As of 1 January 2012, Russian law provides for an investment partnership ("Investment Partnership"), which is a variation of a simple partnership. An Investment Partnership is designed to be the organisational form for collectively accumulating funds for investment under Russian law.
It is intended only for the joint acquisition and sale of:
- shares in unquoted companies and economic partnerships;
- corporate and partnership bonds; and
- futures instruments (with a view to deriving a profit).
This is a variation on the current simple partnership scheme that is intended to remove the drawbacks that have made this type of arrangement unattractive for business.
The legislator has extended the scope of the parties to a simple partnership to permit non-commercial Russian and foreign organisations (including publicly funded organisations) to participate alongside commercial organisations and registered individual entrepreneurs (whether Russian or foreign), which were previously allowed to participate as simple partnerships. However, as in the case of a simple partnership, private individuals are barred from participating in investment partnerships.
An Investment Partnership (i) is based on an investment partnership agreement (an "IPA"); (ii) does not require state registration; and (iii) does not result in the creation of a legal entity.
Separating the partners of an Investment Partnership into (managing and non-managing partners, with a different scope of rights, obligations, and liabilities is also new for a Russian contractual partnership structure (simple partnership). This is similar to the concept of limited liability partnerships that exist especially under German law (Kommanditgesellschaft) and English law.
Тhe liability of non-managing partners is limited to their contribution, whereas managing partners are jointly and severally liable for unsatisfied liabilities for contractual claims from legal entities.
The new law allows partners considerable flexibility in structuring the regulations of internal affairs based on an IPA that stipulates the amount, composition, period and procedure of a partner's contributions, the procedure for altering contributions, and sanctions applicable to a partner who fails to pay the agreed-upon contributions. In terms of the management structure, an investment committee may be created under an IPA. If so, the parties to an IPA may either restate the powers provided for by law (e.g. adopting an investment policy, and approving controlled transactions and challenging transactions concluded by the managing partners outside the scope of their authority) or vary them in an IPA.
For the benefit of creditors and for the sake of stability and transparency, the following features have been introduced:
- IPAs must be notarised, with one copy of the agreement being stored at a Russian notary's office. However, the terms and conditions of an IPA are confidential, except for (i) the existence of the IPA; (ii) its date, number and name; and (iii) the names of the managing partners.
- The managing partners may only exit an IPA on the condition that all of the partners give their written consent. In each IPA, the parties are free to decide whether (and how) non-managing partners (simple partners) are permitted to exit the Investment Partnership.
- Managing partners are not permitted to assign rights and obligations under an IPA. Simple partners may assign such rights and obligations, as stipulated in an IPA.
The new law on Investment Partnerships improve the legal framework for investment activities in Russia, creating an organisational framework for collective investment activities. This is very similar to Western European models, with a much more flexible regime than exists for corporate entities.
[Federal Law No. 335-FZ "On an Investment Partnership", dated 28 November 2011, and Federal Law No. 336-FZ "On Amending Separate Legislative Acts of the Russian Federation Relating to Applying the Federal Law 'On an Investment Partnership'", dated 28 November 2011, as amended in the following: (i) the Civil Code of the Russian Federation; (ii) the Tax Code of the Russian Federation; and (iii) Federal Law No. 229-FZ "On Enforcing Proceedings", dated 2 October 2007]