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DEBT AND LIABILITY MANAGEMENT: SUPPORT OF BANKRUPTCY PROCEEDINGS

CASE


OPPOSITION TO INCLUSION OF DISHONEST CREDITORS INTO THE REGISTER (CREDITORS WITH ARTIFICIALLY INCREASED PAYABLES)


FACTS


As part of bankruptcy proceedings against a Russian company (Debtor), whose key bankruptcy creditors included a Client of Paradigma Law Company (at the monitoring stage), a New Creditor applied to the Arbitrazh Court seeking to be included into the register of creditors as a creditor under a promissory note debt, the existence of such debt evidenced by a court order issued by a justice of the peace. Were such claims included into the register of creditors, the new creditor would have gained complete control over the bankruptcy proceedings.


WHAT WE  ACHIEVED


Specialists of Paradigma Law Company developed and efficiently implemented a system of comprehensive measures to oppose inclusion into the register of creditors of such New Creditor’s artificial payables.


WHAT PROBLEMS THE CLIENT AVOIDED


Considering that the New Creditor’s claim was based on a recoverable promissory note debt, Paradigma professionals faced a task: to contest the court order and prevent the inclusion of the New Creditor into the Debtor’s register of claims. This allowed Paradigma’s client to retain control over the Debtor’s bankruptcy and avoid the problem arising from the New Creditor’s strategically wrong decisions.


WHAT THE CLIENT GAINED FROM WORKING WITH US


The correct selection of tactics allowed Paradigma lawyers to successfully contest, in cassation, the court order ordering recovery of the promissory note debt in favour of the New Creditor in the regional court, thus ultimately preventing the New Creditor from being included into the register of creditors and, accordingly, it was possible to retain control over the bankruptcy proceedings of the Debtor.

DUE DILIGENCE

CASE


DEVELOPMENT OF A SYSTEM OF MEASURES FOR PREVENTING THE BEGINNING OF A CORPORATE CONFLICT


FACTS


Paradigma Law Company was approached by a group of shareholders in an open joint stock company asking to provide qualified legal assistance in preventing the beginning of a corporate conflict between the majority and minority shareholders.


WHAT WE ACHIEVED


Lawyers of Paradigma Law Company carefully studied the internal documents, performed a legal analysis of the corporate and pecuniary rights of the main groups of the company’s friendly and hostile shareholders, analysed in detail the structure and powers of the corporate governance bodies.


WHAT PROBLEMS THE CLIENT AVOIDED


We protected the client from a burgeoning corporate conflict that might result in a significant curtailment of the rights and interests of the friendly shareholders, threaten the integrity of the company’s fixed assets, and ultimately the economic stability as a whole.


WHAT THE CLIENT GAINED FROM  WORKING WITH US


Upon the due diligence results, not only written recommendations were prepared for the client aimed at minimising the risks of hostile takeover and disposal of fixed assets, but internal corporate documents were drafted allowing to harmonise and balance the corporate governance system in order to increase the efficiency of corporate controls in the company.




DEBT AND LIABILITY MANAGEMENT

CASE


RECOVERY IN COURT OF LOSSES UNDER CONTRACTS


FACTS


An oil production company faced an unreliable counterparty who failed to properly perform works under a drilling well contract. Due to the contractor’s failure to perform, the oil well under development proved unfit for further operation. In addition, when attempting to restore the well’s production capability, the Client was forced to engage a third party organisation and incurred additional losses. Paradigma lawyers were instructed to recover from the guilty party the losses and additional costs. Disputes on the recovery of losses are among the most difficult in litigation. Russian arbitrazh courts grant such claims extremely rarely. The situation was aggravated by the fact that the guilty party was subject to an insolvency (bankruptcy) procedure.


WHAT WE  ACHIEVED


According to the plan suggested by the Client, a court-appointed examination of the well construction works was performed as part of the proceedings, which yielded the required body of proof. Upon evaluating the documents of the case, the court took the Client’s side and recovered from the guilty party the full claimed amount of losses.


