For the first time, the Russian court ordered the confiscation of shares from private investors

In Russia, for the first time, the court ordered the seizure of shares from private investors, sided with the prosecutor’s office. The case is called a precedent.

The arbitration court of the Perm region satisfied the prosecution’s claim to seize shares from private investors of the Solikamsk magnesium plant. This follows from the case report, reports RBC.

The publication’s information was confirmed by the shareholders’ representative, the managing partner of Law & Capital, Victor Obydennov.

The legal proceedings have been ongoing since August 2022, when the prosecutor of the Perm region filed a lawsuit to seize shares in favor of the state. The reason for the lawsuit was the court’s recognition of the illegal privatization of the enterprise, carried out back in 1992.

Initially, the seizure of shares affected only the company’s majority shareholders. In favor of the state, their share of 89.4% was confiscated. But part of the plant’s securities remained in the possession of minorities, since 10.6% of the plant’s shares were placed on the Moscow Stock Exchange. In November 2022, their trading was terminated, but the securities remain with investors. Later, the prosecutor demanded that they be seized, too.

Mosbirzha criticized the possible withdrawal of papers. The site believes that such a measure may contradict the legislation on organized auctions, RBC wrote earlier.

Investors intend to challenge the decision in the appeals court, Viktor Obydennov said. “There are chances, the decision of the first instance creates an extremely negative precedent for the market, we do not think that such a decision will remain in force. And our position is supported by the Central Bank,” he added.

Head of the Central Bank of Russia Elvyra Nabiullina, commenting on the situation, called it worrying. Nabiullina emphasized the fact that minority shareholders purchased securities at organized auctions. “This is a very important factor that affects the trust of retail investors in the stock market. If we want to attract resources for development and, in particular, use the opportunities of the capital market, of course, preserving this trust is extremely important,” Nabiullina is quoted as saying by RBC.