Shareholder activist strategies


What common strategies do activist shareholders use to pursue their objectives?

Activist shareholders initially try to use all informal means to reach a settlement privately (eg, informal meetings and discussions with involvement of a third party, including arbitrator, lawyer or simply a trusted person). Thus, it is not typical for Russian shareholders to make the corporate conflict public with the involvement of a wide audience and social media.

If these informal measures do not work, the next step will be enjoying their statutory corporate rights through participation in the GSM, making proposals to the agenda of a meeting, requesting information from a company or bringing claims in court as covered in more detail below.

Processes and guidelines

What are the general processes and guidelines for shareholders’ proposals?

In general, a shareholder of a Russian company is entitled to make a proposal within the process of preparation to a GSM. In contrast to LLCs (where each shareholder has a right to make a proposal), shareholders of a JSC are entitled to make a proposal only if they hold in aggregate not less than 2 per cent of shares that carry voting rights.

Upon receipt of a shareholder’s proposal, a management body authorised to convene a GSM shall, within five days of expiry of the deadline for directing the shareholder’s proposals, examine the proposal and decide on its inclusion in the agenda of a meeting.

The LLC Law stipulates the exhaustive list of grounds for refusal to accept the shareholder’s proposal, namely when the proposed issue:

  • does not fall within the competence of the GSM; or
  • does not comply with legal requirements.

The JSC Law establishes two additional grounds - a shareholder:

  • missed the deadline for the proposal; and
  • did not own the quantity of shares required to make a proposal.

According to the JSC Law, the shareholder must be notified on rejection of the proposal by a motivated letter within three days from the decision on rejection. The shareholder whose proposal was rejected or not included due to omission of the competent body is entitled to request the court to include its proposal in the GSM’s agenda.

GSM may only be entitled to vote on issues not included in its agenda, if all shareholders of a LLC or non-public JSC attend a meeting.

Shareholder may request the company to call an extraordinary GSM outlining the proposed agenda, if a shareholder or several shareholders acting jointly own one-tenth of aggregate votes in the company.

The competent body must then decide within five days whether to convene a meeting. In the case of a positive decision, an extraordinary GSM shall be held within 40 days for JSC (or 75 days if GSM’s agenda includes an item on appointment of members of a board of directors) and 45 days for LLC from the date of receipt of a shareholder’s requirement to call a meeting.

The authorised management body is entitled to refuse convening a meeting only if: (i) a shareholder violated the procedural requirements; or (ii) the proposed issues does not fall within the competence of GSM. Where a negative decision or no decision has been adopted, a shareholder (or shareholders), who requested a meeting, in the case of a LLC - is entitled to convene a meeting by itself and in the case of JSC- is entitled to claim in court for such a company to hold a meeting.

May shareholders nominate directors for election to the board and use the company’s proxy or shareholder circular infrastructure, at the company’s expense, to do so?

Shareholders of a Russian company may nominate their candidates to be appointed to the board at GSM convened in accordance with the procedure described in question 7. In a Russian JSC, such right belongs only to a shareholder (shareholders) who holds in aggregate not less than 2 per cent of shares that carry voting rights, while in LLCs no thresholds are established.

The shareholders may agree in the company’s charter to apply the cumulative voting system for the election of board members that strengthen the ability of minority shareholders to elect a director.

May shareholders call a special shareholders’ meeting? What are the requirements? May shareholders act by written consent in lieu of a meeting?

Shareholders may call an extraordinary (special) GSM in accordance with the procedure described in question 7.

GSM can be held in the form of voting in person or absentee voting without holding a meeting with prior submitting of voting ballots (Russian law establishes certain restrictions on issues of the agenda which cannot be resolved by absentee voting). In the latter case, the voting may be performed by the exchange of documents through postal, telephone, electronic or any other communication that ensures the authenticity of transferred and received messages and their documentary confirmation.


What are the main types of litigation shareholders in your jurisdiction may initiate against corporations and directors? May shareholders bring derivative actions on behalf of the corporation or class actions on behalf of all shareholders? Are there methods of obtaining access to company information?

Shareholders are entitled to initiate, inter alia, the following types of civil actions against a Russian company and its management bodies:

  • challenging resolutions of company’s management bodies;
  • bringing a claim to the court to procure JSC convening the GSM (in cases described in question 7);
  • challenging company’s transactions; and
  • claiming for compensation of damages caused by controlling persons (as defined in question 11) to the company due to the actions (omissions) in breach of fiduciary duties.

In the context of challenging the GSM’s resolutions, claims may be brought only by those shareholders who voted against or did not participate in the GSM in question.

For shareholders of JSCs to bring a claim in court against company’s management bodies, the claiming shareholder (or several shareholders acting jointly) shall hold in aggregate not less than 1 per cent of issued ordinary shares of the company.

Following civil law reform that took place in Russia in 2014 the shareholders have been granted with a right to bring derivative actions acting on behalf of a Russian company in cases set out in questions 3 and 4. Resolution of the Plenum of the Supreme Court of the Russian Federation No. 25 dated June 23, 2015 additionally clarified that where litigation is successful, the damages caused to the company are awarded in favour of the company, shareholders in such cases act as company’s representatives.

Group actions (akin class actions) may be initiated by shareholders in accordance with the rules of Chapter 28.2 of the Arbitral Procedural Code of the Russian Federation. However, this instrument is not widely used in practice, since the minimum number of shareholders should be five, while, for shareholders of Russian LLCs and JSCs with concentrated capital structure, it is more practical to initiate an action with multiple claimants having their own individual claims. At the same time, it can be expected that minority shareholders of PJSCs will tend to use group actions to protect their interests due to apparent difficulties in reaching the 1 per cent threshold to initiate a litigation in situation of dispersed shareholding in PJSCs.

For the purpose of preparing for a litigation, the shareholders can use publicly available information (especially information disclosed by PJSC) and use their information rights under corporate law as described in question 26.