Client Alert (Part One), issued January 16, 2009, addressed
certain key changes in the Russian Civil Code resulting from
December 24 (30), 2008 amendments to Russian laws governing Limited
Liability Companies. The new law introduced modifications to the
Russian Civil Code, the "Law on LLCs" (the Federal Law of
the Russian Federation of February 8, 1998, No. 14-FZ "On
Limited Liability Companies" as restated through 2008), and
the law on Notariat. The modifications will become effective on
July 1, 2009. This alert, part two in the series, reflects the new
legal regime of the Russian LLCs.
Most of the modifications in the Russian Law on LLCs are similar
to those in the Civil Code, with more detail added in the Law on
LLCs, including: governance; management bodies; decisions; voting;
time limitations; state registration; shares ("equity
interests"); share transfer transactions (including disposal,
sale, acquisition, pledge, division, consolidation); notarial
action, and others.
The modifications added imperative rules and discretionary
formalities which amount to better protection of LLC shareholder
rights and governance, thus making Russian LLCs more convenient for
direct foreign investment. A Russian LLC remains a more flexible
form of business organization than corporations organized as
"joint stock companies." The following are some of the
key features of a Russian LLC:
Russian LLCs are "juridical persons," or "legal
persons," created via State registration (incorporation).
Russian LLCs are always fully taxable entities (no
"pass-through" taxation or a "non-profit"
status is allowed for LLCs).
Shareholders ("Owners," "Founders,"
"Participants") of an LLC enjoy limited liability for an
LLC's obligations and liabilities.
By default, an LLC's profits are distributed pro-rated to
share ownership, unless the Charter provides otherwise.
LLCs may be operated by members and managers; the law
establishes certain mandatory procedures.
Russian LLCs must hold annual meetings and maintain formal
There is no need to be a Russian citizen or a Russian company
to form a new LLC.
Foreigners may need to file notification or obtain an
investment permit or an anti-monopoly permit if investing in an
If an LLC in which a foreigner owns a share becomes eligible
under certain criteria set by investment or anti-monopoly laws,
foreigners may need to file notification or obtain investment
permits or anti-monopoly permits.
Continuing alerts in this series, including analysis of the
amendments introduced in the Russian Law on Notariat, will follow
in the near future.
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.
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