On 29 September 2020, following an ex-parte (without notice) application filed into the District Court of Limassol, our Client, represented by Mr. Angelos Paphitis and other members of our Litigation team was successful to have obtained an Interim Prohibitory Injunction against two (2) Cyprus companies, prohibiting them from exercising their voting rights during an annual general meeting (AGM) of an Open Joint Stock Company (OJSC) in Russia.
What’s interesting about this case is that (a) the prohibitory injunction obtained in Cyprus was filed in aid and support of arbitration proceedings filed at the London Court of International Arbitration (LCIA), in the UK, against an indirect shareholder of the two Cypriot companies / respondents in Cyprus; and (b) the two Cypriot respondent companies are not parties to the LCIA arbitration process.
According to the interim prohibitory injunction, the two Cypriot companies / the Respondents, holding together a total of 49.9% in a Russian OJSC, were prohibited from exercising their voting rights during the AGM that was set to take place on 30 September 2020 in Moscow.
The interim order was issued ex-parte on 28 September 2020 (i.e. one day prior to the AGM in Moscow) and became absolute on the 5 October 2020.
Background
Following a leveraged buyout agreement concluded in 2012, two Cypriot companies, part of a well-known larger group in Russia, acquired 49.9% of an OJSC, a major logistics and transportation public company in Russia.
These two Cypriot companies are indirect subsidiaries of the debtor company, which obtained financing through a leveraged buyout from the Plaintiff’s Group, itself a part of the OJSC’s Group.
To clarify, a leveraged buyout is a corporate finance transaction where the target company (in this case, the OJSC) lends money, directly or indirectly, to a third company (the purchaser) to acquire shares in the target company. In the situation at hand, the borrower defaulted on all loan repayments to the creditor, leading the creditor to file a debt claim with the LCIA for the repayment of sums pursuant to the loan agreements, amounting to nearly US$1.4 billion.
Given the two Cypriot companies’ significant shareholding in the OJSC, and the borrower’s control over these companies, there was a clear risk that at the OJSC’s upcoming Annual General Meeting (AGM) scheduled for September 30, 2020, these companies could vote to replace the OJSC’s board of directors with individuals aligned and/or related with the borrower. This could potentially allow for an extension of the loan repayments by the new board, a move that could have severe repercussions for the OJSC due to its existing financial obligations to a third-party Russian bank.
To prevent such outcomes, it was crucial to ensure that the two Cypriot companies were barred from voting at the AGM to replace the board of directors. The application for interim orders/prohibitory injunction in support of the LCIA arbitration was successful, and as a result, the two Cypriot companies were prevented from exercising their voting rights at the AGM.
Lawyer representing our clients:
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- Angelos Paphitis, Managing partner, Barrister (Gray’s Inn)
- You can find further information on interim orders in our
- Angelos Paphitis, Managing partner, Barrister (Gray’s Inn)
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