Hostile Takeover: 5 Steps to Protecting Your Business

Contents:

• Raider takeover: myth or reality of the 21st century?
• How to distinguish a raider takeover from legal actions?
• How do employees and business partners assist raiders?
• Risks associated with the use of powers of attorney in business
• How raiders can take advantage of your debts: defense strategies
• How to protect a company from takeover: important technical measures
• Don't forget to check your company's documents
• What to do in case of a raider takeover: step by step Management
• What to do after a business is taken over?
• The conflict around Natura Siberica: a corporate raid or inheritance disputes?
• Escalation of the conflict: new appointments and dismissals
• Legal examination: a corporate raid or an inheritance dispute?
• The future of Natura Siberica: potential investors

• Why does corporate raiding remain a relevant threat in 2023?
• How do raiders operate and what methods do they use to legalize their actions?
• What needs to be purchased to protect the office from possible takeovers?
• How to respond correctly in the event of a corporate raid and what steps to take afterwards?
• The case of Natura Siberica: is it a corporate raid or another offense?

Commercial raid: myth or reality of the 21st century?

Commercial raiding in Russia is a real threat to business. In 2021, more than 150 cases of corporate raiding were registered, which is 50% higher than the 2019 level. According to the Investigative Committee, 102 criminal cases related to corporate raiding were opened this year. In total, more than 20,000 cases of economic crimes were considered in the past year, of which about 0.5% were corporate raiding operations. This means that one corporate raid occurs every 2.5 days. Given current trends, it is important to raise awareness of this phenomenon and take measures to protect businesses from potential threats.

How to distinguish a corporate raid from legitimate actions?

The term "corporate raid" currently does not have a clear definition in criminal law. However, the business association "Opora Rossii" is actively developing a bill that could include this concept in the Criminal Code. A corporate raid refers to actions aimed at illegally seizing an enterprise's assets or establishing control over it. Introducing a clear definition of this term will help strengthen the legal protection of businesses and prevent cases of unlawful interference in their activities.

Modern corporate raids have undergone significant changes. According to experts, these actions are no longer associated with armed raids, but rather represent hostile takeovers or legitimate transfers of ownership. Currently, such operations are often carried out using legal methods, making them more difficult to detect and combat. Raiders exploit legal loopholes and manipulate documents, highlighting the importance of legal awareness and protecting businesses from unscrupulous actions. There are several common corporate raiding schemes that can be identified. Each has its own characteristics and mechanisms of action. The main schemes include the use of forged documents, manipulation of company shares and assets, and pressure on management through threats or blackmail. These methods are often used to illegally seize control of businesses, causing serious damage to both individual companies and the economy as a whole. Understanding these schemes will help you better protect your business from potential corporate raids.

• Forgery of minutes of general meetings.
• Submission of false documents on changes of ownership to registration authorities.
• Issuing a loan secured by shares or stocks with a subsequent demand to repay the debt using the collateral.
• Registration of the transfer of rights to a share in a company with the tax authorities on a formally legal basis.
• Initiation of bankruptcy of the debtor company.

Some of the methods used in business can be considered legal. Lawyer Yuri Kochergin emphasizes that the term "corporate raider takeover" is often used incorrectly. Any loss of control over a company immediately leads to talk of raiders. However, it may be that the business never belonged to these people. The transfer of an investor from minority to majority stakes is not a crime, but a standard business practice. It's important to understand the differences between legitimate asset management practices and unfair practices to accurately assess the situation and avoid unfounded accusations.

In recent years, the seizure of business shares has become increasingly common, often accomplished through collusion or fraud. One of the most common methods is the forgery of signatures on share transfer documents. This practice is actively used by corporate raiders, causing serious legal consequences and threatening the stability of the business. Protecting against such actions requires a careful approach to document preparation and verification of their authenticity. Promptly contacting legal specialists will help prevent corporate raiding attacks and protect your business interests.

Attorney Philipp Nastavshev describes a case in which a business owner forged share transfer documents without notarization, which was permitted by the company's charter. The raider handed these forged documents to the director, who submitted them for registration. The notary, accepting the documents as authentic, facilitated the seizure of the business share. This case highlights the importance of verifying the authenticity of documents and following legal procedures to protect a business from corporate raids.

How do employees and business partners assist corporate raiders?

Corporate raids may not Not only due to external factors, but also due to information leaks from company employees. Such actions can be both intentional and accidental. For example, an employee might forget to secure an important document, leaving it in an accessible location. This creates opportunities for attackers to exploit this information to carry out a corporate raid. Ensuring information security and training employees on how to handle such situations are key measures to prevent such threats.

• information on the financial position of the organization;
• a list of counterparties, including those with outstanding debts;
• copies of key company documents.

