Page 1 CORPORATE BRIEFING MAJOR REFORM OF RUSSIAN CORPORATE LEGISLATION On 1 September 2014, a number of major changes to the provisions of the Russia’s Civil Code regulating legal entities came into force1 (“Amendments”). In particular, starting from 1 September: • depending on whether or not the company’s stock has been publicly placed or is publicly traded, all existing companies are now classified into public companies (joint stock companies (“JSCs”) only) and non-public companies (JSCs as well as limited liability companies (“LLCs”)); • the non-public companies have been allowed more flexibility in corporate governance which is particularly relevant in the case of former closed joint stock companies (“CJSCs”); • the highly criticised provision allowing expulsion of participants in LLCs has been extended to non-public JSCs; • companies can now have more than just one sole executive body (“CEO”) with sole and/or second signature powers or, alternatively, a collective CEO consisting of several individuals (not to be confused with the management board); • the rarely enforced provisions imposing on the liability on the controlling shareholders of a company have been revised and expanded to include the indirect shareholders; • where all of the shareholders are parties to a shareholders’ agreement, they are now allowed to challenge any resolutions of the company and transactions which contradict the terms of the shareholders’ agreement; • a class action type of procedure has been introduced in respect of claims for the compensation of losses or challenging transactions entered into by a company, which allows all interested parties to join the suit, but prevents them from bringing similar claims separately; • members of the company’s board of directors are now also allowed to sue on behalf of the company; and • simultaneous reorganisation of two or more entities with different corporate form has been allowed along with the liberalisation of some other aspects of this procedure. 1 Federal Law No. 99-FZ dated 5 May 2014 “Concerning introduction of amendments to Chapter 4 of the Civil Code of the Russian Federation and annulment of certain acts of legislation of the Russian Federation”. NOVEMBER 2014 MOSCOW Table of Contents 1. New classification of companies 2 2. Effect on existing companies 2 3. Multiple CEOs and joint signature 3 4. New rules on shareholders’ agreements 3 5. New shareholders’ and directors’ rights and obligations 4 6. Expulsion of shareholders 4 7. Claims for compensation for losses incurred, and invalidation of transactions entered into, by the company 5 8. Payment of the charter capital 5 9. Liability of management and the company’s controlling persons 6 10.Corporate reorganisation 6 11.Contacts 7 RELATED LINKS > Herbert Smith Freehills > Herbert Smith Freehills Insights > Herbert Smith Freehills news Page 2 Below we provide a detailed description of these and some other legal changes introduced by the Amendments. 1. New classification of companies As a result of the reform, starting from 1 September 2014, all companies are divided into public companies and non-public companies. Public companies can only exist in the form of a public JSC. Non-public companies can exist in the form of a non-public JSC or an LLC. New companies can be established only in these new forms. JSCs which are already in existence will need to adopt an appropriate name reflecting the public or private form (as applicable). A public JSC is a JSC whose shares (or securities convertible into shares) are publicly placed (via open subscription) or are publicly traded. All JSCs which meet either of these criteria are automatically considered public. The rules on public JSCs in their entirety also apply to a company which does not meet these criteria, but has for some reason (e.g., in the course of preparation for a proposed later public placement) voluntarily opted for the inclusion of the word “public” in its company name. All JSCs which are not public JSCs are considered non-public JSCs. Logically, LLCs, too, can only be non-public companies and their regulation remains largely the same. The key features of the new types of companies are outlined in the chart attached in Schedule A below. In summary, the reform appears to have successfully liberalised certain aspects of corporate governance as well as dealing in shares in non-public JSCs. On the other hand, in many respects there now appears to be an even greater overlap between non-public JSCs and LLCs resulting in these types of companies becoming increasingly similar. Based on this, we think that the second stated goal of the authors of the reform – which was to eliminate the duplication between CJSCs and LLCs – does not appear to have been achieved. ∧ Back to top 2. Effect on existing companies From 1 September 2014, existing companies are treated as follows: • Existing open joint stock companies (“OJSCs”): will be treated as public JSCs if their shares have been publicly placed or are publicly traded and will need to include the word “public” in their company name when they next amend their charters; otherwise, they will be treated as non-public JSCs. The