United States: Significant Changes In Corporate Law

Companies will be obliged to disclose their beneficial owners

For the first time Russian companies are required to identify their beneficial owners.

Applicable to: all legal entities, except for:

  • public/municipal authorities, state corporations and state-controlled companies;
  • international organizations and foreign states;
  • listed companies disclosing information in accordance with the law;
  • foreign companies listed on a foreign stock exchange included in the Central Bank list.

What is required:

  • to obtain information on the company's beneficial owners;
  • to undertake all reasonable and available measures to obtain complete information on their name, citizenship, date of birth, details of passport and migration documents, address, taxpayer identification number;
  • to update such information not less than once a year;
  • to retain such information for a minimum of five years;
  • to provide supporting documents upon request of the competent authorities (inter alia, tax authorities).

What is meant by "beneficial owners": a person who ultimately directly or indirectly owns (possesses a major participation interest of more than 25 percent of share capital of) a legal entity, or is able to control its actions.

Penalty: fine up to RUB 500,000.

Federal Act No.215-FZ dated 23 June 2016 (effective as of 21 December 2016).

Clarification on the rules for contributions to the assets of a joint-stock company

For several years under the provisions of the Russian Tax Code and the decisions of the Higher State Commercial (Arbitrazh) Court, it was permitted to increase the net assets of a joint-stock company by asset contribution, similar to LLCs. This has also been confirmed later in the context of the Russian Civil Code reform.

The provisions outlining the detailed procedure for making such contributions finally have been introduced to the legislation on joint-stock companies.

In accordance with the amendments, on the basis of a contribution agreement with the company, each shareholder may contribute the following items to the company's assets: money, things, shares in the charter capital of other partnerships and companies, public and municipal bonds, as well as exclusive rights, other intellectual property rights and licenses that can be monetized. Rules applicable to gifts do not apply to such agreements; however, preliminary approval shall be given by the Board of Directors.

In addition, it may be generally agreed in the charter that, by unanimous decision of all the shareholders, the shareholders may be obliged to make cash contributions to the company's assets proportionally to their shareholdings. This may be further detailed in the company's charter.

Federal Act No.339-FZ dated 3 July 2016 (entered into force).

Rules on approval of large-scale and interested-party transactions have been changed

In accordance with the amendments, the rules on approval of large-scale and interested-party transactions have been changed and unified for joint-stock and limited liability companies.

The key changes related to large-scale transactions include:

  • the notion of "transactions in the ordinary course of business" (and, thus, not requiring approval) is changed to include any transaction that does not cause the business to be terminated or materially altered (in terms of the nature or the scope). There are no clear criteria for such transactions, and Dentons will closely monitor how these provisions will apply;
  • the approval may contain minimum and maximum parameters of the proposed transaction, alternative terms, etc.;
  • a large-scale transaction may be conditioned on approval being granted;
    justification of the transaction (to be approved by the Board of Directors) is introduced. Supporting statement shall contain information on the intended consequences of the transaction and its feasibility;
  • there are less grounds for the court to refuse to challenge the transaction (for example, if the transaction caused no damage to the company), however, general provisions of the Civil Code may still apply;
  • if a large-scale transaction is to be approved by the general meeting, ¾ of votes is required.

Key changes related to interested-party transactions include:

  • changes in determining interested shareholders – 20% shareholding threshold is replaced with the "controlling person" (as a general rule, owning more than 50% of the votes or having the right to appoint the CEO), or a "person entitled to give binding instructions";
  • the company shall inform the Board of Directors of the contemplated interested-party transaction;
    the shareholders shall be provided with the report on the executed interested-party transactions as part of preparation for the annual general meeting;
  • as a general rule, mandatory prior approval is not necessary (but one may require it);
  • for the Board's approval clear criteria of an uninterested director are set, including related to past circumstances (not only at the moment of transaction);
  • charter of a non-public company may provide for its own procedure for the approval of interested-party transactions or provide that the approval is not required;
  • new rules on challenging transactions (inter alia, in relation to potential claimants);
  • a transaction is presumed to cause damage if it was not approved and the information on it was not disclosed upon request.

Furthermore, the law clearly upholds the long-standing institute of additional grounds for the Board's / GM's approval, as well as clearly allows challenging transactions executed in the absence of such approval based on the provisions of the Russian Civil Code.

Federal Act No.343-FZ dated 3 July 2016 (effective as of 1 January 2017).

Interest in a cash debt obligation

Interest in a cash debt obligation (Article 317.1 of the Russian Civil Code) shall now be charged only if it is set forth in the agreement or is required by law (earlier, such interest was charged by default).

Federal Act No.315-FZ dated 3 July 2016 (effective as of 1 August 2016).

Out-of-court enforcement of debts

Debts under credit facility agreements (except for the agreements with microfinance organizations) may be enforced in out-of-court procedures on the basis of a notary's executory endorsement, if such agreements or additional agreements thereto provide for such enforcement.

Federal Act No.360-FZ dated 3 July 2016 (provisions entered into force).

The participants' list may be maintained by the notary

In accordance with the amendments, general meeting of participants will be entitled to authorize the Federal Notarial Chamber to maintain the participants' list with the Registry of the LLC participants' lists in the Unified Notarial Information System.

Federal Act No.360-FZ dated 3 July 2016 (provisions effective as of 1 July 2017).

Dentons is the world's first polycentric global law firm. A top 20 firm on the Acritas 2015 Global Elite Brand Index, the Firm is committed to challenging the status quo in delivering consistent and uncompromising quality and value in new and inventive ways. Driven to provide clients a competitive edge, and connected to the communities where its clients want to do business, Dentons knows that understanding local cultures is crucial to successfully completing a deal, resolving a dispute or solving a business challenge. Now the world's largest law firm, Dentons' global team builds agile, tailored solutions to meet the local, national and global needs of private and public clients of any size in more than 125 locations serving 50-plus countries. www.dentons.com.

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