THE KEY AMENDMENTS TO THE RUSSIAN CIVIL CODE - Details
The Russian President introduced to the State Duma draft amendments to the Civil Code (the Draft) prepared jointly by representatives of both the legal and business communities.
The following should be noted as key points.
1. CORPORATE LAW
First, the new regulation will grant greater freedom in determining the management structure for private companies, execution of shareholders’ agreements, and changing the form of incorporation of legal entities.
2. Public and private companies A new classification of business entities will be introduced, so that they will fall into the categories of either public or private companies.
As opposed to members of public companies (joint stock companies, or “JSCs”, with shares traded in regulated markets), members of private companies may freely determine the management structure. For example, they may forego a governing body and change the way general members meetings are convened, prepared, and held.
3. JSC – a unified form
The form of a JSC as a closed joint stock company (“CJSCs”) will cease to exist. Before July 1, 2013 CJSCs may, at their own discretion, either (1) change their company type to an LLC or production cooperative; or (2) retain their JSC status (this will not require any extra steps to be taken as the JSC will be the standard form "by default").
4. A Shareholders’ agreement may be entered into not only between a company’s shareholders but also between shareholders, company creditors, and any third parties.
5. Reorganisation scheme will be made available in various forms, including involvement of more than two corporate entities of any form of incorporation.
Second, rules intended to prevent abuse in corporate and ancillary relations will be introduced.
6. Registered capital will from now on have to be paid for by cash only.
7. Registration with the Uniform State Register of Legal Entities
Interested parties will be entitled to file their objections to amendments entered in the Uniform State Register of
Legal Entities, and the registration authority will be bound to consider such objections and render its decision
8. Shareholders agreement
Parties to a shareholders’ agreement will be obligated to notify the company as to its execution. If they fail to notify,
they will be obliged to indemnify against any damages incurred by other company members.
Furthermore, information about shareholders’ agreements for public will be subject to mandatory disclosure.
Finally, resolutions of corporate governing bodies or transactions involving parties to shareholders’ agreements
may be invalidated if such resolutions / terms of transactions contradict the shareholders’ agreement.
9. Affiliation and control
Now the Russian Civil Code will define specific indicia of affiliation and control and the concept of controlling and
Furthermore, even if formal grounds are missing, a court may confirm actual affiliation upon an analysis of factual
Liability of controlling entities will be strengthened. In certain cases, they will be liable jointly and severally together
with controlled entities and responsible for any losses incurred by the latter and their members.
10. Management liability
Management as well as those who have an actual possibility to give instructions to the company’s management will
be liable for any losses incurred by the company through wrongful, unreasonable or unscrupulous acts. Those who
actually determine a legal entity’s conduct, without having formal grounds for control, will be also liable.
12. TRANSACTIONS AND OBLIGATIONS
First, regulation as to invalidity of transactions will be clarified.
13. Limitations on grounds for invalidation of voidable transactions
Only a voidable transaction which infringes upon the rights and interests of the contesting party may be invalidated.
If a party approved a transaction or expressed its intention to uphold it, that party will not be able to later contest it.
14. A presumption of voidability will be established in respect of: (1) resolutions passed by meetings; (2)
transactions executed in breach of a law; (3) transactions executed without the required consent of a third
party, corporate authority, government authority, local authority.
. The following matters will be regulated comprehensively: (1) invalidation of resolutions passed by meetings;
(2) transactions void ab initio in respect of property whose disposal is restricted or limited; (3) invalidity of
transactions executed in error.
15. New opportunities
Business entities may independently determine the effect of the invalidity of voidable transactions.
A party to a transaction executed ultra vires may withdraw from such a transaction.
Second, parties will have more liberty in determining terms of their transactions, the principles of optionality and
freedom of contract will have a broader application.
16. Conditioned performance of obligations
Despite the restriction of entering into conditional transactions that depend exclusively or primarily on one of the
parties, the performance of obligations, exercise, change or termination of rights under a contractual obligation
may nonetheless be made conditional in any manner.
17. Irrevocable power of attorney may be used in business relations.
18. Creditor agreements
Creditors will be able to enter into agreements regarding their demands for a debtor to perform its obligations and
the priority of such demands.
19. Managing pledged assets
Several creditors will be able to appoint a representative – a manager of pledged assets (by analogy with
securities trustee known in foreign law systems) exercising the pledge rights on their behalf and to their benefit.
20. Good faith acquisition of right of pledge and pledged assets
If assets are pledged by an unauthorised person, the good faith acquisition of a right of the pledge will be
Onerous acquisition of pledged assets by a party, which was not aware of and was not obliged to be aware of the
pledge, will be considered a good faith acquisition of the pledged assets and in such a case the pledge will be
21. Late fee
The court’s powers to reduce the amounts of late fee penalties will be limited in business relations.
Parties will be able to recover losses caused by false representations made prior to or following execution of an
In business relations parties will be able to provide for one of the parties’ right to demand indemnification from the
other party for pecuniary losses incurred in connection with performance, amendment or termination of
obligations, including misconduct by third parties. Indemnity—a concept that is quite common and widely
applicable in large and complex structured deals abroad—would be permitted under Russian law.
23. New types of agreements
New contractual structures will be introduced: (1) a framework agreement (agreement with open terms); (2) option
agreement (agreement with unconditional right to enter into a specific agreement); (3) subscription agreement
(agreement with performance on demand); (4) escrow agreement.
Third, measures to protect parties’ rights will be improved.
