-12283/2021 in case No. A53-35233/2019 .
- notify the participants/shareholders of such circumstance and of the reasons why the document is missing; and
- provide documentary evidence and demonstrate that it is impossible to restore and make the relevant document available.
