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The High Court (ICC Judge Burton) has rejected claims that the English holding company of a major Russian insurer is to be run on the basis of a ‘fundamental understanding’ reached between its founders.

The Petitioner in the case, Cossac Holdings, alleged unfairly prejudicial treatment, contrary to section 994 of the Companies Act 2006, on the basis that the English company Preferred Management Ltd (which holds some 40% of Russian insurer JSC Energogarant) was being managed contrary to a ‘fundamental understanding’ formed by its three founding shareholders. In particular, the Petitioner alleged that all decisions were to be taken unanimously, regardless of the shareholdings held by each founding partner or their heirs. The Petitioner also sought rectification of the company’s register, on the basis that shares transferred in 2006 from a retiring founding shareholder should have been divided equally between the remaining two, rather than transferred to only one.

Following cross-examination of various Russian witnesses, the Petitioner’s case on the existence of a relevant ‘fundamental understanding’, and the claim for rectification of the register, were wholly rejected. The Judge found that no relevant understanding survived the departure of one of the retiring founders in 2006, and that his shares were properly acquired by the Third Respondent and now properly held by the Second Respondent.    

Fraser Campbell, instructed by Benedict Walton and Bryan Shacklady of Forsters LLP, acted for the successful Respondents.

The judgment is available here.

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