The court has rejected Black Duck Invest's application to seize Olainfarm shares

The Vidzeme Suburb Court of Riga City has completely rejected the application of the Czech company Black Duck Invest against SIA Olmafarm, the largest shareholder of the pharmaceutical manufacturer JSC Olainfarm, for securing the claim before instituting proceedings, the court decision shows.

The Czech company had asked the court to seize Olmafarm's 42.5% stake in Olainfarm and to ban Olmafarm from exercising its voting rights granted by Olainfarm's shares.

The court also rejected Black Duck Invest's request to apply on Olmafarm a ban on making decisions on increasing or decreasing Olainfarm's share capital, profit distribution, liquidation or reorganization, making decisions on amendments to Olainfarm's Articles of Association regarding changes in the competencies and decision-making procedures of the governing bodies, as well as the removal and/or election of members of the Supervisory Council of Olainfarm.

In its application to the court, Black Duck Invest stated that an agreement on the sale of Olainfarm's shares belonging to Olmafarm to Czech investors was signed on April 27, 2021, and that the agreement was legal and valid in the opinion of the Czech company.

In its application to the court, Black Duck Invest stated that no institution in Latvia or the Czech Republic had declared the agreement invalid, as well as no institution had been asked to declare the agreement invalid. The Czech company has also not received any explanations from Olmafarm as to why the contract is invalid and why it will not be fulfilled.

According to the Czech company, Olmafarm is acting in bad faith to prevent the contract from being fulfilled, so Black Duck Invest applied to the court to secure the claim before instituting proceedings.

Olmafarm, on the other hand, told the court that on April 30, criminal proceedings were initiated in the second division of the Economic Crime Department of the Main Criminal Police Department of the State Police for signs of large-scale fraud against Olmafarm by Tibor Bokor and Vojtěch Kačena, representatives of the Czech company Black Duck Invest, by concluding a possibly forged agreement on the sale of Olainfarm shares belonging to Olmafarm, signed by Olmafarm's former board member Milana Beļeviča.

Olmafarm explained to the court that, following her removal from the board, Beļeviča made an attempt to sell all of Olmafarm's Olainfarm shares, which form a controlling stake in Olainfarm.

Olmafarm's application to the court states that there are grounds to believe that the Czech company Black Duck Invest will file a claim with a Latvian court, possibly to impose an obligation to perform the contract signed by Beļeviča on behalf of Olmafarm. The application states that Black Duck Invest is likely to file the possibly forged contract with the court and will state in the application a distorted statement of facts, including regarding the jurisdiction of the Latvian court.

According to Olmafarm, the counterfeit contract establishes the jurisdiction of the Czech courts, but it cannot be ruled out that another version of the contract will be submitted with the application, according to the application to the court.

In its application to the court, Olmafarm also emphasizes that none of the owners of Olmafarm wanted or agreed that the former member of the board of Olmafarm would dispose of Olmafarm's property after her dismissal. "Particular attention should be paid to the fact that one of the owners of Olmafarm is the minor Anna Emīlija Maligina and any expropriation of Olmafarm's property directly affects the interests of the child," said the application to the court.

The grounds of the court decision state that it follows from the submitted evidence that there is a share purchase agreement signed in the person of the at-time legal representatives of the parties on April 27, which is of a property nature and, consequently, securing the claim may be permissible.

At the same time, it appears from the case file that both parties to the dispute have a diametrically opposed opinion on the terms and legality of the contract, the performance of the contract and other essential components, besides which both Czech and Latvian lawyers are involved, including Latvian law enforcement authorities.

The court considers that the circumstances set out in the application may entitle the claimant, Black Duck Invest, to bring proceedings in court, but do not automatically confer a right to secure the claim. In addition, the securing of a claim is, by its very nature, an exceptional measure because of its serious consequences and is therefore applicable after assessing the balance between necessity and justification, including evidence.

Assessing the materials submitted by Black Duck Invest in connection with the facts indicated in Olmafarm's application, the court acknowledged that at this stage it is not possible to conclude categorically that the chances of satisfying the claim are greater than rejecting it, thus at prima facie level, the court finds it insufficient to enforce the securing of the claim.

The court held that, in the absence of a prima facie formal legal basis for the action, it is irrelevant to assess the second cumulative criterion for the admissibility of the action, namely that enforcement of a favorable judgment may become difficult or impossible in the future.