current provisions of the law on JSCs (“JSC Law”) on OJSCs shall apply to public JSCs to the extent they do not contradict the new provisions of the Civil Code on public JSCs. • Existing CJSCs: will be treated as non-public JSCs and will need to delete the word “closed” from their company name when they amend their charters next. The current provisions of the JSC Law regulating CJSCs (to the extent they do not contradict the amended provisions of the Civil Code) will continue to apply to a non-public JSC until the next amendments to its charter have been adopted. • Existing LLCs: will continue to be treated as such, but will need to amend their charters to bring them in line with the amended Civil Code. Importantly, new rules set forth in the revised Civil Code apply as from 1 September 2014 regardless of any provisions in the charters to the contrary. Although there is no firm long stop date for changing the charters of existing companies in accordance with the above, they will need to be brought in compliance with the new rules at the time the next amendments to the relevant charter are introduced. Companies can, therefore, decide on the optimal time for bringing their charters up-to-date. In fact, in the absence of special circumstances which may require a company to do so earlier rather than later (e.g., a planned public placement), it may be expedient to delay changing the charter until the other relevant laws have been revised to conform to the amended Civil Code. The reason for this is that both the law on LLCs (“LLC Law”) and the JSC Law currently in force contain provisions which appear to contradict the amended Civil Code or go beyond provisions of the latter. The general rule is that provisions of the Civil Code prevail (which means that, until amended2, the LLC Law and JSC Law can only be applied to the extent they do not contradict the Amendments), however, in a number of cases, which we explain below, it is not clear how these legal discrepancies should be resolved in practice and, thus, what should be included or omitted from the charter in order to be compliant. ∧ Back to top 2 The Russian Ministry of Economic Development has published draft amendments to the LLC Law and the JSC Law. Their texts (as of the date of this publication) are available in Russian only at: http://regulation.gov.ru/project/17210.html?point=view_project&stage=2&stage_id=11614 and http://regulation.gov.ru/project/17128.html?point=view_project&stage=2&stage_id=11534. Despite earlier comments that the draft laws were expected to come into effect from 1 January 2015, as of now, there is little clarity as to when they are going to be voted on by the Parliament. Page 3 3. Multiple CEOs and joint signature The Civil Code now permits a company to have a CEO consisting of several persons acting jointly (not to be confused with the management board which is a separate executive body which can optionally be created in the company), or several CEOs acting independently. These provisions will finally allow implementing a so-called “joint signature” mechanism in Russian companies which is used in many continental and common law jurisdictions. The Amendments do not, however, go into much detail as to how exactly this mechanism is proposed to operate, except for the requirement that the names and exact powers of each of the CEOs will need to be reflected in the Unified State Register of Legal Entities (the “Register”). As such, practical steps to implement this mechanism in any given company will need to be carefully designed to make sure they work as part of the larger corporate governance landscape. The literal reading of the Amendments suggests that the CEO of a company can now be regarded as its representative which deviates from the traditional Russian law view of the CEO as a body (i.e., a part) of a company. If this reading is supported by the courts, this change is likely to have far-reaching legal implications, including, in particular, the consequences of abuse of power when entering into a transaction, authorisation of proxies and other. ∧ Back to top 4. New rules on shareholders’ agreements The Amendments introduce the concept of a “corporate agreement” as a generic term for shareholders’ and participants’ agreements, which were first recognised by Russian law in 2009. For simplicity, in the rest of this note, participants in LLCs and shareholders in JSCs are referred to as “shareholders” and unless otherwise stated, a reference to “shareholder” of a company is a reference to both shareholders in JSCs and participants in LLCs (as applicable). The Amendments have resolved certain issues which were unclear in the LLC Law and JSC Law, in particular: (a) it is now expressly permitted to conclude a corporate agreement between some only (and not all) of the shareholders; (b) parties to the corporate agreement may not claim that it is invalid due to the fact that it contradicts provisions of the company’s charter; (c) breach of the corporate agreement can be used as a ground for invalidating the decision of the relevant company’s body provided that as of the date of such decision all the company’s shareholders were parties to the corporate agreement3; (d) a transaction entered into by a party4 to the corporate agreement in violation of its provisions can be invalidated on this ground only if the counterparty knew or should have known of such restriction; and (e) the shareholders may conclude an agreement similar to a corporate agreement with the company’s creditors or other third parties in order to secure legitimate interests of those parties. In relation to disclosure of the information on the corporate agreement, the Civil Code contains the following requirements. 