Point of law: what are the standards of reasonable and in good faith behaviour of the chief manager of the company and how the burden of proof should be distributed if the plaintiff (shareholder of the company) submits weighty arguments of the disputed transactions being interrelated and of the chief manager of the company being in the situation of a conflict of interests?
Ratio decidendi: the Presidium held that:
- the failure of the defendant (director general of the company) to submit proofs should be assessed as solely the refusal to refute the fact the existence of which is being convincingly argued for by the other party to the proceedings; the person that participates in the dispute and fails to make a procedural act bears the risk of consequences of such behaviour;
- if the director general, when being in the situation of potential conflict of interest, does not make necessary steps for receiving information on interrelated transactions or refuses to disclose such information to shareholders, he should not be considered as behaving reasonably and in good faith as required by the law on joint-stock companies. The above circumstances do not allow, in their turn, to apply the presumption of innocence to the defendant; instead, they burden him with the duty to prove that the transactions in question have been made in the interests of the company and not in his own interest;
- since the disputed transaction have been made in the conditions of the potential conflict of interests, the respective relations cannot be assessed as actions made within the normal business risk.
There is a concurring opinion by Judge D.Dedov who believes that in the present case the defendant was not only a person interested in the transaction but in fact a party to it.
Practical consequences: the Judgment says that prior court decisions in analogous cases if inconsistent with this interpretation may be reversed in the procedure and within the limits envisaged by Art 311 of the Commercial Procedure Code. This case may become fundamental for the formation of practice of holding directors liable for the transactions of their companies.
Judge Dmitrii Dedov believes that in the present case the defendant was not only a person interested in the transaction but in fact a party to it.