To reduce the risk of information leakage, employees should be provided with only the information that is critical to the performance of their official duties. Business security expert, lawyer Vladimir Gorbenko, emphasizes the importance of keeping key aspects of business process management confidential. This helps not only protect confidential data, but also maintain the company's competitive advantage. Developing a clear information access policy and regular employee security training are important steps in ensuring business protection.

Business security is largely determined by the interaction between the owners and their internal harmony. To reduce the risk of conflicts and improve the level of company security, the following recommendations should be considered:

— Establishing transparent and open communication between owners to prevent misunderstandings.
— Regular meetings to discuss current issues and make joint decisions, which helps build trust.
— Create a clear management structure that will help avoid conflicts in management.
— Develop an internal dispute resolution policy to ensure a prompt response to emerging disagreements.
— Implement risk assessment systems that will help identify potential threats and develop strategies to minimize them.

These steps will help create a safer and more stable business environment conducive to the growth and development of the company.

• Resolve controversial issues using a corporate agreement and the support of qualified lawyers.
• Provide conflict resolution mechanisms in the agreement.
• Limit the powers of the hired CEO in the company's charter.
• Agree that important transactions must be approved by all participants or a majority of them, and fix these conditions in the charter. This will help prevent the unauthorized withdrawal of assets from the business.

Risks Associated with the Use of Powers of Attorney in Business

Powers of attorney allow third parties to act on behalf of the company, which can lead to serious consequences if they fall into the hands of unscrupulous people. To reduce the risks of corporate raiding, it is necessary to carefully review the contents of the power of attorney and the list of powers granted. Particular attention should be paid to checking the background of the person for whom the power of attorney is issued, especially if this is an invited specialist with an unknown past. Conducting a thorough check will help protect the interests of the company and avoid potential threats.

Lawyer Vladimir Gorbenko notes that cases of forged powers of attorney are quite common. In one of the recent bankruptcy cases, he encountered a situation where the general director of a credit institution never signed a power of attorney for his representative, but the latter continued to represent the company's interests in court for a long time. This case highlights the need to maintain a power of attorney log to promptly identify unnecessary documents and request their return. Maintaining such a log not only protects the company from fraud but also promotes more transparent management of its affairs.

How Raiders Can Take Advantage of Your Debts: Defense Strategies

Imagine a situation where your company has debts to several creditors. At first glance, such financial obligations may seem insignificant and non-threatening. However, if unscrupulous individuals learn of your financial difficulties, they can acquire your debts and initiate bankruptcy proceedings. This will lead to serious consequences for your business, including the loss of assets and reputation. It is important to closely monitor the company's financial health and take measures to prevent such risks.

To prevent unwanted situations, it is important to include protective provisions in agreements with creditors that will ensure the safety of your company. It is recommended to add a clause that prohibits the creditor from transferring their claims to third parties without your consent. This will limit the actions of raiders and minimize the risk of losing control over your business. Properly drafted contracts will help maintain stability and protect your interests in financial relations.

To protect your business from raiders, in addition to the wording of the terms in loan agreements, it is important to consider additional measures. Implementing comprehensive legal protection, including registering property and asset rights, will help prevent takeover attempts. It is also worth considering creating an internal control system that will allow you to promptly identify and respond to potential threats. Having reliable partners and consultants in the field of law and business security will be an important factor in preventing corporate raiding attacks. Regularly updating and auditing all business processes also helps increase your company's resilience to external risks.

• Conduct regular financial audits to assess the health of your business.
• Establish transparent relationships with creditors and create strategic partnerships.
• Work to improve corporate governance and minimize debt burden.

The Rospotrebnadzor website provides recommendations for protecting businesses that may be useful for entrepreneurs. It is also recommended to study the successful practices of other business owners, which will help you avoid common mistakes and improve efficiency.

Answers to frequently asked questions will help you better understand how to act in a situation involving the threat of corporate raiding. This knowledge will allow you to protect your interests and take the necessary measures to minimize risks. Understanding the key aspects of corporate raiding, such as threat indicators, legal steps, and effective defense strategies, will help you be prepared for potential challenges and act confidently.

• How do I know if my company is at risk of corporate raiding?
• What steps should I take if corporate raiders have already begun the takeover process?
• What legal tools are available to protect my business?

How to protect a company from takeover: important technical measures

In the face of growing cyber threats and corporate raiding, companies are required to take serious measures to protect their assets. We discussed with IT and security experts to identify seven effective technical solutions that can help minimize the risks of takeover and ensure the protection of your company's rights in litigation. These recommendations will help strengthen your information security and create a solid foundation for protecting your business from potential threats.

Maxim Klyuchkin, Head of Internet Marketing at Bitcop, recommends implementing DLP systems to effectively monitor employee activity with corporate data. These systems provide control over the movement of information, including copying to flash drives, sending via email, and uploading to cloud storage. DLP systems feature text recognition and can alert you to suspicious activity, such as if an employee attempts to send confidential data to an unknown address. Implementing such systems helps protect corporate data and minimize the risk of information leaks.

