On 17 March the UCP fund, a minority shareholder of Transneft, filed a lawsuit with the Commercial Court of Moscow with regard to the monopoly to recovery of damages in the form of lost profit and interest (Vedomosti possesses a copy of the document). A representative of UCP confirmed the filing of the lawsuit and the authenticity of the document. A representative of Transneft did not answer any questions. We could not reach a representative of the Federal Property Management Agency on Sunday.
The information about the lawsuit of UCP Industrial Holdings LTD. to Transneft for the amount of 97.18 million rubles can be found in the database of commercial courts. The lawsuit began on 18 March, and the first hearing was held on 11 May.
The amount of UCP’s claims is 97.18 million rubles, from which 84.7 million rubles is the lost profit, and the remaining part is the interest on monetary resources, as it is stated in the lawsuit. UCP disagrees with the dividends for 2013, when Transneft paid 724.21 rubles for one preferred share and 1221.38 rubles for one common share. The claimant stated that, in accordance with the legislation and pursuant to the decision on issuance of Transneft’s preference shares, if dividends on them are less than those on common shares, the amount should increase proportionately. There is no published decision on the issuance of preferred shares in Transneft’s materials. One of UCP’s companies had 170,272 shares (2.7% of the capital) in 2013, and the claimant estimated the lost profit as 84.7 million rubles. From the year 1997 the amount of payments per share, as far as preference shares are concerned, exceeded or was equal to the dividends on common shares, and the total payments were in favor of the common shares (follow the link above to see the graph in the original article). The representative of the fund does not say how many shares UCP has now, emphasizing that the portfolio is significant. The representative of Transneft previously gave the number of 1 million shares to Interfax (two thirds of all outstanding shares, or 16.02% of the capital).
Transneft was established in 1992. In 1995, in the course of privatization, it was decided to allocate up to 25 percent of preferred shares to the company’s employees and persons with equal status. UCP noted that, during privatization of state enterprises, the Russian President approved a standard charter through a decree as of 1 July 1992, which contained the requirement to increase the dividends on preferred shares to to equal those of common shares. The current Articles of Association of Transneft state that the owners of preferred shares get 10 percent of net profit, by Russian accounting standards. As a whole, the company gives no less than 25% percent to its shareholders.
“The increase of dividends on preferred shares up to the amount of payments on common shares was a stipulation of the standard charter, indeed, but the relevant decree of the president ceased to be in force since 29 March 2003 and cannot be applied to the dividend policy of Transneft in 2013”, Dmitry Magonya, the managing partner of the ART DE LEX law firm, remarked.
“If the offering memorandum contains such a provision, it is a strong but not decisive argument”, ,” stated a partner of Yukov and Partners, Mark Karetin, “A charter is the main document of the company.
Payments for 2015 can also be disputable. The Ministry of Economic Development and Trade prepared a guideline for Transneft to pay 100 percent of net profits as dividends, by Russian accounting standards, or 12.8 billion rubles. Minority stockholders will receive 10 percent of this amount. On one share, the state can get 2,077 rubles; private individuals, 823.3 rubles. Last week, Interfax cited the letter of the Association of Professional Investors (API) to the government, concerning the fact the owners of Transneft’s preferred shares are guaranteed to get dividends equal to those on common shares, according to by the provisions of the issuance of securities. To that the representative of the monopoly, Igor Demin, asserted that there was no such provision in the offering memorandum. He stated that Transneft considers that “API is acting in the interest of Tscherbovich” . “Tscherbovich tries to consciously mislead the Russian Government . . . The mentioned shares were not issued when Transneft was established, in the process of privatization, in 1993, but emerged as late as in 1996. These shares became free-floating as late as in 2007”, Demin said to told Interfax. Demin noted that neither former nor current owners of the preference preferred shares invested in the company and remarked that the Supreme Arbitration Court established that the contribution of the shareholders to the company’s capital should determine the scope of equity rights.