No. 58. Better regulation of commercial operations and resolution of corporate conflicts (for limited liability companies)

04.08.2009

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

The Federal Law regulates a wide range of matters for improving operations of commercial entities and resolution of corporate conflicts. Owing to its breadth, the different provisions of the Federal Law come into effect on different dates.

With respect to limited liability companies (the LLC), the Federal Law first modifies certain amendments introduced in the federal law on LLCs that have been in effect since 1 July 2009.

Alongside transactions involving disposal of a participation share in the charter capital of an LLC or a part thereof, the authenticity of the signature on an application for waiver of the right of first refusal to purchase a participation share or part thereof is now also subject to mandatory notarisation. In addition to the cases already stipulated, transfer of a participation share or part thereof, if the right of first refusal is exercised by an offer being submitted, no longer has to be notarised. If a participant unlawfully evades legalisation of a transaction involving disposal of a participation share or part thereof, this obligation being envisaged by contractual obligations, the bona fide acquirer under the contract may demand that the participation share or the relevant part thereof be transferred thereto by a court of law. The Federal Law determines that, for the purposes of registering a change of ownership to a participation share or part thereof, an application for the records in the unified state register of legal entities to be amended on behalf of an LLC participant that is a legal entity, may be signed by its CEO or by another person acting on the basis of a power of attorney. The terms of reference of the General Meeting of Participants of an LLC have been modified. Previously, such meetings were restricted to resolving issues expressly listed or otherwise envisaged by the federal law on LLCs, while the terms of reference may now be extended to include a number of issues stipulated by the LLC’s charter. The procedure for including issues within the exclusive terms of reference of the General Meeting of Participants of an LLC has also been clarified. All these amendments have been effective since 22 June 2009.

Within the scope of streamlining the procedure for transferring a participation share in the charter capital of an LLC or part thereof, a new provision has been added to the Fundamental Principles of the Russian Federation Legislation on Notary Services, requiring that all documents conveying the essence of the transaction be submitted for legalisation of the deal at least in duplicate. This new requirement will come into effect on 21 October 2009. Another essential amendment was introduced into the Russian Tax Code, to the effect that, in calculating the amount of state duty payable for legalisation of transactions involving disposal of participation shares or ones establishing an obligation to dispose of such shares, the value of the contract indicated by the parties (but no less that the par value of the relevant participation share or part thereof) shall be taken into account, rather than value of the participation share itself or part thereof as determined by an independent appraiser. This amendment will come into effect after 22 August 2009.

Another basic group of amendments relates to challenging decisions adopted by management bodies of an LLC and invalidating major and interested-party transactions of an LLC. For instance, it is envisaged that the established two-month period for filing an application with a court for invalidation of decisions taken by the General Meeting of Participants and other management bodies of an LLC is not subject to prolongation if missed (with the exception of cases when the application was not filed under duress or threats). Nor are missed statutes of limitation for demands seeking invalidation of a major transaction or an interested-party transaction subject to recovery. The Federal Law specifically stipulates that invalidation of a Board’s decision to convene a General Meeting of Participants does not automatically invalidate decisions taken by participants during the meeting. The same principle applies to major transactions and interested-party transactions: invalidation by a court of resolutions of LLC management bodies approving a major or interested-party transaction does not automatically entail invalidation of the transaction itself. At the same time, the new developments emphasise that, irrespective of whether or not they are challenged in court, decisions of the General Meeting of Participants on matters not included on the agenda for the meeting, as well as ones taken without the requisite majority of votes, have no force (apart from cases when all the participants were present at the meeting). A list of circumstances has been added to the provisions on major transactions and interested-party transactions concluded with departures from applicable requirements: should any of the circumstances arise, the court will refuse to invalidate said transactions. All these amendments will come into effect on 21 October 2009.

The Federal Law has also introduced amendments intended to eliminate conflicts between the federal law on LLCs and the Civil Code of the Russian Federation and some other changes relating to limited liability companies.


For additional information, please contact:

Anton Rogoza, Partner,
Corporate/M&A,
Goltsblat BLP;
T: +7 495 2874444
E: anton.rogoza@gblplaw.com

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