Joint Stock Companies And Limited Liability Companies From 1 September 2014

On 1 September 2014 changes to the Civil Code of the Russian Federation (the Civil Code) regarding legal status, corporate relations and activities of legal entities, in particular, joint stock companies (JSCs) and limited liability companies (LLCs) introduced by the Federal Law No. 99-FZ dated 05 May 2014 (the Law No. 99-FZ) come into force.

1. Public and non-public companies

Instead of open joint stock companies (OJSCs) and closed joint stock companies (CJSCs) all JSCs shall be deemed public or non-public based on the following criteria:

whether shares of a JSC and securities convertible into shares thereof are publicly placed (by an open subscription) on conditions provided for by laws on securities; or whether the charter and the company name of a JSC contains an indication that the JSC is public. In the event that a JSC meets any of the abovementioned criteria it shall be deemed non-public. LLCs shall be deemed nonpublic companies as well.

The Civil Code as amended provides for a more flexible regime for regulating corporate relations in non-public companies:

The charter of a non-public company and the corporate agreement (an agreement entered into by the shareholders/participants of a company and regulating how they exercise their rights) may state that the extent of the rights of the company's participants is not proportionate to the amounts of their shares in the charter capital of the company (provided that information on such corporate agreement and the scope of rights of the company's participants is entered into the Uniform State Register of Legal Entities (the USRLE); Participants (founders) of a non-public company may on the basis of a unanimous decision include in the charter of the company certain provisions changing the scope of authority of the management bodies of the company and the procedures for taking decisions, as well the procedure for disposing of the shares/participatory interests, in particular: to transfer to the authority of the collective management body or the collective executive body of the company certain matters which by law are within the authority of the general meeting of participants (except for particular matters that concern interests of all the participants, i.e. reorganization or liquidation of the company, determination of the number, nominal value and categories (types) of declared shares and the rights granted by such shares); to establish the procedure for convoking, preparing and conducting a...