The Supreme Court of the Russian Federation Protected the Company’s Interests in the Payment of a Share to a Withdrawing Participant in Kind
The Supreme Court of the Russian Federation emphasized the need to verify compliance with corporate procedures and the interests of the company when transferring property to a former participant in satisfaction of the actual value of their share. By its ruling in case No. A40-156101/2024, the Economic Chamber set aside the decisions of the lower courts and remanded the dispute for a new trial.
The dispute arose from the company’s claim to declare invalid a transaction under which the general director transferred to his son a share in title to the company’s only real estate asset, which generated rental income, in satisfaction of the share of a withdrawing participant who had previously assigned the relevant claim to that person.
The lower courts dismissed the company’s claim, referring to the permissibility of payment of the share in kind and the failure to prove damage. The Supreme Court, however, set aside these rulings and stated that, upon a participant’s withdrawal, a mechanical transfer of property in kind is impermissible where the asset in question ensures the company’s core business activity and generates profit. The mere calculation of the share value based on the cadastral value, without taking into account all assets, liabilities, and the role of the property in the business, does not make it possible to determine whether the consideration is equivalent.
The Court separately noted that it is necessary to assess not only the value of the transferred property, but also its significance for the company’s business and the existence of a reasonable business purpose for the transaction, which must be proven.
This legal position strengthens control over related-party transactions and excludes a formal approach to the payment of shares in kind, particularly when key assets of the company are being disposed of.
