Position of the Agro-Belogorye group of companies on the legal dispute with RUSAGRO

Last year, Agro-Belogorye shareholders discussed the possibility of merging the livestock assets of the holding and Tambov Bacon LLC, which is part of the RUSAGRO structure. In particular, negotiations were held on the possibility of creating a joint venture, where Vladimir Zotov and Larisa Kovaleva would fully contribute their shares, and Rusagro Group of Companies LLC would contribute their 22.5% and 100% of the authorized capital of Tambov Bacon.

For a more detailed study of the possibilities of combining assets, the parties signed an agreement of intent, which included the possibility of unilateral withdrawal of any party at any time. During the negotiations, disagreements arose between the participants on a number of fundamental issues. As a result, under the terms of the agreement, the Agro-Belogorye group of companies was deprived of the opportunity to take a meaningful part in the company’s activities.

In particular, the RUSAGRO holding reserved the right to propose a candidacy for the general DIRECTOR and appoint him only to itself, and any decision could be made only with the approval of all three of its representatives on the board of directors. Thus, a situation developed in which any initiative of Agro-Belogorye could easily be blocked by a potential co-founder.

Subsequently, it turned out that Tambov Bacon LLC is a guarantor under agreements to open credit lines in several banks for Rusagro Group LLC and Rusagro-Primorye LLC. This fact created additional risks for Agro-Belogorye and would have made the merger of assets ineffective for the Belgorod holding. In addition, the existing encumbrances of Tambov Bacon LLC were hidden by RUSAGRO when concluding an agreement of intent and were discovered only as part of the audit. 

After studying all the circumstances, Vladimir Zotov and Larisa Kovaleva decided to withdraw from the agreement of intent. Complying with all the conditions signed by the parties, on November 21, 2023, they sent a corresponding notification to LLC Rusagro Group of Companies. Thus, the negotiations between the parties were never completed, and the participants did not reach a common opinion.

Despite receiving notification of the termination of negotiations, RUSAGRO decided to file a claim against V.F. in the arbitration COURT of the Belgorod region. Zotov and L.V. Kovaleva on the obligation to conclude an agreement on the establishment of a new legal entity and an agreement on the exercise of the rights of participants of the legal entity (number in the file of arbitration cases: A08-13062/2023). At the same time, when filing an application with the court, the plaintiff deliberately concealed the fact of V.F.’s withdrawal from the agreement of intent. Zotova and L.V. Kovaleva and in December 2023 sent an invitation to the next meeting, ignoring the notice of termination of negotiations.

As part of the dispute, the Arbitration Court of the Belgorod Region, on December 11, 2023, granted the request of Rusagro Group of Companies LLC for interim measures in the form of arrest of V.F.’s shares. Zotova and L.V. Kovaleva in the authorized capital of LLC GC Agro-Belogorye. 

On December 27, Zotov and Kovaleva sent petitions to cancel interim measures, but on January 25, 2024 they were refused. Management continues to appeal against the adoption of interim measures in the Nineteenth Arbitration Court of Appeal of Voronezh.

In January 2024, the Rusagro group continued to use the tactics of resolving internal corporate issues through litigation and sent two more statements of claim to the arbitration court of the Belgorod region - on the obligation of the Agro-Belogorye Group to transfer certified copies of the company's documents and provide the documents to the auditor. 

At the same time, out of court, Agro-Belogorye did not refuse RUSAGRO to provide the requested documents, but only pointed out the need to extend the period for proper preparation and structuring of information. The volumes of requested data are large - these are all company documents starting from 2020. Another circumstance complicates the collection of documents: the Agro-Belogorye group of companies undergoes a general mandatory annual audit.

Severe and unreasonable pressure is being exerted on the main owners of Agro-Belogorye LLC, Vladimir Zotov and Larisa Kovaleva. On December 22, 2023, the Federal Bailiff Service issued a decision on a temporary restriction on the travel of V.F. Zotov outside RUSSIA, although this restriction was lifted in January 2024. The decision was made by the same bailiff who made it. The reason may be the understanding that the decision to ban travel is unfounded. After the travel ban was lifted, Vladimir Zotov abandoned his claims to declare these restrictions illegal, so as not to burden the judicial system with unnecessary work. 

