04.04.08

The State Duma is considering a draft bill “On Introduction of Changes into the Criminal Code of the RF,” which is supposed to stiffen penalties for corporate "raiding," the act of illegally usurping control of a company, often by fraudulently altering a company's registration. For the first time, “raiding” has been officially deemed to be equivalent to the “illegal removal of property.”

It is worth noticing that until recently Russian corporate and criminal law contained no definition of an illegal takeover. As a result, instances of "raiding" have gone virtually unpunished.

According to the proposed draft, fraudulently attaining rights of ownership, use and management of assets of a legal entity is viewed as an aggravating circumstance to the theft. The draft proposes sentences for this of 3 to 5 years of imprisonment (up to 15 years in special cases), a fine of up to 1 million rubles (up to 5 million rubles and confiscation of property in special cases), for theft – from 10 to 20 years of imprisonment and confiscation of the property, for property damage caused by fraudulent actions or breach of confidence – from 3 to 7 years of imprisonment,  for falsification of evidence – from 2 to 5 years, for passing a knowingly unjust sentence, decision or other judicial act – from 5 to 10 years. These last two are necessary because often raiders work with corrupt judges and prosecutors to protect their fraudulently gained property and businesses.

Experts admit that there are more opportunities for proving evidence of corporate raiding in the context of criminal justice than within arbitration proceedings.

If passed, the draft will become operative starting July 1, 2008.

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