Goltsblat BLP supports "Changes in the Law on LLCs: Opportunities, Threats, Risks and Advantages" roundtable
On 8 April 2009, a roundtable was held in Moscow on “Changes in the Law on LLCs: Opportunities, Threats, Risks and Advantages”, supported by the corporate law journal Aktsionerny Vestnik, the Institute of Corporate Development (INCOR) and the law firm Goltsblat BLP. More than 70 delegates to the roundtable from major Russian and foreign companies heard representatives from the Russian Supreme Arbitration Court, the Federal Notarial Chamber of Russia, and Goltsblat BLP, as well as leading corporate law experts from major Russian holdings.
The purpose of the roundtable was to discuss legislative bottlenecks and share experience of preparing to implement the new legislative provisions.
Federal Law No. 312-FZ on significant amendments to the Law “On Limited Liability Companies” of 30 December 2008 (published on 31 December 2008 and effective from 1 July 2009) was seen as a New Year gift to all holders of participation shares in LLCs. Amendments were introduced into 36 out of the 59 effective articles of the Law, demonstrating the Government’s wish to streamline this sector and rein in this corporate form.
In-house lawyers will experience a significant increase in the volume of work involved in setting up new companies and in bringing the charters of existing companies into line with the law.
The success of bringing order to this sphere is dubious, and it is quite obvious that the amendments will cause trouble to participants in and ultimate owners of companies:
the procedure for changing ownership of participation shares in the capital of an LLC is now more complicated, with participation share disposal being subject to certain charges and validation by a notary;
there has to be documentary confirmation of the authority of the person disposing of a participation share;
the procedure for transferring a participation share to the purchaser has become more complex;
the size and par value of a participation share will have to be recorded in the Companies Register (Unified State Register of Legal Entities);
withdrawal from the company by a participant in an LLC will require a relevant condition in the company Charter;
Foundation Agreements are no longer required, and other significant changes have been introduced to come into effect on 1 July 2009, making owners actively address the fate of their existing LLCs.
The roundtable was moderated by Anton Sitnikov, Partner, Head of Corporate/M&A, Goltsblat BLP, and Maxim Bounyakin, Deputy Director, Corporate Governance and Development, Russian Corporation of Nanotechnologies – Rusnano.
One positive innovation with implications that cannot, however, all be foreseen is that the founders of (participants in) an LLC are granted the right (or, as we see it, have their right confirmed) to enter into an agreement on the rights of LLC participants, whereby they undertake to exercise their rights in a specific manner and (or) refrain from exercising them, including by voting in a certain manner at a general meeting, selling a participation share or part of it at a certain price and (or), subject to certain conditions, refraining from disposing of a participation share until certain events are triggered and taking other coordinated actions to set up, manage, reorganise or liquidate an LLC. Following an overview of the new legislative developments in this area by Anton Rogoza, Partner, Goltsblat BLP, the English-law approach to similar agreements in the UK was discussed by Ian Ivory, Partner, Goltsblat BLP.
Explanations of the principal tasks and key aspects of the amendments to the Law on LLCs, as well as current trends in Russian company law, transactions with participation shares by LLC participants (disposal, pre-emptive right, joinder of parties, pledge), contesting decisions taken by company bodies, and exits from LLCs, were provided by Evgeny Danilov (Head of Group, Corporate/M&A), Matvey Kaploukhiy (Head of Group, Corporate/M&A), Ekaterina Dedova (Head of Group, Corporate/M&A), and Anastasia Lukyanova (Associate, Corporate/M&A), Goltsblat BLP.
A particularly lively discussion revolved round the address delivered by Marina Bragina, Notary Public of the Moscow City Notarial Chamber. She touched upon aspects of liaison between the notaries’ community and participants in LLCs. Roundtable participants believe that the lack of legislative regulation on this and the differences between the new Law on LLCs and the current laws and regulations on notarial services require additional clarifications and measures from the government.
Issues arising when an LLC acquires participation shares in its own capital were analysed and clarified by Dmitry Novak, Chief Advisor with the Case Law Department of the Supreme Arbitration Court of the Russian Federation. He noted, as being yet another drastic legislative development, that LLC participants are now permitted to join in state arbitration proceedings on a suit lodged by another LLC participant seeking assignment thereto of the rights and obligations of the purchaser of a share purchased in violation of the pre-emptive right.
An animated discussion of the burning problems associated with adoption of law No. 312-FZ dated 31 December 2008 on significant amendments to the Law on LLCs was instigated by Sergey Savchuk, Editor-in-Chief, Aktsionerny Vestnik journal.
In the light of the new legislative developments, Svetlana Lakina, Corporate Governance Director, Optima-Invest Holding, examined corporate procedures mandatory for limited liability companies.
There was lively input from the participants in the roundtable. All the speeches gave rise to numerous questions and heated discussions resulting in specific steps being developed for resolving various situations or outlining issues to be addressed by the Government.
The roundtable participants and speakers alike believe that discussing problems and sharing experience is essential and might help in implementation of the new law and avoidance of possible errors.
Here are some examples of what roundtable participants thought:
“… a very lively and helpful discussion…”, “… interesting, informative, timely and efficient…”, “…useful, but too many questions still remain unanswered, as there is no actual practice and there are many opinions on each issue. In the future, we will see which of these was right and is most applicable…”, “… the main thing is not to give up…”.
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