The Constitutional Court Recognized Equal Rights to Dividend Payments for All Shareholders
Shareholders holding preferred shares of the Signal Radio Plant challenged the legality of paragraph 1 of clause 5 of article 32 and clause 3 of article 42 of the Federal Law “On Joint-Stock Companies” before the Constitutional Court of Russia. The dispute arose after lower courts refused to recover unjust enrichment from the company, which had paid dividends on ordinary shares but failed to pay them on preferred shares for the first nine months of 2017.
The Constitutional Court of the Russian Federation declared the contested provisions unconstitutional, noting that they do not provide effective protection of the rights of preferred shareholders when a company violates the order of dividend payments.
As a result, shareholders are now entitled to seek recovery of unjust enrichment if a company’s decision to pay dividends on ordinary shares infringes upon their rights.
