On 24th April 2013 State Duma of the Russian Federation approved in second reading Federal Law No. 100-FZ “On amending subsections 4 and 5 section 1 of part I and article 1153 of part III of the Civil Code” (hereinafter “the Law”). On 07th May 2013 the Law was executed by the President of the Russian Federation and published. The Law constitutes second set of amendments brought to the Civil Code of the Russian Federation (hereinafter “Civil Code”) within the frames of civil legislation review. Mentioned set of amendments is dedicated to issues of legal regulating of transactions and grounds of their invalidity, proxyship, delegation of powers and action limitation periods. The most significant changes are:
- Establishment in the Civil Code of the general provision on preliminary or post approval on transaction. Preliminary approval shall contain distinct subject of future transaction.
- Introduction of the term “legally relevant notices” (notifications, letters etc.) which cause civil law consequences for participant of civil relations. Said notices are deemed to have been received as of the moment of their delivery. In case the addressee did not receive them or did not get acquainted with them due to reasons within and beyond his control those notices are considered to have been duly delivered unless otherwise stipulated by law, agreement or custom.
- Frames of applying consequences of transaction invalidity were specified in favor of decreasing possibilities for acknowledging transaction null and void. For instance refuse from assuming invalidity of transaction violating statutory requirements has been established. Such transaction will be deemed as defeasible unless otherwise provided by law.
Transaction will be acknowledged as void provided compliance with several conditions:
- if such transaction violates statutory requirements or requirements of any other legal or statutory act;
- if such transaction infringes public interests, rights or any other interests of third parties protected by law;
- if such transaction is not defeasible pursuant to law.
- With regards to invalidity of transactions entered into under influence of deceit or ignorance, term of “substantial ignorance” has been introduced (for instance making by the party of obvious misprint, misbelief pertaining to nature or subject of transaction etc.). Deceit will also include “deliberate non-disclosure of circumstances that were known to the party and that were meant to be divulged by the party provided bona fides required by the conditions of business conduct”.
- Three years’ limitation period for claims on applying consequences of invalidity of a void transactions as well as acknowledging transaction null and void will commence from the day when the person has learnt or was supposed to learn of the transaction execution commencement and will not exceed ten years from said date.
- Civil code was supplemented by the chapter dedicated to shareholders’ resolutions thus long term discussions regarding legal nature of said institution were brought to their conclusion. The Law liaises arise of civil law consequences with shareholders’ resolutions for participants of legal entities, co-owners, creditors in bankruptcy etc. Shareholders’ resolution is deemed to be taken in case majority of meeting participants have voted for its adoption and not less than fifty percent of total amount of participants took part in the meeting. Shareholders’ resolution is drawn in form of minutes. Amendments to Civil Code establish criteria of transaction contestability or voidability of shareholders’ resolutions. It should be taken into account that invalid shareholders’ resolution is challengeable unless the law stipulates for its voidability.
- Annual validity term for powers of attorney has been introduced unless the wording of Power of attorney implies for another term.
- Regulations have been established that in case the attorney delegates powers to third party initially issued in his favor power of attorney shall not become inoperative unless otherwise stipulated by power of attorney or the law. A list of powers has been established that can not be delegated for instance receipt of salary, author’s and inventor’s remunerations, receipt of allowance, benefits etc.
- The Law introduces institution of “irrevocable power of attorney” as method for securing execution of the principal’s obligations before representative. Such power of attorney can be issued in favor of attorney due to fulfilling of commercial activity and is subject to obligatory notary verification. Powers under the “irrevocable power of attorney” shall not be delegated to third parties. The wording of power of attorney may contain conditions for its cancellation.
- The Law specifies the order for expiration of limitation period. Three years will remain as general limitation period starting from its commencement day, however protection of violated right can not be effected upon expiration of ten years as of the day of right violation. Commencement of limitation period has been supplemented by the provision stating that on the said date the person should have known the proper defendant on the law suit on right’s protection.
In accordance with item 1 of art. 3 of the Law amendments to Civil Code will come into effect starting from 1st September 2013 apart from item 22 of art. 1 dedicated to possibility of acknowledging transaction invalid in case it was made by the legally incapacitated person for the reason of psychiatric disorder upon at the suit of his trustee. Said provision comes into effect from 2nd March 2015.
New Civil Code provisions that will come into effect in September of current year will bring significant changes into practice connected with acknowledging transactions invalid, into the procedure for calculating limitation period, issuance of powers of attorney including introduction of new institution of irrevocable power of attorney etc. It should be noted that second set of amendments to Civil Code is aimed to elimination of multiple legal “gaps” most of which have already been interpreted by courts for instance separation of shareholders’ resolutions institution instead of their considering legally equal to transactions.