1. Parties to a corporate agreement must notify the company on its existence, but are not obliged to disclose its contents to the company or third parties (except as mentioned below). The draft amendments to the LLC Law and JSC Law stipulate that the notification should disclose: (a) names of the parties to the corporate agreement, (b) the date it is effective from, the date of any amendment thereto and (if applicable) the date of its termination. 2. If a company is a public JSC, parties to the corporate agreement are also required to disclose the information which they were already required to disclose under the JSC Law (including, perhaps most importantly, the number of votes controlled by a party if, as a result of entering into the corporate agreement, such party acquired more than 5, 10, 15, 20, 25, 30, 50 or 75% of the total number of votes). 3. If the company is non-public, information about the contents of the corporate agreement does not have to be disclosed and is deemed confidential. 3 It is worth noting here that invalidation of a corporate resolution does not automatically result in the invalidation of the transaction entered into on the basis of such corporate resolution. As a general rule, a transaction will not be held invalid if the counterparty, acting in good faith, was not aware and should not have been aware of the underlying legal defect. In any case, a separate action based on the breach of contract can be brought against the shareholder who is in breach. 4 Whether or not the company itself can be a party to a corporate agreement is not regulated expressly, but is expected to be resolved in the upcoming amendments to the LLC Law and the JSC Law. The current drafts of these amendments suggest that this should be permitted. Page 4 4. If a corporate agreement provides for disproportionate rights of certain shareholders, the relevant information must be reflected in the Register and will, therefore, become public. The draft amendments to the LLC Law and the JSC Law further stipulate that provisions on disproportionate rights granted by shares/participatory interests, in a company will become effective with respect to third parties from the moment they are included into the Register. The law on state registration of legal entities is yet to be amended to clarify (a) whether a complete copy of the corporate agreement needs to be disclosed to the registration authorities, and (b) the extent to which the contents of the corporate agreement will need to appear in the Register. So far we do not have any information that any such amendments to this law have been drafted. The new rules on corporate agreements obviously make the concept work better in Russia. However, the key issue concerning availability and enforceability in Russia of various instruments commonly used in shareholders’ agreements, including warranties and representations, indemnities, tag and drag along rights, call and put options, waiver of certain rights, as of now remain unresolved. Some of these are proposed to be considered as part of the ongoing Civil Code reform later, but the timing is unclear. ∧ Back to top 5. New shareholders’ and directors’ rights and obligations The Civil Code now expressly lists the rights and obligations of the shareholders, including the following new rights and obligations, which to some extent had already been recognised by the courts even before the Amendments were passed: (a) the obligation to participate in passing corporate resolutions in the absence of which the company would not be able to continue its activities in accordance with the law (if participation of such shareholder is required for adoption of such resolutions); (b) the obligation to refrain from actions that are known to be harmful for the company or that would “materially complicate” or render impossible the pursuit of the company’s fundamental goals; and (c) the right to file a derivative claim for compensation on behalf of the company in respect of losses suffered by the company due to the actions of its management and/or controlling persons and to challenge transactions entered into by the company, but only on a limited number of grounds5. Members of the board of directors (also known as a supervisory board) have also been granted two important rights, namely: (a) the right to receive information about the business of the company, review its accounting and other internal documentation (which, rather strangely, was not expressly set out before); and (b) the right to file a derivative claim for losses suffered by the company due to actions of its management