NPO Elektromashina, a Chelyabinsk manufacturer of equipment for Russian Railways, is involved in a major legal dispute with shareholders of OAO Elektromashina, where it has been operating for many years.
The mentioned enterprises, mainly earning rental income, decided, without considering all shareholders' opinions, to commission R&D for over 350 million rubles. The plaintiff, representing private shareholders, believes that the transactions were made to withdraw funds. However, the NGO, which partially controls OJSC Elektromashina, announced plans to develop mass production for Russian Railways. Rostec-controlled research and production association is still involved in the official announcements about the plans for new products.
The Chelyabinsk Arbitration Court ruled in favor of Elektromashina OJSC in a lawsuit to recover 347 million rubles from NPO Elektromashina OJSC (part of Uralvagonzavod concern of Rostec). The plaintiff claimed that the transactions in 2020 were fictitious and possibly aimed at withdrawing funds.
Igor Afanasiev, the General Director of Electromashina
It is worth mentioning that OJSC Elektromashina is controlled by OJSC NPO Elektromashina and JSC NPK Uralvagonzavod by 49.999703%. The remaining shares are controlled by individuals, including Evgeny Chepurnov (19.67%) and Alexander Shindyapin (25.29%). These shareholders have been disputing the actions of the board of directors for quite some time. Igor Afanasiev, who also heads the NGO of the same name and leases production facilities from Elektromashina, has been a subject of their disagreements.
In 2020, Electromashina made 124 million in revenue (down from 151 million in 2019) but only had a net profit of 314,000. They also had a 295 million ruble obligation for R&D payments at the end of the year. The company's accounts payable went up from 19 to 182 million, while receivables decreased from 584 to 490 million (476 million coming from buyers and customers).
After analyzing the situation, the court found no evidence to support the claim that JSC Elektromashina caused harm by signing contracts for design documentation development.
The court decision stated that the stable economic situation at the company is the result of planned cost reduction and having a large tenant, NPO Elektromashina JSC. However, it pointed out that the rent paid by NPO Elektromashina JSC is higher than market prices.
The trial regarding shareholder Shindiapin's claim that the 2.981 million rent was too low lasted over a year. During this trial, it was revealed that the deal was not approved by all shareholders. An expert assessment showed that the average market rent from 01.02.2011 to 06.03.2012 for the lease of real estate, with the tenant responsible for property repairs, is 432,057.76 rubles. No valuation of movable property lease (including equipment) was conducted.
In the case involving the 347 million paid for R&D, the examination to verify the works' value was not carried out. For instance, the documentation contracts for the production of electromagnetic contactors of the KEMV-3.0-400ET and KEMV-3.0-800ET series cost 90.96 and 86.4 million rubles, respectively.
Soviet design developments from the 60s or 70s have been used for dubious transactions between related companies for a long time. These old designs are somewhat adapted to Russian conditions by some individuals and then presented as the latest innovative nanotechnological development. Lawyer Ivan Kadochnikov suggests that the arbitration court needs to investigate what the actual subject of the transaction is and why so much money is being paid.
In 2018, JSC NPO Elektromashina held a tender for the acceptance testing of high-voltage contactors KEMV-3.0-400 ET and KEMV-3.0-800 ET. In early 2021, it announced a tender for the right to use an accounting copy of the design documentation set “Production of electromagnetic contactors of the KEMV-3, 0-400ET series”. The enterprise also announced plans for mass production of contactors of the KEMV-3.0 series, expanding the line and creating KEMV-400ET based on them at the end of last year.
In court, NGO representatives stated that Elektromashina OJSC, which had been leasing the production complex for almost a decade, now intends to independently produce products and even began recruiting personnel, and the organization of production, “according to preliminary forecasts, is possible in 2022-2023.” In what quantity, however, new employees were accepted, it was not indicated.
Photo: ngs.ru
“In substantiating the need to conclude the disputed contracts, the defendant indicated that the fixed assets of the company are becoming obsolete, in particular, buildings and structures, equipment, which, in turn, requires major repairs, inexorably entails an increase in costs, a decision was made to resume production on the basis of OJSC Elektromashina “civilian products”, – NGO representatives substantiated their position.
The arbitration was satisfied with this explanation, and the court, relying on it, did not find grounds for recognizing the transaction as detrimental to the interests of society. The court did not accept the arguments that some of the shareholders of Elektromashina OJSC were not informed about the conclusion of contracts for R&D, since the company provided information on sending the relevant explanations in response to a request before concluding contracts, but the letter was returned due to lack of demand. Ultimately, the court denied the plaintiff.
However, while the decision has not entered into force and an appeal is possible.