Using UEBA (user and entity behavior analytics) helps prevent hackers from gaining unauthorized access to critical data. AI-based systems monitor user behavior, alerting security personnel to any abnormal activity. The optimal combination of DLP (data protection) and UEBA technologies ensures reliable protection of your company's data, minimizing the risk of leaks and cyberattacks. Integrating these solutions allows for effective threat detection and response, improving the overall security of information systems.

Integrating an access control system into an office building is an effective solution for preventing unauthorized access. Maxim Epikhin, a software testing expert at CITS, recommends restricting access to key areas using special cards. Ensure that after entering the building, access to stairways and other critical areas is inaccessible without the appropriate access control. This increases security and protects company resources from potential threats. This approach not only strengthens security but also creates a more controlled environment for employees.

Panic buttons should be installed at key workstations and near exits. Anton Kuzin, an expert in security systems, recommends using wireless and portable models that are difficult to disable. Silent buttons can be an excellent solution for discreetly alerting employees, which is especially important in situations that require a discreet response. Proper placement and selection of panic buttons help improve workplace safety.

The effectiveness of video surveillance is significantly increased by the inclusion of audio recording. Anton Kuzin emphasizes the importance of protecting the memory card and storing it remotely. It is recommended to install cameras at a height of more than 2.5 meters to prevent damage. Video camera recordings can serve as irrefutable evidence in court proceedings, making them indispensable in matters of security and law enforcement.

Key company documents, including charters and contracts, must be stored in secure safes. This significantly reduces the risk of loss due to unauthorized access or theft. Safely storing documents protects important information and promotes business stability. Using high-quality safes helps prevent financial losses and legal consequences associated with the loss of important documents.

Save important data on removable hard drives. This will ensure information is protected in the event of a computer compromise, ensuring that data remains safe and secure.

Don't forget to check your company's documents

Conduct regular checks of information about your company Registration in the Unified State Register of Legal Entities (USRLE) is an important measure for protecting your business. Fraudsters can falsify documents and make false changes to the register, including misrepresenting management information. Therefore, it is crucial to keep your information up-to-date and secure. This will not only help prevent fraud but also build trust with partners and clients. Ensure that information about your company is always up-to-date and accurate.

Corporate law expert Vladimir Gorbenko recommends amending the company's charter by adding provisions that will complicate corporate raids and ensure shareholder protection. Such measures are essential for preventing unwanted situations and maintaining business stability. A properly drafted charter will help minimize risks and strengthen corporate security, which is crucial in today's business world.

Recommended measures to protect a company's shareholders include implementing transparent corporate practices, ensuring regular reporting, and access to information about the company's financial status. It is also important to establish mechanisms to protect shareholder rights, such as the opportunity to vote at meetings and participate in key decisions. Effective communication with shareholders and the organization of regular meetings help build trust and strengthen relationships. The implementation of an internal control system and compliance with the law also play a key role in protecting the interests of shareholders and minimizing the risk of investment loss.

• prohibition on the assignment of a stake in the authorized capital to third parties without the consent of other shareholders;
• priority right of the company and its shareholders to purchase shares offered for sale;
• mandatory consent of all shareholders to any actions with shares or stocks, which should be recorded in the charter.

What to do in the event of a corporate raid: a step-by-step guide

A corporate raid is not only an offense, but also a significant threat to your business. If you encounter this problem, it's important to understand that legal grounds for a takeover may already have been established. Lawyer Sergei Zakharov emphasizes that many business owners often realize a takeover is happening too late, when their assets are already under the control of fraudsters. To protect your business, it's essential to take action in advance and consult with legal professionals to minimize risks and prevent potential losses.

Lawyer Vladimir Gorbenko emphasizes that interacting with the raiders before the police and legal professionals arrive is highly undesirable. This can worsen the situation and lead to undesirable consequences. In such critical situations, it's recommended to follow certain recommendations to help protect yourself and your rights.

• Check the documents the raiders are using to enter your premises. This could be, for example, an investigator's warrant for a search.
• Immediately call a lawyer and security. Do not allow anyone into the premises until they arrive, citing the raiders' lack of legal expertise. Avoid signing any documents.
• Resist provocations and threats. Remember that raiders' main goal is to seize control of your business as quickly as possible. While they may intimidate your employees, they are unlikely to take actions that could worsen their legal situation.

In the event of a corporate raid, it is essential to take swift and confident action. Protect your rights by seeking professional legal assistance. Consultations and additional information are available on the Human Rights Center website. Don't delay resolving the problem; act now to protect your interests and prevent negative consequences.

What to do after a business is seized?