and controlling persons, and challenge transactions entered into by the company (on the same grounds as the shareholders of the company – see above). ∧ Back to top 6. Expulsion of shareholders Prior to 1 September 2014, a participant (or a group of participants) in an LLC holding at least 10% in the charter capital was, under certain conditions, entitled to file a claim for expulsion of another participant. This right has now been extended to all non-public companies. Furthermore, according to the Civil Code shareholders in non-public companies have this right regardless of the size of their shareholding. The LLC Law, as currently in force, still requires a minimum of 10% of the total shareholding in an LLC to initiate expulsion. It is unclear whether this threshold contradicts provisions of the Civil Code (in which case the requirement should not apply) or provides an additional condition to be satisfied (in which case the 10% threshold continues to apply). This issue is expected to be resolved when the draft amendments to the LLC Law and the JSC Law are passed6. Expulsion can be effected only through a court order and is only available where the shareholder being expelled: • caused substantial harm to the company; or • grossly violated its duties established by the law or the charter; or 5 These include: (a) exceeding authority when entering into a transaction; (b) entering into a transaction contrary to the company’s interests; and (c) specific grounds for invalidating transactions set out in the LLC Law and the JSC Law, as applicable (e.g., pursuant to the current provisions on major and interested-party transactions). 6 The current draft amendments to the LLC Law and the JSC Law do not provide for a 10% threshold. Notably, the draft amendments provide that the charter of a company and the corporate agreement (if all shareholders are parties thereto) can provide for other consequences (i.e., other than expulsion of such shareholder from the company) if a shareholder violates its duties or causes harm to the company. Page 5 • otherwise significantly aggravated the company’s activities and the achievement of goals for which the company was founded. The expelled shareholder is entitled to receive the “actual value” of its stake in the company, calculated as the pro rata portion of the “value” of the entire company. Any waiver of a shareholder’s right to claim expulsion of another shareholder is deemed to be void. Understandably, there are concerns as to whether this powerful provision may be abused. The past practice of application of this provision in respect of LLCs as well as the guidance published by the Russian Supreme Arbitrazh Court in 20127 give some basis for an expectation that this provision would be applied restrictively. Even though the Supreme Arbitrazh Court no longer exists, we do not expect an immediate change in the judicial policy on this issue. ∧ Back to top 7. Claims for compensation for losses incurred, and invalidation of transactions entered into, by the company The Civil Code now provides for the general right of any shareholder or a member of the board of directors, to bring a derivative claim on the company’s behalf to claim losses and challenge transactions, but only on a limited number of grounds (see the section “New shareholders’ and directors’ rights and obligations” above). At the same time, the JSC Law currently stipulates that shareholders can claim compensation of losses caused by the company’s management on behalf of the company only if that they hold at least 1% of voting shares in that company. It is unclear, therefore, whether starting from 1 September 2014 the 1% threshold remains applicable in relation to claims by the shareholders in JSCs8. The Amendments also introduced a pre-trial procedure which should be complied with if the company itself, a shareholder or a board member intends to file an action claiming compensation for losses suffered by the company or to challenge a transaction to which the company is a party. The prospective claimant should notify the other shareholders (and the company itself, if applicable) in advance, setting out all relevant information about the claim which it intends to file. If other shareholders choose not to join the action, as a general rule, they lose the right to file similar actions in the future. In many cases there may be little or no real consequences of not joining the action though, since such claim will in any event be made on behalf, and for the benefit, of the company (as opposed to individual shareholders). The detailed process of such notification is yet to be determined by law and could be specified further in the company’s charter. Until all procedural issues have been determined, it might, however, be difficult to comply with the notification requirement in practice. ∧ Back to top 8. Payment of the charter capital Although the minimum prescribed charter capital remains relatively small (please refer to Schedule A at the end of this note), the Amendments require that, as a general rule, three quarters of the charter capital of a company must be paid up by the time of its state registration, with