Dmitry Tugushi and Eduard Sinelnikov: The Role of a Crisis Management Team Is to Restore the Owner’s Control – Not to Operate in Reactive Crisis Mode

In recent years, Russian businesses have increasingly faced situations in which conventional management models no longer deliver the expected results. Competitive pressure is intensifying, the regulatory environment is changing, financing is becoming more expensive, and the number of corporate conflicts and complex financial disputes is growing.

Business owners are being forced to make decisions amid heightened uncertainty, as pressure simultaneously increases from creditors, counterparties, regulators, or internal shareholders. The risk of subsidiary liability for owners and senior executives further raises the stakes in such situations.

The key priority is to protect the interests of the owner and their assets. This is why legal expertise has traditionally remained one of the main pillars of support for businesses facing a conflict or crisis.

However, experience shows that legal protection does not always resolve the problem in full. Even when a company succeeds in winning a legal dispute, halting bankruptcy proceedings, or protecting key assets, the business itself may remain in a difficult position: management processes have been disrupted, financial stability has been undermined, the team is demotivated, and the owner is forced to become involved in day-to-day operations once again. In other words, the asset may be legally protected while the business itself remains in crisis.

This is why, in recent years, there has been a growing need to focus not only on legal protection, but also on the asset itself – its operational control, financial stability, and future development strategy.

For example, in a number of cases, law firms have begun working in tandem with crisis management teams, bringing in financial specialists, analysts, and other experts whose work lies outside the traditional legal sphere.

This integrated approach provides the comprehensive crisis management that owners need: stabilizing cash flows, restoring management systems, identifying growth opportunities, and ensuring legal protection for the owner and the assets. What was previously handled in separate stages is now carried out simultaneously: while the management team focuses on stabilizing the business and preparing it for the next stage – recovery, bringing in a partner, or a sale – the legal team provides protection and pursues the necessary legal remedies, securing outcomes for the business within the required timeframe.

We discussed how the approach to distressed assets is changing, what forms of subsidiary liability owners may face, the situations businesses most commonly encounter, and the role played by combining legal protection with crisis management with Dmitry Tugushi, Partner at Kovalev, Tugushi & Partners, and Eduard Sinelnikov, Managing Director of TREKSIS, a crisis management firm.

– Dmitry Tugushi: In a crisis, there are always multiple challenges – legal, financial, and managerial. That is why working with distressed assets almost always requires an integrated solution, combining legal protection of the assets with the operational stabilization of the business.

Legal expertise makes it possible to protect the owner’s interests, manage relationships with creditors, and mitigate key legal risks. However, the future of the business largely depends on whether its operational control and financial stability can be restored.

– Eduard Sinelnikov: Yes, a crisis cannot be managed without a legal team. There may be litigation, creditors, or even bankruptcy proceedings. In many cases, legal protection can stop a negative scenario, but the business itself may still remain in a state of managerial uncertainty.

What are the key crisis management priorities? Stabilize cash flows, restore the management structure, establish effective controls, and, most importantly, identify strategic alternatives for the owner: relaunching the business or bringing in a strategic partner – essentially, selling the business, either in whole or in part.

– Dmitry Tugushi: Yes, this is a common need today. A strategic partner can provide the business with the impetus it needs to grow. But it is not enough simply to find such an investor – the owner must also demonstrate why the project is worth investing in.

In a crisis, a company often appears opaque to the external market. Its financial and legal position may be distorted, its management structure unclear, and legal and operational risks may have accumulated. In this state, attracting an investor or negotiating a partnership is virtually impossible, even when the underlying business has genuine value. In negotiations, a potential investor will often sum up such an opportunity in one word: “Messy.”

The first step, therefore, is to conduct a comprehensive review and analysis – both legal and managerial. This allows the owner not simply to react chaotically to the crisis, “plugging holes” in litigation or internal management, but to regain a strong negotiating position and the ability to choose the next course of action.

What needs to be done to prepare? From a legal perspective, the company needs to undergo due diligence at the appropriate level. This helps demonstrate to a potential investor that the business is not “sinking,” but remains a viable asset.

It is important that the owner does not conduct this review alone, but engages an independent market expert whose assessment can be relied upon. From a financial and management perspective, the business also needs to be prepared for investment.

– Eduard Sinelnikov: Yes, investment packaging essentially means bringing a business to a state where it can be professionally assessed by investors, banks, or strategic partners. The outcome is a set of investment documents and presentation materials describing the asset and the key terms of a potential transaction.

The first step is to determine the appropriate strategy for the asset. In simple terms, this means defining the transaction rationale and its key structure. At this stage, it becomes clear what the asset is and what condition it is in; which scenario is realistic – relaunching the business, bringing in a strategic partner, selling a partial stake, or preparing the company for a full sale; what role the investor will play; and how value will be created and protected.

Without this understanding, any materials remain merely a description of the situation rather than a basis for a transaction. Once the strategy has been defined, the investment package can be built around it – including a financial model, investment teaser, information memorandum, presentation materials, and a due diligence document package. This is the minimum baseline set of materials that professional investors, banks, and funds need to assess an asset substantively and discuss a potential transaction.

In essence, investment packaging transforms a distressed asset from a state of uncertainty into a clearly defined investment opportunity. For the owner, this means regaining a negotiating position – the ability to discuss not only the problem, but also the future path of the business.