WHAT PROBLEMS THE CLIENT AVOIDED


Upon the court judgement on recovery of losses taking force, the Client, in the subsequent bankruptcy proceedings of the debtor who had caused the losses, was no longer under an obligation to prove the amount of debt, thus allowing the Client to be freely included into the register of claims to the debtor.


WHAT THE CLIENT GAINED FROM WORKING WITH US


The lawyers’ actions allowed within a minimal time, to create conditions for including the Client as creditor, to the full amount, into the register of claims to the debtor in bankruptcy, subsequently allowing an efficient exercise of the creditor’s rights in the debtor’s bankruptcy.

DEBT AND LIABILITY MANAGEMENT: TRANSACTION SUPPORT, INCLUDING SUPPORT FOR INTERNATIONAL CONTRACTS

CASE


RECOVERY OF DEBT FROM A RUSSIAN INDIVIDUAL SURETY UNDER FOREIGN LAW


FACTS


A Client of Paradigma Law Company, a BVI Company, issued a loan to another BVI Company. The agreement was governed by the laws of Switzerland, with the competence of the International Chamber of Commerce (Zurich, Switzerland), the surety was a Russian citizen, and the surety agreement too was governed by the laws of Switzerland. The borrower failed to repay the loan, and the Client instructed Paradigma.


WHAT WE  ACHIEVED


Even though the dispute was to be resolved by a foreign tribunal and the agreement in dispute was governed by foreign legal rules, Paradigma lawyers were able to quickly and efficiently recover the entire debt amount in the territory of Russia, avoiding the transfer of the case with respect to the enforcement against the individual surety to a court of general jurisdiction.


WHAT PROBLEMS THE CLIENT AVOIDED


The Client avoided significant spending of finances and time arising from arbitration in foreign jurisdictions, with the results of the dispute there unpredictable.


WHAT THE CLIENT GAINED FROM WORKING WITH US


The Russian trial court’s judgement was left standing by the Ninth Arbitrazh Appeals Court, which allowed the Client to quickly obtain a writ of execution for enforcing recovery against the debtor’s assets located in Russia.

SHAREHOLDER DISPUTES

CASE


THEFT OF SHARES IN COMPANIES


FACTS


One of the oldest and most renowned publishing houses in Russia applied to Paradigma Law Company due to the existence of a long-standing corporate conflict within the entity and a threat of a complete hostile takeover, which would result in certain destruction of the publishing house and termination of its activities. The situation was aggravated by the fact that the majority shareholder’s stake (more than 65%) had been misappropriated by third parties by forging the majority shareholder’s signature on the share purchase agreement. Moreover, at the time when Paradigma became involved, the opponents in the publishing house had already held meetings with new membership, removing the previous director (the majority shareholder whose stake had been stolen), and a new director had been appointed, who succeeded in entering on behalf of the publishing house into numerous onerous transactions.


WHAT WE ACHIEVED


The stage-by-stage and strategically accurate actions of Paradigma Law Company resulted in the development and efficient implementation of a system of comprehensive measures to oppose the hostile assault and prevent a takeover of the publishing house from the outside. Paradigma filed numerous claims with courts seeking to restore the majority stake in the publishing house to its former lawful owner, rule invalid the new director’s appointment, and contest the transactions made by the new director and causing losses to the publishing house. Provisional measures were also imposed in order to prevent further development and deepening of the corporate conflict.


WHAT PROBLEMS THE CLIENT AVOIDED

The steps taken by Paradigma Law Company allowed to restore the share in the publishing house to its lawful owner, remove the illegally appointed director and avoid liability for the publishing house under economically unfavourable transactions.


WHAT THE CLIENT GAINED FROM WORKING WITH US


After the end of the corporate warfare resulting in the client retaining strategic control of the publishing house, Paradigma Law Company assisted the client in further development and support of the publishing house by providing advice on the current affairs of the publishing house involving an external investor pool interested in developing publishing business.