the remaining quarter being paid within one year of such registration. Where special rules allow a company to be registered before three quarters of the charter capital have been paid (which is currently the case in respect of JSCs and LLCs), the shareholders can be held secondarily liable for the obligations of the company which emerged before full payment of the charter capital. It is not entirely clear how this new provision correlates with the “old” and still existing provision that a shareholder’s liability is limited to the nominal value of the unpaid stake of such shareholder. To mitigate the risk of shareholder’s liability going beyond that, it would therefore be advisable to pay up the charter capital in full before or as soon as possible after the state registration of a new company. The list of rights and assets which can be contributed to the assets of a company by a shareholder has also been revised and is now restricted to money, movable and immovable property, participatory interests and shares, state and municipal bonds and, unless prohibited by special laws, intellectual property rights with monetary value and license rights. As such, the use of other securities or rights (e.g., rights arising out of a contract, most commonly, lease rights) for these purposes appears to be no longer permitted. A company’s charter can set out further restrictions on the types of assets and rights which can be used. Furthermore, the literal reading of the Amendments suggests that the above also applies to what can be used for payment of the charter capital of a company. It is yet to be seen whether or not this was the intention of the lawmaker or is simply a mistake in the wording of the law which is subsequently corrected by future amendments to the Civil Code. 7 See Information Letter of the Presidium of the Russian Supreme Arbitrazh Court No. 151 dated 24 May 2012. 8 The draft amendments to the JSC Law do not propose to amend the relevant wording of the current law; hence, the assumption is that the 1% threshold remains applicable. Page 6 Finally, any non-cash contribution to the charter capital of any company must now be valued by an independent appraiser regardless of the value of such contribution; the RUB 20,000 (approx. US$470) threshold previously in place no longer applies. The time period in which the claims can be brought against the shareholders and/or the appraiser in the event the valuation was overstated has been increased from three to five years following establishment of the company or passing the relevant amendments to the company’s charter (in case of a subsequent charter capital increase). ∧ Back to top 9. Liability of management and the company’s controlling persons The list of persons who may be held liable for company’s actions (or omissions) has been extended to include persons with an actual opportunity to determine the company’s activities, including those doing so by giving mandatory instructions to the CEO and members of any other bodies of the company (e.g., board of directors or management board). Following recent court clarification9, the conditions when the members of the company’s bodies are exempted from liability have been clarified: in addition to being exempted where they voted against the decision which damaged the company they can also avoid being held liable if they did not participate in the voting “acting in good faith” (by way of clarification, mere abstention would likely not be sufficient to satisfy this requirement). This probably means that not participating in voting can release of liability only if the member has valid reason not to participate in the meeting. Any purported exclusion or limitation of liability of the company’s CEO or members of its bodies for any bad-faith actions, and in the case of a public company, bad-faith or unreasonable actions, is deemed void. The removal of inactive companies from the Register does not prevent the former members of such companies’ management from being held liable for losses. The situations in which a parent company can be held liable for its subsidiary have also been expanded. They now include not only where a transaction was entered into by the subsidiary at the instruction of the parent, but also where there was a transaction of the subsidiary to which the parent has consented. What would be deemed a “consent” in this context is not clarified in the law, and so one may argue that this could capture any corporate approvals given by the parent in its capacity of a shareholder. The more narrow approach to interpreting this provision argues that it should only cover the situations where a transaction is entered into at the initiative (even if no formal instruction has been given) of the parent as opposed to the company itself. How this provision will be applied in practice is yet to be seen. The pre-trial procedure described in the section “Claims for compensation for losses incurred, and invalidation of transactions entered into, by the company” above should be complied with where the company itself, a shareholder or a board member intends to file an action claiming compensation for losses suffered by