On 1 January 2012 the Federal law "On Investment Partnership", passed by the State Duma and approved by the Federation Council on 25 November 2011 ("the Law") came into force. The Law was developed on the instruction of the President of the Russian Federation issued at the end of the meeting of the Modernization Committee on 27 July 2010, which emphasised the necessity to "develop legislation regulating the means of organizing pooled investments without the necessity to form a legal entity".

The Law is aimed at the creation of legal conditions to attract investment in the Russian economy and the realization of investment projects on the basis of investment partnership contracts.

The Law specifies a new type of a partnership contract – an investment partnership contract, on the basis of which partners can jointly acquire and/or alienate stock (shares) not publicly traded, bonds of business entities and partnerships, financial instruments of futures, and shares of business partnerships in joint-stock capital.

In accordance with the Civil Code of the Russian Federation, the Law regulates the particulars of investment partnership contracts, including the legal status and liability of the parties to such contracts, the procedure for establishment, change or termination of their rights and obligations.

According to the investment partnership contract stipulated by the Law, two or more persons undertake to pool their investments together and carry out a joint activity without the formation of a legal entity.

The Law determines the rights and obligations of partners under investment partnership contracts, requirements of the form and content of such contracts, settles the issues related to fees paid to a managing partner for conduct of partners' common business, sets out the requirements to partners' contributions and common property, regulates the procedure for conduct of partners' common business, sets out partners' responsibility for shared obligations, and determines the procedure and consequences of amendment, termination and cancellation of investment partnership contracts.

Both commercial and non-commercial partnerships can become parties to an investment partnership contract. Individuals can join an investment partnership only if they are individual entrepreneurs. According to the law, the same persons can be members of several investment partnerships. The law stipulates that one partnership cannot have more than 50 members.

Also according to the Law, one or several partners (managing partners) may conduct common business on behalf of all the other partners. The Law specifies the different scope of rights and obligations for managing partners and ordinary partners, and also determines the relevant scope of responsibility.

The Law establishes that an investment partnership contract and amendments, additions and attachments to it (including the policy for conduct of common business/ investment policy statement) and powers of attorney for conduct of common business, must be notarized. A contract validity term cannot exceed fifteen years.

Terms and conditions of investment partnership contracts are confidential and are not subject to disclosure in accordance with the general rule and are preserved in accordance with the law on commercial secrets. Parties to an investment partnership contract and other persons are not entitled to advertise the common investment activity carried out in accordance with an investment partnership contract or involve new people in the common investment activity by means of public offer.

According to experts, the Law creates a legal mechanism for pooling funds of several investors in order to carry out different business projects, which can be especially important in the field of innovation-driven economy.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.