Moscow: +7 495 234 4959 Saint Petersburg: +7 812 740 5823 London: +44 (0)20 7337 2600

Stanislav Danilov’s commentary on the possibility of terminating a contract on grounds of bankruptcy

One of the major smartphone suppliers Retentiva Distribution Company (RDC) is facing difficulties: reseller of Xiaomi and other brands Mobilidi is pursuing its debt in the amount of 201 mn rubles, and Otkritie bank has notified the company of its intention to initiate bankruptcy. RDC has also been selected as one of the smartphone suppliers on Aurora national operating system (OS) for officials, and Rostelecom, the tender organiser, does not rule out redistribution of orders among other participants.

Arbitration court of Moscow obliged RDC to pay out 201 mn rubles to Mobilidi under the claim on collection of outstanding payments for supplied smartphones, pursuant to the court ruling published on November 26. RDC has not paid for goods worth 129 mn rubles and 72 more mn rubles were demanded by Mobilidi as penalty. The dispute concerned Xiaomi smartphones. Mobilidi tried to negotiate peaceful settlement with RDC, but failed, the claimant's press office told Kommersant. RDC General Director Denis Cherfas refused to comment on the court ruling.

On November 15 Otrkitie bank notified RDC of its intention to file a bankruptcy claim, according to kartoteka.ru database. Otrkitie bank refused to give any comments to Kommersant. ‘We are now actively negotiating with the bank,’ Denis Cherfas explained to Kommersant. According to him, Otkritie does not pursue the objective of driving the company bankrupt, and RDC does not pursue the objective of driving its legal entity bankrupt.’ ‘The company continues its operation and in the next few days we are expecting final settlement of the situation,’ he added. The amount of Otkritie’s claims has not been disclosed by Denis Cherfas, but he noted that the amount of unsettled claims is insignificant compared to the scale of the company’s business. As of 2018 net income of RDC OOO amounted to 202 mn rubles, according to kartoteka.ru.

Mobilidi is an official supplier of Xiaomi, One Plus, Hasee, Hisense and Lenovo smartphones. Xiaomi, Fossil and Jinga, a proprietary smartphone brand, are specified on RDC’s website. Xiaomi told Kommersant that they have no ‘commercial relations’ with RDC and work with other distributors. MegaFon and VimpelCom also say they have no business with the company. M. Video-Eldorado Group does not procure smartphones from RDC, according to their press office. ‘A number of large distributors are officially working with Xiaomi. We work with them and have not experienced any difficulty with Xiaomi supplies,’ a representative of the retailer added. According to him, Jinga accounts for less than 1% of the market in monetary and physical terms. According to IDC, Xiaomi’s share in supplies in the third quarter amounted to 13%. And in sales from the beginning of the year to mid-October the brand accounted for 9.5%, according to data provided by a partner of large retailers. Svyaznoy refused to give any comments.

RDC, Distribution Centre and QTech were selected by Rostelecom as smartphone suppliers on Aurora for public authorities, Kommersant reported on May 14. ‘We always sign framework contracts with a number of suppliers, which allows us to keep risks under control. In this case, respectively, orders may be re-distributed among other participants,’ Rostelecom told Kommersant.

RDC’s contract with Rostelecom may contain special grounds for its termination, including introduction of oversight or even simple initiation of a bankruptcy case, but it is still premature to talk about termination of the contract on grounds of bankruptcy, Partner and Head of Dispute Settlement Practice of Pen & Paper Stanislav Danilov says. RDC was not a key player, and its possible bankruptcy is unlikely to significantly affect the market, lead analyst of Mobile Research Group Eldar Murtazin believes.