CORPORATE RELATIONS WITHIN FIGS

CASE


OPPOSITION TO A DILUTION OF SHARE IN THE COMPANY’S CAPITAL


FACTS


The general manager of a legal entity incorporated in the British Virgin Islands approached Paradigma Law Company in connection with a long-standing corporate conflict within a Kazakhstan limited liability partnership. The Client was a minority member of the partnership. The situation was aggravated by the fact that the majority member’s share (more than 75%) allowed it to pass corporate decisions without reference to the minorities’ opinion. The partnership had valuable assets – subsoil deposits, however generated no profits for its members. The Client believed that the lack of profit was a direct result of failure to perform their duties by the partnership’s top management, appointed on the initiative of the majority member. Whereas the appointment of the partnership’s top management uncontrolled by the majority member was not part of its plans, steps were commenced against the Client aimed at diluting its share in the partnership. In particular, the majority member kept passing resolutions on increasing the share capital without any justification of the amount and necessity of such increase.


WHAT WE ACHIEVED


Upon analysing the legal rules of the Republic of Kazakhstan and case law, Paradigma developed and efficiently implemented a system of comprehensive measures to prevent dilution of the Client’s share in the Kazakhstan partnership. Paradigma Law Company filed claims with the courts of the Republic of Kazakhstan and international arbitration tribunals seeking to rule invalid resolutions on increasing the share capital of the partnership, passed only on the initiative of the majority member, and requesting interim measures to prohibit the actual increase of the share capital without basis.


WHAT PROBLEMS THE CLIENT AVOIDED


The steps taken by Paradigma Law Company allowed to stop abuse of its corporate rights by the majority member of the partnership, stem the ongoing process of capital increase, and prevented dilution of the Client’s share in the Kazakhstan partnership.


WHAT THE CLIENT GAINED FROM WORKING WITH US


After stopping the ongoing process of capital increase and preserving the Client’s share in the partnership, Paradigma Law Company further assisted the Client to preserve its rights as a minority member and ensure full resolution of the corporate conflict in the Client’s interests.

BANKRUPTCY

CASE


CONTESTING TRANSACTIONS IN BANKRUPTCY


FACTS 


In 2012 Paradigma Law Company was approached by the receiver of one of the largest oil and gas companies in the process of bankruptcy. The issue was, that the debtor’s documentation showed that due to a malicious agreement between a creditor and the debtor’s former management, several transactions were made expressed in set-offs of similar claims. As a result of these transactions, one of the creditors had advantage in satisfying its claims for a substantial amount of several dozen million roubles.


WHAT WE  ACHIEVED


Lawyers of Paradigma Law Company developed a plan of action, and as part of it, several claims were filed contesting the transactions expressed in set-offs of similar claims, and other measures were taken to influence the creditor through governmental authorities. A court judgement as part of the bankruptcy proceedings against the debtor, granted the claims contesting the transactions, and the transactions expressed in set-offs were ruled invalid.
One of the claims, inter alia, was a claim to apply the consequences of a transaction being ruled invalid. The court applied bilateral restitution and the mutual debts of the creditor and the debtor were reinstated on their balance sheets.


WHAT PROBLEMS THE CLIENT AVOIDED


Application to Paradigma Law Company allowed the client to continue with the operations of a large production facility, performing to its counterparties under current payments. At the same time, a team of lawyers was dealing with the counterparties located at a significant distance, while the client was unable to take part in all of the hearings. In addition, the client lacked in-house lawyers, and hiring was not feasible due to the bankruptcy.


WHAT THE CLIENT GAINED FROM WORKING WITH US


By the actions of Paradigma lawyers, the bankruptcy assets of the debtor were replenished with a substantial sum, allowing the receiver to restore the creditors’ rights, pay some of the creditors, and first of all, repay debt for salaries.

PROPERTY DUE DILIGENCE

CASE


PROPERTY DUE DILIGENCE


FACTS


Subject to an application from the Client (a foreign entity) who instructed Paradigma Law Company, a legal due diligence was performed on properties (non-residential premises and land plots) in Russia prior to acquisition. The legal due diligence was complicated by a large number of such properties. In addition, in the course of the due diligence, the ownership scheme for the properties was identified and their actual owner found (beneficiary). The scheme included several offshore entities and nominal shareholders.


