The state will receive 100% of the shares of the Solikamsk magnesium plant

The Arbitration Court of the Perm Territory satisfied the claim of the prosecutor’s office to confiscate about 10% of the shares of Solikamsk Magnesium Plant OJSC (SMZ) from minority shareholders. Over 2.3 thousand legal entities and individuals were defendants in the case, which is a record in Russian arbitration practice. Previously, the supervisory authority was able to achieve a decision to turn over 89% of the shares of SMZ, owned by a group of businessmen, into state revenue. The court agreed with the plaintiff that the privatization of the plant in the 1990s was carried out illegally, without the approval of the country’s government. Minority shareholders insist on the legality of owning shares; some of the defendants were even supported by the Central Bank, but this did not influence the court’s decision in any way.

The Prosecutor of the Perm Territory filed a claim to turn over about 40 thousand shares belonging to minority shareholders of Solikamsk Magnesium Plant OJSC into state revenue in the summer of 2022. In the final version, over 2.3 thousand individuals and legal entities, who together own 10% of the total number of SMZ shares, were recognized as defendants. In addition, the nominal shareholders of the Solikamsk Magnesium Plant were also recognized as defendants. According to the Arbitration Court of the Perm Territory, this dispute became a record in domestic practice in terms of the number of participants.

The lawsuit was filed after the 2022 trial satisfied similar demands from the Prosecutor General’s Office to businessmen Pyotr Kondrashev, Timur Starostin, Igor Pestrikov and Sergei Kirpichev.

The plaintiff insisted that the privatization of the strategic enterprise in 1992–1996 was carried out in violation of the legislation in force at that time.

In particular, it was carried out without permission from the government of the Russian Federation, but only on the basis of the approval of the State Property Committee of the Perm Region. As a result, the decision regarding the controlling stake was upheld in the appellate and cassation instances. The demands of the regional prosecutor’s office on minority shareholders were fully supported by the Prosecutor General’s Office.

The minority shareholders participating in the trial categorically disagreed with the demands of the prosecutor’s office. In their opinion, the supervisory authority missed the three-year limitation period. In addition, during the consideration of the claim against the majority shareholders, prosecutors said that they had no claims against the minority shareholders. They consider such actions inconsistent.

Representatives of the Central Bank and the Moscow Exchange, involved in the dispute as third parties, insisted that the shareholders who purchased SMZ securities at organized auctions were bona fide purchasers. In particular, the Central Bank indicated that the legality of the origin of shares is verified by the exchange even before the start of trading. However, this did not help the defendants either.

Dmitry Astakhov, Perm