In these circumstances, the application must be rejected in its entirety as unfounded, the court ruled.

The decision of the court may be appealed to the Chamber of Civil Cases of the Riga Regional Court within ten days, submitting an ancillary complaint to the Vidzeme Suburb Court of the Riga City.

It has already been reported that the shareholders of Olainfarm will decide on the election of a new Supervisory Council at the extraordinary meeting on June 17.

Olmafarm proposes to elect Juris Bundulis, Andrejs Leibovičs, Vadims Telics, Pēteris Rubenis, Sandis Petrovičs, Irina Maligina and Inga Balandina to the company's Supervisory Council.

Currently, the Supervisory Council consists of the chairman Gundars Bērziņš, his deputies Kārlis Krastiņš and Jānis Buks, as well as council members Haralds Velmers and Andrejs Saveļjevs.

It is also planned to decide on the proposal of the company's shareholder Nika Saveļjeva to cancel the compensation of a member of the Supervisory Council in connection with his early dismissal, according to the draft resolutions submitted by Saveļjeva to the shareholders' meeting.

The draft resolution proposed to the Saveļjeva at the shareholders' meeting seeks to revoke the decision of the extraordinary general meeting of shareholders of Olainfarm of April 1, 2019 in the part providing for compensation to a member of the Supervisory Council due to early dismissal by the decision of the shareholders' meeting, in the amount of 12 months' fixed remuneration.

Saveļjeva also urges the shareholders' meeting to decide on amendments to the company's Articles of Association, stipulating that the company's Supervisory Council consists of seven council members. At present, the articles of association stipulate that the company's Supervisory Council has five members.

Saveļjeva also calls for the deletion of the clause in the company's Articles of Association, which stipulates that the shareholders' meeting is entitled to make a decision if more than 50% of voting and paid-up capital is represented at the meeting.

It was also reported that the majority of Olainfarm's shareholders demanded that Krastiņš and Velmers resign immediately from the positions of Olainfarm's Supervisory Council members due to the loss of trust and new circumstances related to the possible fraud case with Olainfarm's shares.

Rubenis confirmed to LETA that all three heirs of Valērijs Maligins - Irina Maligina, Saveļjeva and Anna Emīlija Maligina, who directly and indirectly own the majority of Olainfarm shares - have made such a claim.

At the beginning of May, the shareholders sent a written request to both members of the Supervisory Council to resign, but received a reply that neither Krastiņš nor Velmers planned to do so.

Rubenis pointed out that the members of the Supervisory Council represent the interests of shareholders between shareholders' meetings and manage the company in the interests of the shareholders, thus Krastiņš and Velmers' actions have resulted in two members of the Supervisory Council no longer having the trust of the majority of the shareholders who should therefore leave the post immediately.

The position of a member of the Supervisory Council is an elected position, and it is the very shareholders who previously elected Krastiņš and Velmers to the Supervisory Council, who have now requested their immediate resignation due to a loss of trust after receiving information about their involvement in the possible fraud, Rubenis explained.

Earlier, the TV3 program "Nekā personīga" reported that two Czech citizens and Beļeviča had been detained by the State Police on suspicion of attempting to defraud 42% of Olainfarm's shares.

On May 10, Rubenis told LETA that, thanks to the operational work of the State Police, an attempt to defraud Olmafarm's shares in Olainfarm had been thwarted, but he did not provide further information.

The fight for control of Olainfarm has been going on for three years, and the Czech company Black Duck Invest claims to have become the company's largest shareholder, but police are investigating suspicions that the deal is in fact fraud and have detained at least three people. Documents at the disposal of "Nekā personīga" show that Velmers and Krastiņš, members of the Supervisory Council of Olainfarm, also planned to get the shares together with this Czech company.

It is also reported that the Olainfarm group's turnover last year was 122.157 million euros, which is 11% less than in 2019, while the group's profit decreased 2.3 times and was 9.478 million euros.

Olainfarm operates in the production of finished dosage forms, pharmaceutical preparations, and food supplements, as well as chemicals and active pharmaceutical ingredients. The largest shareholder of the company is Olmafarm (42.56%), which is owned in equal parts by the heirs of Valērijs Maligins - Irina Maligina, Anna Emīlija Maligina and Nika Saveļjeva. The shares of Olainfarm are listed on the NASDAQ OMX Riga Official List.