the company from the actions of the company’s management or controlling persons. ∧ Back to top 10. Corporate reorganisation Rules on reorganisation of companies (including merger, accession, demerger, spin-off and transformation) became more flexible. Now the Civil Code permits simultaneous reorganisation of two or more companies of different types and the combination of various types of reorganisation in a combined procedure (which previously was allowed only to a very limited extent and in relation to JSCs only). Another important change is that reorganisation in the form of transformation of an LLC into a JSC (or vice versa) no longer triggers a creditor’s right to claim early performance or termination of obligations of the reorganised company (which is triggered by all other types of reorganisation, unless the reorganised company has entered into an agreement with its creditors to exclude this right). At the same time, in respect of other types of reorganisations certain additional protections for creditors have been included into the Civil Code. For example, the persons actually controlling the companies which have been reorganised and their management could be held jointly liable for losses suffered by the creditors where their actions result in a violation of creditors’ rights. A shareholder of the company may challenge its reorganisation by filing a suit requesting (a) the invalidation of the decision on the company’s reorganisation (general rule is that this does not lead to liquidation of the companies formed in the course of reorganisation or invalidation of any transactions entered into by such companies), or (b) a ruling that a reorganisation is to be treated as if it had in fact not happened. In the latter case, if the court supports the claim, this would have the following consequences for all parties concerned: (i) the original companies will be restored and the companies established following the 9 See Ruling of the Plenum of the Russian Supreme Arbitrazh Court No. 62 dated 30 July 2013. Page 7 reorganisation will cease to exist; (ii) the transactions entered into with any good-faith counterparties by the companies established as a result of the reorganisation will be binding on the restored companies; and (iii) as a general rule, the corporate rights of the shareholders of the original companies will be restored, too. Time-wise, reorganisation cannot be completed until the expiry of a three-month period for challenging the resolution on the company’s reorganisation (which starts on the date of entry of the information about the reorganisation in the Register). This presently sets the minimum timeframe for effecting a reorganisation in Russia. ∧ Back to top 11. Contacts Alexei Roudiak, Partner T +7 495 36 36534 M +7 985 9286543 firstname.lastname@example.org Oleg Konnov, Partner T +7 495 36 36531 M +7 985 9209310 email@example.com Yulia Zaytseva, Senior Associate T +7 495 78 37371 M +7 985 233 0145 firstname.lastname@example.org Angelina Shalamova, Senior Associate T +7 495 78 36774 M +7 985 7764892 email@example.com ∧ Back to top Page 8 Schedule A KEY FEATURES OF NEW TYPES OF COMPANIES Public companies Non-public companies Public JSC Non-public JSC LLC Minimum charter capital to be set out in the law; according to the draft amendments to the JSC Law it remains RUR 100,000 Minimum charter capital to be set out in the law; according to the draft amendments to the JSC Law it remains RUR 10,000 Remains RUR 10,000 Collective supervisory body (board) is mandatory and shall consist of not less than 5 members (para. 3 art. 97) Collective supervisory body is optional (para. 4 art. 65.3), the charter may deviate from statutory requirements re: the number of members and formation of such body (para. 3 art. 66.3) Collective supervisory body is optional and loosely regulated (art. 91 of the Civil Code re: management in the LLC has been deleted) Strict statutory requirements re: corporate governance which cannot be amended by the charter (it is forbidden to delegate powers of the general shareholders’ meeting (“GSM”) to the other bodies, to change the order of preparation and holding the GSMs, etc.) Statutory requirements re: corporate governance can be altered in the charter, in particular: (a) powers of the GSM (except for its exclusive powers) may be shifted to the level of the supervisory board or management board (or CEO); (b) competence of the GSM can be broadened by issues not expressly set out in the law; (c) the order of holding the GSM and adoption of its decisions may be changed provided that the shareholders are not deprived of the right to participate in the GSM and obtain information about the company (para. 3 art. 66.3). These changes can be included into the charter only by unanimous resolution of shareholders Same as in non-public JSCs (para. 3 art. 66.3) It is not allowed to limit the maximum amount of shares held by a shareholder, their aggregate nominal value or the maximum number of votes given to one shareholder (para. 5 art. 97) Allowed, if set out in the charter (art. 11 of the JSC Law) Same as in non-public JSC (para. 5 art. 99) It is not allowed to provide for