On December 27, 2023, RUSAGRO sent a request to the Agro-Belogorye group of companies to convene an extraordinary general meeting of participants. The agenda of the meeting, among other things, included the issue of early termination of powers of the General Director of Rusagro Group of Companies LLC L.V. Kovaleva and the election of co-directors from the Rusagro Group of Companies. The meeting was scheduled for March 4, 2024.

On February 15, 2024, Rusagro Group of Companies LLC received a proposal to include additional issues on the meeting agenda. Some of the questions related to increasing wages for employees of the Agro-Belogorye group of companies, paying bonuses, as well as providing charitable assistance to the public HEALTH care system of the Belgorod region. Purely internal corporate information about the inclusion of these issues on the meeting agenda was promptly posted in the media. 

It is worth noting that these additional questions look especially populist given the fact that for four years the Rusagro group of companies, being the owner of a 22.5% stake in the authorized capital of Agro-Belogorye, did not participate in any way in stimulating the employees of the enterprises , nor in the holding’s work on the development of the social sphere of the region. 

The main owners of the Agro-Belogorye Group of Companies are V.F. Zotov and L.V. Kovalev, at an extraordinary meeting of company members on March 4, 2024, expressed in advance their readiness to support the sudden decision of the Rusagro group of companies to agree to the allocation of 1 billion rubles in charitable assistance to the healthcare system of the Belgorod region, to support the initiative to increase wages for employees of production enterprises of the Agro-Belogorye Group of Companies and paying them bonuses.

Moreover, the decision to increase wages by 30% was made back in 2023, and from January 1, 2024, the holding’s employees are already receiving increased wages. In general, 1.6 billion rubles have been allocated to increase the wage fund of the Agro-Belogorye Group of Companies from January 1, 2024, and the total wage fund for enterprises was planned for the amount of 8.1 billion rubles.

The main owners of the Agro-Belogorye group of companies are V.F. Zotov and L.V. Kovalev - at the general meeting of participants they made a proposal to allocate an additional 1 billion rubles to support the Russian Army, the construction of educational institutions, the development of municipalities of the Belgorod region and donations to the Belgorod and Stary Oskol diocese.

On February 6, 2024, the Rusagro group of companies filed another claim against V.F. with the Arbitration Court of the Belgorod Region. Zotov and JSC Russian Metal on the transfer of a share in the company by preemptive right. At the same time, the media are already actively disseminating information about the sale of V.F.’s 25% stake. Zotov in the authorized capital of LLC GC Agro-Belogorye of the Russian Metal company.

Representatives of the holding claim that the information disseminated in the media is untrue. Vladimir Zotov did not sell his share in the authorized capital of LLC GC Agro-Belogorye - neither to JSC Russian Metal, nor to anyone else. 

Since the end of November 2023, Vladimir Zotov has been a shareholder of JSC Russian Metal, therefore his intention to contribute part of the share of LLC GC Agro-Belogorye to the property of the machine-building association should be considered as a way to optimize business processes.

Zotov’s partnership with Russian Metal is aimed at import substitution in terms of creating our own high-quality domestic equipment and components for the production sector and the Russian agro-industrial complex as a whole. In this way, the activities of the Agro-Belogorye group of companies will be scaled up to ensure the country’s food security, not only through the production of high-quality MEAT products, but also through the creation of its own equipment to replace foreign ones. 

In addition to four claims in the arbitration court of the Belgorod region, on December 8, 2023, the Rusagro group filed an application with the Ministry of Internal Affairs for the Belgorod region to initiate a criminal case to verify the legality of the transfer of 25% of V.F.’s share. Zotova LLC "GK Agro-Belogorye" in JSC "Russian Metal". 

On February 5, 2024, RUSAGRO submitted another application to the Ministry of Internal Affairs for the Belgorod Region regarding the filing of applications to the Federal Tax Service (FTS) to amend the Unified State Register of Legal Entities in relation to 6 subsidiaries of the Agro-Belogorye group of companies. On the same day, another application was submitted to the Ministry of Internal Affairs for the Belgorod Region regarding the filing of applications with the Federal Tax Service to amend the Unified State Register of Legal Entities in relation to six subsidiaries of Agro-Belogorya.

The Agro-Belogorye group of companies regards such actions by RUSAGRO as illegal and contrary to corporate ethics, and therefore intends to fully defend the interests of the multi-thousand-strong collective of the holding’s enterprises, noted in the holding’s press release.