Shareholders of Norilsk Nickel are dissatisfied with the management

A new lawsuit by Rusal with claims against the head of MMC Norilsk Nickel, Vladimir Potanin, may lead to the fact that the aluminum company will become the largest co-owner of the MMC. The shareholder agreement of the parties stipulates that in case of its violation from the shareholder who allowed it, another may buy out 7.5% of the shares with a 25% discount. This will happen if the managing partner has not made all the necessary efforts to cover the losses caused by the activities of the management and directors of the company. However, according to lawyers, it will not be easy to prove the incorrectness of commercial decisions.

Rusal October 24 announcedthat, in accordance with the terms of the Norilsk Nickel shareholder agreement, filed a lawsuit with the High Court of London against the head of the MMC Vladimir Potanin and his Whiteleave Holdings Limited (an Interros structure). Mr. Potanin, through Interros, owns 35.95% of Norilsk Nickel, another 26.25% – from Rusal, about 4% – from the structure of Roman Abramovich. Rusal’s report states that its claims are related to Mr. Potanin’s failure to fulfill his duties as a managing partner at Norilsk Nickel.

According to the plaintiff, under the management of Vladimir Potanin, MMC lost a number of key assets, which led to losses for Norilsk Nickel itself and its shareholders.

Rusal did not specify what assets they are talking about. The plaintiff insists on compensation for damages, the amount of which must be determined by the court, and the appointment of an “independent head” of the MMC. The statement also said that Mr. Potanin is obliged to ensure the “proper management” of Norilsk Nickel and is responsible for this – “in accordance with the 2012 agreement, special liability and a special procedure are provided for “significant violations”.

Violation of the shareholder agreement may entail the repurchase of part of the shares from the party that allowed this, analysts at Renaissance Capital explain with reference to the disclosure of Rusal dated June 2014, which sets out some of the provisions of the document. In particular, the violations that give rise to such a right are stipulated, including “the failure by the managing partner of all reasonable efforts to recover damages through the courts, if any, were caused by the actions or omissions of the directors and management of the Norilsk Nickel group due to their willful misconduct or gross negligence.” The second party can choose between buying back 7.5% of the shares from the offender at a 25% discount or receiving 1.875% of the shares for $1. “These actions now depend on the final decision of the High Court,” according to Renaissance Capital. The parties do not give additional comments.

The next round of the shareholder conflict in Norilsk Nickel takes place two months before the expiration of the shareholder agreement, where the dividend formula is fixed, in accordance with which MMC transferred 60% of EBITDA to shareholders.

Vladimir Potanin’s position is to count dividends not from EBITDA, but from free cash flow. This would lead to a reduction in payments, which Rusal is not interested in.

In July, Vladimir Potanin said that in 2022 and 2023, against the backdrop of additional costs and the expiration of the shareholder agreement, MMC shareholders should not expect the level of profitability that dividends have provided so far. Last year, Mr. Potanin did named shareholder agreement “rudiment”. “I think this is precisely the struggle for dividends, for a new policy and agreement,” Kirill Chuiko, an analyst at BCS, interprets the purpose of the Rusal lawsuit.

According to Ekaterina Makeeva, Head of Sanctions Practice at A-Pro, it is possible to prove losses as a result of commercial decisions. But, the lawyer clarifies, as a general rule, such decisions, if they were not deliberately taken to the detriment of the company or did not lead to its insolvency, “can hardly have such consequences as removing the majority owner from management.” Georgy Okromchedlishvili, senior analyst at the ITS WM multi-family office, agrees with her: “Rusal’s side will have to prove that Vladimir Potanin did not fulfill his obligations to shareholders, deliberately took steps that were unprofitable from the point of view of Norilsk Nickel’s corporate interests, used his position for personal purposes, or simply maliciously violated certain corporate agreements while in office. It won’t be easy to prove it.”

Additionally, lawyers emphasize, the situation is complicated by the fact that both Vladimir Potanin and the founder of Rusal, Oleg Deripaska, are under British sanctions. Mr. Okromchedlishvili admits that Rusal does not expect to win at all, using the court “as an additional trump card in negotiations with Mr. Potanin’s structures.”

Evgeny Zainullin