• The first thing you need to do is contact law enforcement: file a report with the police and the prosecutor's office to find out the reasons for the invasion. It often turns out that the new "owners" have documents confirming their legitimacy.
• If your company has been re-registered to a new owner, contact the Federal Tax Service (FTS) to obtain information about the reasons and grounds for re-registration.
• Contact the Arbitration Court to regain control over your legal entity, for example, to restore the powers of a director or founder.

If you discover that the signatures of the founders on the documents confirming the transfer of ownership are forged, strongly demand that a criminal case be initiated under Article 159 of the Criminal Code of the Russian Federation. Keep in mind that this process can take a considerable amount of time. According to attorney Danil Tkachenko, you'll likely face a year or two of active interaction with the courts and law enforcement. However, you should be prepared for the fact that achieving a positive outcome may prove challenging. As Denis Dubovik, managing partner of Law & Wise, notes, resolving the issue becomes complex at this stage. You may be able to challenge the transactions and have them declared invalid in court. It's recommended to carefully document all stages of the process and consult with experienced lawyers to increase your chances of success.

The Conflict Around Natura Siberica: A Hostile Takeover or Inheritance Disputes?

The situation at Natura Siberica has attracted the attention of the business community due to inheritance disputes that arose after the death of founder Andrei Trubnikov. The conflict among his relatives worsened when they were unable to agree on the future management of the business. This discord can impact the company's stability and market reputation, causing concern among both employees and clients. Management and succession issues in successful companies often become the source of serious conflict, highlighting the importance of clear planning and legally formalizing successions. Irina Trubnikova, Andrey's ex-wife, was a candidate for the position of company manager, owning 40% of its shares. However, the lack of heir status created additional difficulties in the appointment process. Anastasia, Andrey's widow, opposed Irina's candidacy and initiated the succession process, choosing notary Aigul Karnaukhova. According to the law, the appointment of a trustee requires the consent of all heirs, which in this case was not achieved. This situation highlights the importance of strictly adhering to inheritance rights and procedures in business.

Boris Lyuboshits, appointed trustee, stated that his main task is to preserve the inheritance and transfer it to the heirs at the end of the management period. However, he encountered difficulties accessing the office and necessary documents, making it difficult to fulfill his duties.

Lawyers representing Irina Trubnikova emphasize that they did not interfere with Lyuboshits' activities. They claim that the trustee did not initiate an audit or request information about the company's status. This raises questions about the transparency and effectiveness of management.

Kirill Popov, a lawyer at Natura Siberica, emphasized that since Lyuboshits' appointment, there have been no meetings with Irina Trubnikova or other heirs. No activity reports have been provided during the three months of his management. This raises questions about management transparency and interaction with heirs.

Escalation of the conflict: new appointments and dismissals

In August 2021, the situation escalated when Irina Trubnikova announced attempts by new faces to occupy the office and introduce a new administration. This led to mass layoffs: more than 60% of employees submitted their resignation letters. These events highlight the instability within the organization and the need to analyze the reasons for such drastic personnel changes. Growing tension within the team may negatively impact the future work of the company and its reputation.

On August 30, 2021, Irina Trubnikova regained control of Natura Siberica. This decision was made by the Babushkinsky Court of Moscow. Trubnikova's return of control over the brand underscores her importance in the development of the company, known for its natural cosmetics. Natura Siberica continues to be a leader in the organic cosmetics market, and the return of its founder may impact the brand's future strategy and growth.

Legal Expertise: Corporate Raiding or Inheritance Dispute?

Expert opinions on this issue differ. Lawyer Vladimir Gorbenko argues that this situation does not constitute a corporate raid, but rather a conflict over inheritance. He emphasizes that the trustee had no right to enter the office; his actions were limited to merely requesting the necessary documents. This situation underscores the importance of legal regulation and compliance with rules in matters of inheritance and property management.

Lawyer Yuri Kochergin notes that the situation is too complex to clearly classify the events as corporate raiding. A court in the Novosibirsk Region found that the trustee's actions may have been dishonest. This underscores the importance of a thorough analysis of all the circumstances of the case and the need for a professional legal assessment. Raiding is a serious offense, and its determination requires a careful examination of all details and facts.

The Future of Natura Siberica: Potential Investors

Potential investors are emerging on the horizon, including AFK Sistema and Oleg Deripaska's En+, who are showing interest in stakes in the company. However, as expert Vladimir Bublikov emphasizes, reputational risks could become an obstacle to attracting direct investment in the context of the existing conflict. Investors need to consider the potential negative consequences associated with the image of the company and the industry as a whole, which could affect their decisions. It is important to conduct a comprehensive analysis of the situation to minimize risks and take informed steps towards investment.

In September 2021, Dmitry Trubnikov filed an application with the arbitration court requesting the appointment of a new trustee, Professor Ruslan Grinberg. This decision can significantly affect the further development of the situation.