Unified consequences of authorised capital being reduced and net assets not complying therewith. The new Unified Federal Register.
Legal Update No. 257.
Goltsblat BLP advises that Federal Law No. 228-FZ of 18 June 2011 “On amendment of certain legislative acts of the Russian Federation revising ways to protect creditors’ rights during a reduction in authorised capital, changes to the requirements on commercial entities in the event that their authorised capital and net asset value do not comply” comes into effect on 1 January 2012 (certain provisions on 1 January 2013).
The main provisions of the given law are as follows.
Authorised capital reduction
Protection of creditors’ rights in the event of an authorised capital reduction in a limited liability company (LLC) has been unified with such protection in a joint-stock company (JSC). It is no longer mandatory to notify creditors in writing about a reduction in authorised capital. The registration authority has to be notified within three working days of a resolution being adopted to reduce the capital and an announcement must be published in the established print media twice, at an interval of one month.
As in a JSC, creditors of an LLC have retained their right to demand acceleration of obligations and, if this is impossible, their termination and reimbursement for losses. This is permitted if the receivables arise prior to publication of the announcement and the acceleration (termination and loss compensation) demand is lodged within thirty days of the last publication. The statute of limitations for the given claim is, moreover, limited to 6 months from the last publication.
As with a JSC, a court is entitled to reject a creditor’s claims if the LLC can prove that:
creditors’ rights are not violated by the reduction in its authorised capital;
the surety provided is sufficient for due performance of the relevant obligation.
For LLCs, the requirements to reduce authorised capital if net assets fall have been mitigated. If the net assets of an LLC are less than its authorised capital at the end of its third (previously second) or each subsequent financial year when the net asset value is below the authorised capital below, the company is required, within six months of the closing of the relevant financial year, to resolve to reduce its authorised capital to a sum not exceeding its net assets or to go into liquidation.
A method is established for evaluating net assets according to the accounting: for JSCs – as determined by the Ministry of Finance of the Russian Federation and the Federal Service for the Financial Markets of Russia (or other competent federal executive authority) and for LLCs – as stipulated by the Government of the Russian Federation or other competent federal executive authority.
The annual reporting of an LLC must contain a section on the state of the company’s net assets, providing information about changes in their value, etc. The amendments under review stipulate that the annual report of an LLC must always contain such a section, whereas this is mandatory for a JSC only if there is a shortage of net assets in relation to the authorised capital.
Both JSCs and LLCs are now required to provide any interested person with access to information about the value of their net assets in the current manner.
From 1 January 2013, alongside the Unified State Register of Legal Entities, a Unified Federal Register is to be introduced of information about the activities of legal entities, which will be posted on the Internet. An integral part of the given Register will consist of a Unified Federal Bankruptcy Register.
The Unified Federal Register of information about the activities of legal entities will include the following details:
establishment of the legal entity, it being in the process of reorganisation or liquidation, a state arbitration court ruling on putting it into administration, a decision by the registration authority of impending exclusion of the legal entity from the Unified State Register of Legal Entities, its actual exclusion or its liquidation;
reduction or increase in the authorised capital, appointment or dismissal of the sole executive body, change of address (location) of the legal entity;
receipt, suspension, renewal, reissue, annulment or termination of a licence to engage in a specific activity;
the net assets of a JSC (as of the latest reporting date) and of an LLC (when required by law);
those required by the legislation to be included; and
other information introduced by the legal entity at its own discretion (apart from information access to which is restricted by law).
Although the information is, in general, to be entered into the Unified Federal Register by the registration authority, some information subject to publication by the legal entity (including about its net assets) is entered thereby in the established manner.
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Mergers & Acquisitions,
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