Article 8 of the RoA Constitution states that the right to own private property is recognized and defended in Armenia and that the freedom of economic endeavor and free completion is guaranteed. In the pursuit of these rights enshrined in the RoA Constitution, four shareholders in the “Yerevan Ararat Brandy-Wine-Vodka Plant” (YABWV) owned by Gagik Tsarukyan have petitioned the courts.

They are demanding that the decision reached at the general shareholders’ meeting be nullified and that their ownership rights be restored. On October 12, 2008, a special stockholders meeting of the YABWV decided to consolidate the company’s outstanding shares; issuing one new share for each 2,363.5, whose nominal value is 18,908,000 AMD. Those stockholders who didn’t have enough shares to obtain even one new share were obliged to sell their shares or resulting fractions to primary shareholder Gagik Tsarukyan or to his “Multi Group” company. MultiGroup owns more than 90% of YABWV’s stock. After the consolidation the balance is still subject to liquidation. “Hetq” has already covered the travails of the German firm “Ostinvestor”, one of YABWV‘s shareholders that was confronted with the same problem. (See: German Firm Loses Shares in Armenian Company Owned by Gagik Tsarukyan)

4 stockholders wish to remain anonymous

The four shareholders mentioned above wished to remain anonymous for this article, arguing that they are government employees and wish to avoid the possibility of official retribution. In descending order, the four own 63, 56, 20 AMD 20 shares apiece with a nominal value of 8,000 AMD. All four don’t want to sell their shares, especially at the appraised buy-back price of 28,000 AMD given by “En-Audit” Ltd. They believe that the decision of the company’s shareholders must be nullified since it violates their property rights and not only contradicts Article 8 of the RoA Constitution but Article 31 as well – Each person has the right to possess, utilize, manage and bequeath his/her property as they please…No one can deprive another of their property with the exception of the courts in accordance with the law.

District Court rejects suit

On May 6, 2009, the Yerevan Kentron and Nork-Marash District Court, Judge A. Melkoumyan presiding, rejected the suit presented by the four shareholders against YABWV, arguing that the stockholders meeting was conducted in accordance with RoA law and that the buy-back plan was also drafted in accordance with the law. “The Stockholders Meeting never intended to deprive shareholders of their property but rather sought to formulate such prerequisites that would allow the company to collaborate with individuals with heavy financial resources and who are interested in constantly developing the company. One such prerequisite is the increase of the nominal value of company shares. This would allow for the display of investment scales within the company and the level of seriousness of collaborating with the company. Presently, this is only possible through the consolidation of the company stock.” This was the response of Davit Mantashyan, YABWV’s attorney, to the suit filed by the four minor stockholders. During a conversation with “Hetq”, Artur Grigoryan, an attorney representing the four in court, stated that, “It’s called consolidation but as a result people are being deprived of their property. There must be one overriding legal objective to deprive these people of their property. But in this case there is none.”

Plaintiffs’ attorney – Entire case is unconstitutional

In the opinion of Artur Grigoryan, the entire consolidation process is unconstitutional and that they don’t even argue with the appraisal of “EnAudit”. “If they didn’t have the right to consolidate shares then the appraisal is illegal in and of itself,” states the attorney, adding that the aim of the consolidation was to gather up everything in the hands of the primary stockholder and do away with the small fish. In his petition to the Court of Appeals, Artur Grigoryan argues that, “…The company must abide by the RoA Constitution and with the stipulations set forth in the RoA Civil Code regarding the regulation of civil-legal norms of conduct…In essence, the defendant has deprived my clients of their rights to possess, manage and utilize their private property and this hasn’t followed legal procedure.” In the estimation of the attorney, the District Court merely acceded in registering the arguments of both parties and avoided comparing them and failed to pass judgment. The attorney raises the question why legal obligations stemming from a higher judicial body weren’t applied. Moreover, in its decision the court merely substantiated the arguments of the defendant. In conclusion, attorney Artur Grigoryan declares, “We do not claim that they didn’t abide by the law, but when the law in question violates the spirit of the constitution, the court is obligated to proceed directly by the constitution. The court could have halted the case and applied to the Constitutional Court so that it could decide on whether the law in question corresponds to the constitution or not. The court could have waited for this decision and then proceeded with the case at hand. Sadly, our judges seek not to take such ‘bold’ steps.”

The four stockholders will pursue other legal venues, including petitioning the RoA Constitutional Court. If the court finds in their favor all prior transactions of the company will be nullified. Presently, the petition of the four is being heard in the Civil Appeals Court. The next trial session is scheduled for August 29.