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. Last Updated: 07/27/2016

Court: Plant Can Reclaim Steel Shares

An arbitration court in Chelyabinsk has ruled that the Magnitogorsk steel plant can reclaim a package totaling 30 percent of its shares that the plant wanted to use as collateral for a multimillion-dollar loan.

On March 13, the court annulled a decision by the board of directors of Magnitogorsk Steel, a subsidiary of the steel plant, which had authorized the transfer of the share packet, said Irina Sterlikova, a spokeswoman for the Chelyabinsk prosecutor's office.

The prosecutor's office filed the suit in December, she said.

Shares in the steel plant, also known as MMK, were originally transferred to Magnitogorsk Steel, or MS, as start-up capital under a management trust agreement in 1995.

Despite the court victory, retrieving the shares is expected to prove difficult. Sterlikova said they have already been sold to two foreign entities, which resold them to two foreign individuals.

A statement released by MMK last Thursday identified the two foreign companies as Arufa Invest & Trade S.A. and Kraine Invest & Trade Ltd., both registered in the British Virgin Islands.

As part of the fallout surrounding the sale of the shares, the Federal Securities Commission on March 6 revoked the license of Register-Chell, the Chelyabinsk securities registrar that allowed the shares to be sold Feb. 13 despite a court order to the contrary, an official at the commission's regional office confirmed.

The conflict at MMK grew from an October decision to use the shares as collateral for a $105 million loan from the European Bank of Reconstruction and Development. The plan ran into opposition from the plant's board chairman, Rashit Sharipov, who claimed the loan would cause financial ruin for the plant. Sharipov, who was also the general director of MS, was ousted from both his posts in January and is now sought by police seeking to file criminal charges against him.

Yet another twist in the shareholders' battle occurred last Thursday, when a Moscow district court upheld a suit by a shareholder backing Sharipov and seeking his reinstatement, according to MS legal counsel Danil Guryanov.