Sergei Bakeshin assessed for The Dairy News the prospects for the draft external management law

Sergei Bakeshin - Senior Associate

Last week a law on introducing external administration in foreign companies was introduced in the lower house of parliament. According to the document, external administration can be introduced to ensure state security and financial stability, as well as to protect the rights and legitimate interests of organisations. The bill proposes the appointment of external administration by court decision in respect of companies of significant importance to the economy of Russia or a particular constituent entity of the Russian Federation where foreign individuals directly or indirectly own more than 25% of the shares. According to the document’s authors, such companies may include producers of essential goods, goods of natural monopoly, city-forming enterprises and companies whose operations would result in unreasonable growth of retail prices.

According to Sergei Bakeshin, Head of Dispute Resolution and Insolvency Practice at Maxima Legal, some provisions of the draft law can be applied too broadly. “For example, external administration may be introduced in an organization for the production of essential commodities, 25% of the share capital of which is owned by several unaffiliated persons related to unfriendly countries (none of these foreign persons should be controlling, just several foreign minority shareholders). However, the company’s revenues in the last three months must have fallen by 30% compared with the preceding three months. Meanwhile, such a situation is typical for companies with seasonal nature of operations,” the expert explained to The Dairy News.

Sergei also drew the attention of the publication to the fact that the procedure for introducing external administration described in the bill is unwieldy and ambiguous as it is both judicial and administrative. At the same time, according to the expert, the deadlines for the procedures, including judicial ones, are extremely short. “Such deadlines do not allow organisations where external administration is planned to be introduced and their participants to effectively protect their rights and interests. For the mechanism envisaged in the draft law to work, amendments to the Civil and Arbitration Procedure Codes would be required. But the authors of the draft law made no provision for such changes,” said Sergei Bakeshin.

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