WHAT WE ACHIEVED


After the ownership scheme for the properties was identified, a study was performed of the legal status, foundation documents and resolutions of governing bodies of the companies, comprehensive check was made of the status of the properties (for third party rights to the properties, as well as compliance with city planning and land law upon construction of the properties).


WHAT PROBLEMS THE CLIENT AVOIDED


As the properties were pledged to a commercial bank, and there existed a complex ownership scheme for the properties, as well as mutual claims of the companies forming the ownership scheme for the properties, Paradigma lawyers suggested two options for acquiring the properties, which took into account the existing restrictions and were aimed at minimising the risks of potential disposal of the properties in the future.


WHAT THE CLIENT GAINED FROM WORKING WITH US


As part of the due diligence exercise, we also performed an assessment of both the properties themselves and the business on renting out such properties generally, which, in combination with our recommendations on minimising the risks, allowed to considerably reduce the acquisition price for the properties.


SHAREHOLDER DISPUTES

CASE


CORPORATE CONTRACTS AND SHAREHOLDER AGREEMENTS


FACTS


The majority shareholders of an open JSC operating in metals production, approached Paradigma Law Company requesting to structure relationships between the shareholders of the group. As their main goal, the shareholders stated consolidation of the majority stake ownership of the open JSC within the group. The shareholders agreed to structure their relationship in the Russian jurisdiction.


WHAT WE ACHIEVED


Paradigma suggested to the shareholders to utilise the mechanism of a shareholders agreement as per art. 32. 1 of the Federal Law «On Joint Stock Companies». In the shareholders agreement, our lawyers implemented a mechanism providing ongoing control to the group shareholders over the integrity of the majority stake in the open JSC.


WHAT PROBLEMS THE CLIENT AVOIDED


Execution of the shareholders agreement allowed the majority shareholders to settle the relations within the group in the long term.


WHAT THE CLIENT GAINED FROM WORKING WITH US


Upon consultation, in view of the needs and requirements of the shareholder group, lawyers of Paradigma Law Company produced a unique document targeted at achieving the goals set by the majority shareholders.

SECURITIES

CASE


RECOVERY OF DEBT UNDER PROMISSORY NOTES


FACTS

Paradigma Law Company was approached by representatives of a foreign company holding several promissory notes issued by a major Russian industrial company. The noteholder asked to assist in recovering the debt under the promissory notes, as well as overdue interest and penalties.

With immediate assistance of our lawyers, the promissory notes were presented for payment and, with the issuer failing to pay, as well as the other parties liable under the promissory notes (backers, endorsers), the noteholder was forced to proceed by recovering the debt under the promissory notes in court, and was successful.

At the time when the court judgements on debt recovery took force, the noteholder, as well as the other parties liable under the promissory notes (among them large producers, city-forming enterprises) were ruled bankrupt and a receivership was instituted against them.

WHAT WE ACHIEVED


Even though the receivers actively opposed the process (in particular, contested the issuance, avalisation and endorsement of the promissory notes as suspicious transactions pursuant to art. 61.2 of the Federal Law “On Insolvency (Bankruptcy)”), with the assistance of Paradigma lawyers, the client was included in the issuer’s register of creditors, and the registers of the other companies liable under the promissory notes (backer and endorser). Later the client assigned the right of claim under the promissory notes at nominal value and consequently, satisfied its claims in full.


WHAT PROBLEMS THE CLIENT AVOIDED


With the assistance of Paradigma lawyers, the Client was not only included in the register of creditors of debtors under the promissory notes, but retained the promissory notes themselves, there being a real possibility that the unilateral transactions for the issuance, avalisation and endorsement of the promissory notes could be invalidated.

WHAT THE CLIENT GAINED FROM WORKING WITH US


The Client not only preserved the right of claim to persons liable under the promissory notes, but got a viable opportunity to satisfy its claims out of the assets of the promissory note debtors.