Russian business law: the essentials. Отсутствует
or all of the company's members may sign a corporate agreement/shareholders agreement,[35] which will regulate the implementation of the participants’ various corporate rights (in addition to the law provisions). Such an agreement may contain, in particular, provisions obliging the members to:
i) vote in a certain way at the general meeting of the company's participants,
ii) concertedly implement other actions on the company's management,
iii) acquire or alienate shares in the charter capital (stocks) at a certain price or upon the occurrence of certain circumstances,
iv) abstain from the alienation of shares (stocks) before the occurrence of certain circumstances.
A corporate agreement is executed in writing by drawing up a single document. The terms of the corporate agreement concluded by the members of non-public company are deemed confidential and are not subject to discloser, unless otherwise provided for by the law. The shareholders’ agreement concluded by the shareholders of public JSC shall be publicly disnon-public to the extent necessary, in accordance with the Federal law on JSC. Currently, the norms establishing the terms of the relevant information disclosure are absent in the Federal Law on JSC. A company must be notified about the execution of a corporate agreement.
4.1.2.1.5. Affiliates
The company is considered as an affiliate if another company (or economic partnership) has an opportunity to govern a company’s decisions. Such an opportunity may arise, for example, from the participation of the main company in the affiliate’s charter capital, or from a contract between the main and affiliate companies.
The main company of the partnership, in some cases, bears a joint liability for the affiliate’s transactions. Such liability arises from the transactions signed by the affiliate in pursuance of the instructions, or with the consent of the main company or economic partnership (there are exceptions from this rule). Furthermore, in case of the affiliate's insolvency (bankruptcy) due to the fault of the main economic partnership or the company, the main company bears the subsidiary liability for the affiliate’s debts (Article 67.3 of the CC of the RF).
4.1.2.2. LLC
4.1.2.2.1. The Legal Nature of LLC
A LLC is one of the most common organizational legal forms of legal entities in Russia. One of the main reasons for this is that the Federal Law on Limited Liability Companies regulates many aspects on facultative basis, allowing the legal entity’s bodies to resolve various issues at its discretion. This work is done internally at the company.
Charter capital[36] is divided into participatory interests belonging to the LLC participants. The company is not liable for its participants' obligations. As a general rule, the participants are not liable for the company's obligations either.
Generally, a LLC is not obliged to publish its reports.
4.1.2.2.2. The Features of the Establishment of A Limited Liability Company
In accordance with Clause 1 of Article 89 of the CC of the RF, the LLC founders are obliged to sign an LLC foundation agreement in writing, which shall define some aspects of the company’s foundation.
This contract is not a constituent document of the LLC.
The term for the payment of shares in the charter capital (that has been established by the agreement) may not exceed 4 months. Within this period, the founders are obliged to pay the shares fully.
4.1.2.2.3. LLC Participants
Both individuals and legal entities can be participants to an LLC. The number of LLC participants shall not exceed 50. At the excess of this limit, the LLC must be transformed into a JSC. The LLC may have a single participant (a company having a single participant cannot appear as such a participant, according to Article 7 of the FL on Limited Liability Companies).
4.1.2.2.4. The Transfer of Participatory Interest in LLC’s Charter Capital
As a general rule, the transfer of an LLC’s participatory interest from one person to another is allowed. Upon alienation of the entire participatory interest, this person ceases to be the company's participant. In case a participatory interest is sold to a third party, the other participants of an LLC have the priority to buy the share or part of the share (the seller must first offer its share to the other participants). An LLC charter may include the necessity to obtain the consent of all participants for the alienation of a share. Furthermore, the charter may establish a ban on the shares' alienation.
4.1.2.2.5. LLC Profit Distribution Among the Participants
At the general meeting of an LLC, participants may decide to distribute the company's net profit among its participants quarterly, biannually, or annually. Distribution is made in proportion to the participant's interest in the charter capital. The company's charter may provide other proportions of profit distribution. The FL on Limited Liability Companies contains a list of circumstances under which profit distribution is prohibited.
4.1.2.2.6. Increase and Reduction of LLC Charter Capital
An increase of LLC charter capital may be implemented:
i) at the expense of the company’s assets (without the implementation of additional deposits),
ii) at the expense of LLC participants’ additional deposits,
iii) at the expense of the deposits of the persons entering the company as a participant, if it is not prohibited by the company’s charter.
A reduction of LLC charter capital is implemented by:
i) the reduction of the shares par value for all participants of the company,
ii) the redemption of the company's shares.
4.1.2.2.7. Contributions to the Company’s Assets
The general meeting of participants may oblige all of the participants of an LLC to make contributions to the company’s assets; these contributions do not change the sizes and par value of the participants’ shares in the charter capital (and do not increase the company's Charter Capital). Such contributions are made by all participants in proportion to their shares, unless otherwise stated in the charter.
4.1.2.2.8. LLC Management Bodies
LLC Management Bodies are:
i) The General Participants Meeting
The general participants meeting is the highest management body of an LLC. All of the company’s participants have the right to participate in it. During the general participants meeting, most of the important issues concerning the LLC’s activities can be addressed and resolved.
ii) Board of Directors (Supervisory Board)
The terms "board of directors" and "supervisory board" are synonyms. The formation of a board of directors (supervisory board) in an LLC is not obligatory.
The company's charter determines the competence of the board of directors (supervisory board), taking into consideration the Federal Law on Limited Liability Companies.
iii) A Sole Executive Body
The sole executive body manages the company's current activities. The general meeting of shareholders or the board of directors (supervisory board) elects a sole executive body, which shall be accountable to them.
iv) Executive Board
Forming an executive board is not obligatory for an LLC. The appointment of executive board members is within the competence of the general participants meeting or the board of directors (supervisory board). The chairman of this body is a person holding a position in the sole executive body.
v) An Audit Committee (Auditor)
Forming an audit committee is obligatory for a company which has more than 15 participants. The general participants meeting of the LLC appoints a member to the audit committee.
A corporate contract concluded by LLC participants is called "a contract on the implementation of the shareholders’ rights". A similar contract signed by JSC shareholders is called "a joint stock agreement".
For more information about the minimum amount of an LLC Charter Capital, see chapter 4.1.2.1.C.