– Dmitry Tugushi: In practice, business owners turn to lawyers in a wide range of situations, but most often when the business comes under significant external or internal pressure.

This may involve a conflict with creditors or banks, corporate disputes between shareholders, attempted hostile takeovers, pressure from counterparties, or the initiation of bankruptcy proceedings. In such situations, the owner’s key priorities are protecting the assets and maintaining control of the business.

However, it is important to understand that legal conflicts are very often symptoms of deeper underlying problems – for example, a deterioration in the company’s financial position, accumulated management issues, changes in the market environment, or a loss of operational control.

– Dmitry Tugushi: As a rule, this becomes clear when the legal situation begins to stabilize formally, while the business itself remains in a difficult position.

For example, bankruptcy proceedings may have been halted, a dispute with creditors resolved, or a major legal case won. Yet internal problems may persist: operational control has been disrupted, cash flows remain unstable, the team is demotivated, and the owner is effectively forced to take over day-to-day management again.

At this point, it becomes clear that a legal solution alone does not restore the business. It may “slow down” a negative scenario, but the next challenge is managerial – bringing the company back to an operational state and determining which path forward is actually realistic.

– Eduard Sinelnikov: As a rule, an owner senses problems before they become visible in the numbers. The first and most important signal is a loss of control. Decisions stop producing predictable results, deadlines are missed, and management increasingly attributes what is happening to external factors.

The second signal is mounting pressure. This may come from creditors, counterparties, regulators, partners, or internal conflicts. When several pressure points emerge at once, they begin to reinforce one another. At that point, these are no longer isolated problems, but a systemic crisis.

The third sign is a shrinking window for action. It feels as though you are constantly “putting out fires” while the room for maneuver is rapidly narrowing. At this stage, waiting and hoping that the situation will correct itself generally only increases the cost of recovery.

And finally, the key indicator is the absence of a clear path forward. If the owner cannot clearly answer what will happen to the asset in 3, 6, or 12 months and what realistic options are available, the asset is already at risk.

This is precisely when it makes sense to bring in a crisis management team – not when everything has already fallen apart, but while there is still room to make decisions. The objective is to quickly establish a clear picture of the situation, address critical risks, and restore the owner’s control and ability to choose a path forward, rather than simply reacting to a crisis that is already ahead of them.

– Dmitry Tugushi: Yes, in practice, legal disputes are quite often rooted in management issues within the business itself. In such situations, a legal conflict or financial pressure is usually not the cause, but rather the consequence of problems that have accumulated within the business. That is why crisis management begins with restoring operational control, stabilizing the financial model, and determining which path forward is realistically available for the asset.

– Eduard Sinelnikov: Very often, it looks like this: the company continues to operate formally, and revenue may even be growing, but there is less cash available in the business. Liabilities to banks and counterparties begin to accumulate, cash-flow gaps emerge, and pressure from creditors intensifies.

Another common issue is a loss of operational control. The company has grown and its structure has become more complex, but its management system has remained unchanged. At some point, the owner begins to realize that many decisions simply do not get made without their personal involvement, while the team operates largely on autopilot.

Another frequent scenario is driven by changes in the market environment. Competition intensifies, margins decline, and the rules of the game change. A business that operated successfully under the old model for years can suddenly find itself in a situation where its established management decisions no longer produce results.

– Dmitry Tugushi: In recent years, the risks of subsidiary liability for business owners and senior executives have increased significantly. Legislation and court practice have substantially expanded the ability of creditors and insolvency practitioners to hold controlling persons liable for a company’s debts.

As a result, in a crisis, the issue is often no longer limited to the future of the business itself, but also extends to the owner’s personal liability.

In practice, this may arise in connection with a range of circumstances, including management decisions, transactions, corporate conflicts, and claims brought by creditors, tax authorities, or insolvency practitioners.

The key objective in such situations is to establish legal protection for the owner and other controlling persons, assess the actual risks, develop a legal position, and provide support throughout bankruptcy proceedings and disputes concerning subsidiary liability.

It is important to understand that, in most cases, these risks can be managed and mitigated if an appropriate course of action and legal strategy are put in place at an early stage.

– Eduard Sinelnikov: I believe that in the coming years, the market will increasingly move toward integrated solutions.

There are already many strong legal teams on the market. They know how to provide legal protection, win disputes, handle bankruptcy proceedings, and mitigate risks. But in a crisis, this is no longer enough for the owner. Winning cases in court does not, by itself, resolve the owner’s underlying problems. What is at stake is the business itself – its operational control, value, and future.

Across many projects, we see the same pattern: a business enters a crisis, followed by reactive work – one court case, then another, then a third. Decisions are made under pressure, strategy is replaced by tactics, and the owner gradually loses control of the situation. Formally, work continues and processes move forward, but there is no clear understanding of where all of this is ultimately leading.

– Dmitry Tugushi: From the outset, it is important to establish a clear logic: what the asset is, what condition it is in, and what outcome we need to achieve. Litigation, negotiations with creditors, and management decisions are not separate actions – they are all elements of a single strategy.

It is important to determine in advance where the company needs to end up: business recovery, bringing in a strategic partner, attracting an investor, or a sale. The entire process, including litigation, should then be structured around that scenario.

The focus should not be on the problem itself, but on the outcome the business needs to achieve.