disproportionate rights of the company’s shareholders (para. 1 art. 66) Allowed, if specified in the charter or corporate agreement (the scope of rights shall be disclosed in the public register of legal entities (the “Register”) (para. 1 art. 66) Same as in non-public JSC (para. 1 art. 66) It is not allowed to grant to anyone pre-emption rights to acquire shares of the company in the event of a transfer (however effected) (para. 5 ст. 97) Still to be clarified. Provision on pre-emption rights has been excluded from the Civil Code; according to the draft amendments to the JSC Law pre-emption rights may be specified in the charter (as an alternative to the requirement to obtain the shareholders’ or third parties’ consent to disposal of shares in the JSC) Participants (and the company itself if the charter provides so) have pre-emption rights to acquire the interest alienated by other participants in the manner specified in the LLC Law (para. 2 art. 93) No requirements to obtain the other shareholders’ or third party’s consent to disposal of shares are permitted in the charter (para. 5 art. 97) Still to be clarified. According to the draft amendments to the JSC Law requirement to obtain such consent may be specified in the charter (as an alternative to pre-emption rights) The charter may prohibit disposal of participation interests to third parties or (in the event of disposal otherwise than by sale) require consent of the other participants to such disposal (para. 3 art. 93) Page 9 Public companies Non-public companies Public JSC Non-public JSC LLC A shareholder does not have the right to claim expulsion of another shareholder from the company A shareholder can claim such expulsion in court in certain limited circumstances (para. 1 art.67) – this right cannot be waived or restricted. According to the draft amendments to the JSC Law, however, this right can be eliminated by the charter Same as in non-public JSCs (para. 1 art. 67). Arguably, any participant can claim expulsion of another participant (despite provisions of the LLC Law currently in force that 10% shareholding is required to initiate expulsion). Maintenance of shareholders’ register and functions of the counting commission shall be carried out by an independent licenses registrar (para. 4 art. 97); requirement on “independency” is still to be clarified Starting from of 1 October 2014 a licenced registrar is required (no requirement re: its “independency”) The list of participants is maintained by the company’s CEO Public disclosure of information specified by the law (para. 6 art. 97) The Civil Code is silent on disclosure; para. 2 art. 92 of the JSC Law requires disclosure in limited cases The Civil Code is silent on disclosure; para. 2 art. 49 of the LLC Law requires disclosure in limited cases Annual audit is mandatory (para. 5 art. 67.1) Annual audit is mandatory (para. 5 art. 67.1) No special requirements (para. 4 art. 67.1), but check art. 5 of 307-FZ “Concerning Auditing Activities” dated 30 December 2008 for other instances when an audit may be required Certification of GSM minutes (includes verification of the identity of persons participating in the meeting and adoption of the resolutions)10 shall be done by the independent registrar performing the functions of a counting commission (para. 3 art. 67.1´and para.4 art. 97) Certification shall be done by a registrar or a notary (para. 3 art. 67.1) Certification shall be done by a notary, unless the charter or unanimous resolution of the GSM provides for other options (para. 3 art. 67.1) Internal audit committee or internal auditor (the “IAC”) is mandatory IAC is optional; by unanimous resolution the shareholders can amend the charter to provide that IAC is not established or is established only in cases specified in the charter (subpara. 4 para. 3 art. 66.3) Same as in JSCs (subpara. 4 para. 3 art. 66.3 of the Civil Code). The LLC Law currently requires that the IAC (which functions may be performed by the auditor when so provided in the charter) is created in LLCs with more than 15 participants (para. 6 art. 32 of the LLC Law) If you would like to receive more copies of this briefing, or would like to receive Herbert Smith Freehills briefings from other practice areas, or would like to be taken off the distribution lists for such briefings, please email firstname.lastname@example.org. The contents of this publication, current at the date of publication set out above, are for reference purposes only. They do not constitute legal advice and should not be relied upon as such. Specific legal advice about your specific circumstances should always be sought separately before taking any action based on this publication. © Herbert Smith Freehills CIS LLP 2014 This message is sent by Herbert Smith Freehills CIS LLP, 10 Ulitsa Nikolskaya, Moscow, 109012, Russia, Tel: +7 495 3636500. ∧ Back to top 10 The literal interpretation of the law does not require that resolutions of the sole shareholder are certified (since there is no meeting) which is also supported by a non-binding clarification of the Federal Chamber of Notaries. However, the draft amendments to the JSC Law suggest otherwise.