No. 68. Improved Regulation of Joint-Stock Company Operations

Goltsblat BLP advises that Federal Law of 19 July 2009 No. 205-FZ “On Amendments to Certain Legislative Acts of the Russian Federation” (the Federal Law) has been passed.

The Federal Law regulates a quite broad range of aspects relating to improvement of the work of commercial organisations and resolution of corporate conflicts. In particular, amendments affecting the Federal Law “On Joint-Stock Companies” come into effect on 21 October 2009.

Above all, these amendments provide for the company and the registrar to bear joint and several liability for losses caused to a shareholder by violations in drawing up and maintaining the company’s shareholders’ register. A procedure is determined for discharge of joint and several obligations to make recompense for losses caused.

Significant changes have been made to the procedure for appealing against resolutions adopted by General Meetings of Shareholders of a company. For instance, the time limit for appealing such resolutions has been cut from six to three months. The existing right enjoyed by members of the Board of Directors is supplemented by the right of company shareholders to appeal against Board of Directors’ resolutions as well (within three months of the day on which the shareholder becomes aware or should have become aware of the resolution adopted and of the circumstances constituting the grounds for the resolution to be deemed invalid). By analogy with resolutions of a General Meeting of Shareholders, in the event of minor infringements, the court is empowered to uphold the Board of Directors’ resolutions against which appeals have been lodged.

It has been established that invalidity of a Board of Directors’ resolution on convening a General Meeting of Shareholders does not entail invalidity of a resolution adopted by a Meeting convened on its basis. Violations committed in convening Meetings are considered by the court when it hears an appeal against a resolution adopted thereby.

For the first time, invalidity of resolutions adopted by a company’s governing bodies are judicially separated from invalidity of transactions performed in accordance therewith. In particular, the Federal Law established that recognition as invalid of Board of Directors’ resolutions approving major or interested-party transactions does not automatically entail recognition of the transactions themselves as invalid.

There has also been a change to the procedure for disputing major and interested-party transactions and the statute of limitations for claiming invalidity of such transactions, once elapsed, is not subject to reinstatement.

Amendments have been introduced into the procedure for convening an Extraordinary General Meeting of Shareholders. If, during the set period, the Board of Directors fails to adopt a resolution on convening such a meeting or decides not to convene one, the company body or person requesting that such a meeting be convened is entitled to refer the matter to court, demanding that the company be compelled to hold the meeting (but not to convene it themselves). The court ruling obliging the company to hold such a meeting is to indicate the time and procedure for doing so. This rule also applies to an Annual General Meeting of Shareholders if it has not been convened and held on time.

The list of documents that a joint-stock company must store has been extended, with the addition of notifications of conclusion of shareholder agreements, the list of persons concluding such agreements, judicial acts on disputes over the incorporation of the company, management of the company or participation therein. The company’s obligation to provide shareholders with access to the given judicial acts is also secured.

For additional information, please contact:

Anton Sitnikov, Partner,
Head of Corporate / M&A Practice,
Goltsblat BLP,
E-mail: Anton.Sitnikov@gblplaw.com