24. Pre-contractual liability will be stipulated as liability for bad faith negotiations or termination of negotiations in
respect of an agreement to be executed.
25. The amount of losses must be set by the court even if they cannot be credibly determined.
26. PROPERTY LAW
First, the existing system of property rights will undergo a serious change.
Second, new limited property rights will emerge: (1) permanent landownership; (2) development of land plots; (3)
personal usufruct; (4) preferential acquisition of immovable property; (4) pecuniary benefit; (5) limited title of owner
of a building to the land plot under such building.
This review covers only some of the changes being introduced to the Civil Code. Generally, the Draft offers
a comprehensive revision of the Civil Code. It combines both innovatory and conservative proposals.
Generally, the changes covered by this review are progressive in nature. Many of them meet the needs of
Russian business practice and create an environment for their long-term improvement. These amendments
will be conducive to better corporate governance, increased transparency and a clampdown on abuse in
corporate relations, practices to preserve validity of transactions, and growth in business activity in
Medvedev signs Law on political party registration
Transcript of Dmitry Medvedev's speech from the Kremlin Press Office:
Over the past four years I have been meeting regularly with representatives of parliamentary and non-parliamentary political parties, of which we don’t have too many. This is my second meeting with the leaders of political groups that are about to undergo state registration, and this meeting in being held in the expanded format: we have about 40 representatives of organising committees from very diverse political parties, from all sides of the political spectrum. Among those present – I know some of you – there are political heavyweights who have done a great deal for Russia’s political life in different periods, and there also are completely new people who are just starting out in politics.
Moscow 19th in list of global cities
Moscow has shown the most progress on globalization among the world’s 66 most prominent cities since 2010, according to a new Global Cities Index survey released this week.
The Russian capital rose six places in the ranks to 19th slot on the list, which is topped by New York, said the survey, organized by A.T. Kearney management consulting firm and The Chicago Council on Global Affairs.
The multifaceted survey evaluates cities based on their business activity, human capital, information exchange, cultural experience and political engagement factors, said the report, which came out on Monday.
Moscow ranked 19th in the first edition of the biannual rating in 2008, but lost ground in 2010. The survey put it into a group of cities most likely to keep their current positioning in coming years, along with Manila, Kuala Lumpur and Rio de Janeiro.
London, Paris, Tokyo and Hong Kong occupied top slots in the rating, but they risk giving up their positions to Chinese cities including Beijing and Shanghai, now 14th and 21st respectively, the survey said.
Moscow, St Petersburg now have air links to Vilnius
Ak Bars Aero, the Tatarstan-based Russian airline, launched its first international service out of St Petersburg on 25 March when the airline launched twice-weekly flights to Lithuania’s capitalVilnius (VNO). The 650-kilometre route is operated with 50-seat CRJ200LR aircraft. This is the fourth Russian route to Vilnius and its only service from Russia from outside Moscow, from where it is (as of this week) also served from all three airports. The last time the route was operated was in 2005, when Lithuanian Airlines briefly served the city pair; however, Vilnius Airport’s Managing Director Tomas Vaišvila pointed out the lack of regular flights: “According to a historically established tradition, a train trip is the most popular way to reach Saint Petersburg from Lithuania – basically, there has been no regular communication by air with this city for 20 years.”
Charter subscribers to BSR's new magazine believe picture of Russia distorted by international media
Over 40% of charter subscribers to the new monthly journal BSR Russia - THE MAGAZINE believe international media distort the real picture of Russia. Another 58% believe the international media "somewhat" distort the picture of Russia or are "unsure". Revealing these preliminary figures today BSR publisher John Bonar said the new magazine would provide an independent and balanced view of Russia's politics, economy and business.
A pdf pilot issue of the magazine will be published as a download from the web site www.bsr-Russia in May.
An independent candidate has won Yaroslavl's mayoral race by a landslide
United Russia party in need of makeover
The party that has dominated Russia’s political landscape under Vladimir Putin for a decade is in disarray following a stunning nosedive in its popularity this winter and is scrambling to “reinvent” itself to cope with fierce future competition, analysts and party officials said. “United Russia has no chance of remaining unchanged,” said pundit and party supporter Sergei Markov, who was a member of United Russia’s faction in the previous State Duma.
Moscow tower fire extinquished
A blaze on two upper floors of a skyscraper under construction in Moscow has been put out, a law enforcement source told RIA Novosti on Tuesday. “The fire was extinguished around midnight,” the source said. “No casualties have been reported.”
The Russian Emergencies Ministry later confirmed that the blaze had been put out and there was no threat of the building collapse.
Alan Thompson becomes new Russia Director at RBCC
Alan Thompson was appointed RBCC Russia Director in April 2012. In this role he has responsibility for the Moscow and St Petersburg offices of the Chamber. He is based in Moscow.
Alan moved to Russia in 1999 in the search of a challenge. His career has lead him through a broad spectrum of businesses, from agricultural projects, to insurance, advertising sales, and latterly providing hygiene and disinfectant products to hotels in Russian and Eastern European markets. Over the last 8 years Alan took his start up experience as Deputy Director in the Yellow Pages and market exposure into the Marketing Director's role in a large multi-national company.
Alan is a very strong networker and, driven by the exciting Russian business environment to find synergies. He enjoys combining networking with certain elements of his native Scottish cultural background. As the Chieftain of the St Andrews Society Moscow he has been the main coordinator of the Scottish Expatriate community events in Moscow over the last 5 years, and is a regular participant in a Whisky tasting club.