Shareholders of the bank "Vostochny" came to reconciliation

Shareholders set parity on the board of directors of the bank.
19.10.2018
Kommersant
Origin source
The main shareholders of Vostochny Bank are the funds Baring Vostok and businessman Artem Avetisyan, between whom a corporate conflict broke out earlier, established parity on the board of directors of the bank. Baring Vostok, as the main shareholder of a credit institution, refused to reassign the board of directors previously controlled to Mr. Avetisyan. Instead, the parties agreed to put four representatives and one independent director to this management body.

The Vostochny Board of Directors was re-elected on October 17 at the general meeting of shareholders of the bank. Two minority shareholders left him - Yuri Danilov, who acted in the interests of Mr. Avetisyan, and Vahan Abgaryan, who represented the interests of the Baring Vostok funds. The minority shareholder of the bank, Grigory Zhdanov, and a member of the supervisory board of Sovcombank Nikolay Varma were elected instead of them.

Prior to that, five out of nine Vostochny directors acted in the interests of Artem Avetisyan, despite the fact that he does not have control in the bank (Baring Vostok owns more than half of the bank’s shares). According to three sources of Kommersant, Mr. Zhdanov represents the interests of Baring Vostok (since 2015, he has been engaged in legal support for the activities of the funds), and Nikolai Varma is a candidate who suits both major shareholders. Thus, parity is set in the new composition of the board of directors: each of the main shareholders has four representatives, and the ninth is an independent director.

Sources of "Kommersant" previously linked the conflict between shareholders with the right to own a controlling stake and the issue of bank recapitalization. According to them, formally Artem Avetisyan owns 32% of the shares, and Baring Vostok - over 51%. However, Mr. Avetisyan has an option that allows him to gain control in the bank. Baring Vostok disputes this right of Artem Avetisyan in a London court: Vostochny needs additional capitalization, especially after the recently concluded CB check, which resulted, according to Kommersant’s information, the regulator revealed a significant under-reservation. However, neither Baring Vostok nor Artyom Avetisyan are unwilling to buy back the additional issue of the bank. At the same time, an additional issue, if the funds or both major shareholders are fully repurchased by it in proportion, dilutes Mr. Avetisyan's share so that the option becomes useless (it will not allow to get a controlling stake).

It is noteworthy that parity was established by the Baring Vostok funds, which could gain complete control over the board of directors. Cumulative voting allowed the funds to introduce five of their representatives to the board of directors, and Artem Avetisyan only four (every 10% of the shares are allowed to hold one candidate to the board of directors).

Moreover, the board of directors controlled by Artem Avetisyanu initiated a number of personnel changes, including deciding to resign Dmitry Levin, who was then the board of directors, who represented Baring Vostok. As a result, the funds decided to order the bank to hold an extraordinary general meeting of shareholders in order to re-elect the board of directors. Why Baring Vostok has not established control is not clear. However, Kommersant sources claim that both parties to the conflict are satisfied with the agreements reached. The press service of "Vostochny" reported that they did not comment on the actions of shareholders.

Shareholders needed to come to a consensus that would suit both parties, said Mikhail Polukhin, deputy director of the ACRA financial institutions rating group. “The establishment of control by one of the parties on the board of directors could lead to the continuation of a corporate conflict,” says Mr. Polukhin. “It would be unprofitable for any of the parties.” Moody’s Investor Service analyst Peter Paklin believes that the fact that none of the shareholders did not receive a majority in the current board of directors, and the claims of Baring Vostok were withdrawn may indicate the parties' agreements reached, including their participation in the additional issue of the bank.

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