Senior Associate Dmitry Shunaev and Advocate Ilya Smirnov shared their expertise with Pravo.ru.

Dmitry Shunaev notes that, nowadays, you rarely come across a corporate transaction (other than a direct 100% equity sale) in which the parties would forego executing an option contract.

“The nature of an option is entirely and completely dictated by the business arrangement and business objectives of the parties. From a legal perspective, this is an extremely convenient tool for optimally structuring even very complex agreements that have been reached between the parties”, Dmitry explains.

There are differences between traditional and penalty options. It is important to define a reasonable time for the exercise of a penalty option. Otherwise, the court could hold the provision to be invalid.

“In the court practice, there are decisions protecting penalty options against attempted challenges based on fraud, one-sidedness, bad faith conduct by a party and other grounds”, Ilya Smirnov explains.

But, he says, it is still too early to say that the mechanism has been definitively accepted by the courts.

See the full article for more detail.