CORPORATE LAW AND CHANGES IN LEGISLATION

Finnish-Russian Chamber of Commerce November 10, 2009

Partner Tatiana BichevaSenior Associate Kristina Teplova

CHANGES IN FEDERAL LAW “ON LIMITED LIABILITY COMPANIES”

CHANGES IN FEDERAL LAW

On December 30, 2008 several important changes were introduced into the Federal Law “On limited liability companies” which come into force starting from July 1, 2009

AMENDING OF BY-LAWS

All existing limited companies are obliged to amend the by-laws to make them compliant with the new Law. Articles of association and foundation agreements of companies are applied only in part, which does not contradict the new norms beginning from July 1, 2009 and till adjusting them in accordance with the changes

FOUNDATION DOCUMENTS

Foundation agreement does not anymore qualify as a foundation document. The foundation agreement is considered to be the secondary document which sets forth agreement of participants on joint activities

INFORMATION ABOUT PARTICIPANTS

`The information about the size and nominal value of the share of a company’s participant is notreflected in the Charter

`This information is subject to inclusion into the Unified state register of legal entities

PARTICIPANT’S WITHDRAWAL FROM COMPANY

`The possibility of free withdrawal is excluded as it can be used as a method of evasion fromproperty claims connected with losses of the company and its creditors. Thus the rights andlegal interests both of the company’s participants and its creditors can be infringed

`Participant’s withdrawal from the company is allowed only if the right to withdraw from the company is provided for by the company charter

PREEMPTIVE RIGHT TO PURCHASE SHARE

`Procedure of realization of preemptive right to purchase a participant’s share is regulated indetail by the Law

`The contract of purchase and sale of a share should be notarially certified. Failure to comply with the notarial form of such transaction leads to the invalidation thereof (item 11 article 21). This amendment will make the corporate procedures of companies with foreign participants significantly more complicated

NEW OBLIGATIONS

`A company now is obliged to keep a list of participants with indication of the information about each participant of a company, the size of its share in the authorized capital of a company and the payment made for such share as well as about the sizes of the shares held by the company itself, dates of their transfer to the company or acquisition by the company. However, the information from the Unified stare register of legal entities prevails

NEW POSSIBILITIES

`Founders (participants) of the company have been granted the right to enter into agreementson the exercise of their rights (clause 3 article 8)

SHAREHOLDERS AGREEMENTS IN RUSSIAN JOINT-STOCK COMPANIES

REGULATION

`Most shareholders agreements in the Russian business practice are concluded and governed by foreign law a while ago in the absence of legal acknowledgment

`On June 10, 2009 the Federal Law No. 115-FZ dated June 3, 2009 introduced amendments to the Federal Laws “On Joint Stock Companies” and “On the Securities Market”. The amendments determined the form and requirements for concluding shareholders agreements under the Russian law

SHAREHOLDERS AGREEMENT

`Under the amendments shareholders agreement is an agreement on exercising of the rights certified by the shares and (or) peculiarities of exercising of rights to shares

CONTENT OF SHAREHOLDERS AGREEMENT

The shareholders agreement can include the following obligations of the parties:

`to vote in a specific manner on the general meeting of shareholders

`to agree upon voting options

`to purchase or sell shares in advance fixed price and (or) upon the occurrence of certainconditions

`refrain from disposition of shares pending the occurrence of certain conditions; and

`to take other concerted actions associated with the management, establishment, operations,reorganization and liquidation of the company

FRAMEWORK

`The parties of the shareholders agreement can only be shareholders. The company itself cannot be a party to the shareholders agreement

`The shareholders agreement cannot provide for obligation of the shareholder to vote accordingto the management’s instructions

`The shareholders agreement binds only parties of such agreement

`There is no need to register the shareholders agreement within any government authorities

PROTECTION OF SHAREHOLDERS AGREEMENT PARTIES RIGHTS

Methods of protection of civil rights of parties of the shareholders agreement:

`Reimbursement of losses caused by infringement of the shareholders agreement`Recovery of penalty`Payment of compensation

Rights of parties of shareholders agreements are subject to legal defense

LEGISLATION REFORM: PLANNED CHANGES

THE CONCEPT OF DEVELOPMENT OF THE LEGISLATION OFFERS FOLLOWING CHANGES

`Abolition of additional liability companies

`Refusal of classification of joint-stock companies (opened, closed), providing for requirementsto the civil-law status of public joint-stock companies

`Increase of the minimum size of an authorized capital stock: for LLC at a rate of 1 million RUB(an order 25 000 – 30 000 EURO), and for joint-stock company – at a rate of not less 2 millionRUB (an order 50 000 EURO)

THE CHANGES IN REORGANIZATION

`The Interdiction for reorganization of the commercial organizations in the noncommercial

`Universal character of the succession extending not only on obligations, but also on all othercivil relationships

`Registration, instead of right-establishing meaning of the act of transfer

`Possibility of recovery by the participant of the legal entity of the lost corporate control by courtrecourse

THE CHANGES IN LIQUIDATION

`The Nullifying of state registration of legal entity by court will be the independent basis for itsliquidation

`The liquidation of the legal entity will be charge to its participants (founders)

`Liquidation should be realized at the expense of property of the legal entity, and in case of itsabsence - at the expense of property of founders (participants)

`In the long term outlook the norms about priority of satisfaction of demands of creditors atliquidation of the legal entity out of bankruptcy procedure can be excluded in view of assumed sufficiency of property

`Possibility of satisfaction of demands of creditors, unused during liquidation, in case ofdisclosure of property of the legal entity after its exception of the register

THE CHANGES IN THE REGISTRATION OF LEGAL ENTITIES

`The establishment of rules of check of reliability of the data which are required for registrationof the legal entity

`Obligatory legal examination of constituent documents on conformity to the legislation; possibility of passing of typical charters for the most widespread kinds of legal entities

Kristina TeplovaSenior Associate Lidings Law Firm

Phone:+7 (495) 913-67-66+7 (495) 228-18-66

E-mail: KTeplova@lidings.com

www.lidings.com

Tatiana Bicheva Partner Lidings Law Firm

Phone:+7 (495) 913-67-66+7 (495) 228-18-66

E-mail: TBicheva@lidings.com