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Lawsuits deepen shareholder row over 'Russia's Facebook'

A man looks at a computer screen showing logos of Russian social network VKontakte in an office in Moscow May 24, 2013. REUTERS/Sergei Karpu
A man looks at a computer screen showing logos of Russian social network VKontakte in an office in Moscow May 24, 2013. REUTERS/Sergei Karpu

By Maria Kiselyova

MOSCOW (Reuters) - A dispute between shareholders in Russia's biggest social network escalated on Monday, as the rivals took legal action to assert their influence over a business that has been used as a platform for opposition groups.

Known as Russia's answer to Facebook, VKontakte has been the focus of an ownership battle since last April when the United Capital Partners (UCP) fund bought 48 percent of the shares, becoming its then biggest shareholder.

Rival Mail.Ru, which has in the meantime joined forces with VK founder and chief executive Pavel Durov to become the biggest investor, contested the UCP transaction in a lawsuit filed by a subsidiary.

Durov has clashed with authorities for providing a forum for opposition activists to organize protests against Vladimir Putin, including in 2011 when tens of thousands came out on to the streets in the biggest challenge yet to the Russian leader.

But Mail.Ru is controlled by a Putin ally, Russia'a richest man Alisher Usmanov, prompting liberal commentators to portray the alliance between it and Durov as part of a wider Kremlin clampdown on dissent.

Durov and Mail.Ru say they had pre-emptive rights to the stake that UCP bought from VK co-founders last year.

The deal was followed by months of friction between UCP and Durov that seemingly culminated last week in Durov's resignation which he later revoked, saying his departure would have threatened the company's future.

"I have repeatedly said it and will repeat it today, the sale of 48 percent of shares was illegal, and UCP is not a legitimate shareholder of VKontakte," Durov said on Monday on his vk.com page.

LONGER-TERM IMPACT?

VK, the second largest social media network in Europe after Facebook, has 240 million separate user accounts and attracts around 60 million users daily who log on to share news, views and photos.

Durov, whose success in building VK has drawn comparisons to Facebook's founder Mark Zuckerberg, sold his 12 percent VK stake in January to Bullion Development Limited, a company beneficially owned by Usmanov's ally Ivan Tavrin, the CEO of mobile operator Megafon.

Tavrin later sold Bullion to Mail.Ru, which now owns 52 percent of VK shares.

Konstantin Belov, an analyst at Uralsib, said the dispute would likely have a limited impact on Mail.Ru shares but could hamper the long-term development of the social networking site.

"Taking into account that the Internet market and social media in particular are changing very fast, could it be that VK will miss some of the changes on the market because of this mess?" he said.

In a statement on Monday, Mail.Ru's Bullion said it had filed a lawsuit against two VK shareholders in turn owned by UCP and its managing partner Ilya Sherbovich - Blesmir Developments Limited and Palagon Limited.

Bullion alleges that the sale of these firms to UCP was in breach of the VK shareholder agreement, including a requirement to offer shares in VK to the other shareholders first, and is seeking to reverse the deal.

A spokesman for Bullion declined to name the court or say in which jurisdiction the lawsuit had been filed.

UCP said its deal was legitimate.

"This is nothing more than an awkward attempt by Durov to defend himself against our legitimate claims against him," said UCP partner Yuri Kachuro in an email.

UCP said earlier on Monday it had begun legal action against Durov and Mail.Ru over the launch of the Telegram instant messaging application, developed by Durov.

UCP said Durov had "improperly diverted to himself corporate opportunities which he was duty bound to pursue, if at all, within the business of VK.Com" and that VK was "the proper owner" of the Telegram business, the fund said in a statement.

(Reporting by Maria Kiselyova and Anastasia Teterevleva; Editing by Elizabeth Piper and John Stonestreet)

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