Russian Joint-Stock Company (AO): Public and Non-Public, Shareholder Rights, and Governance

The joint-stock company (aktsionernoye obshchestvo, AO) is the corporate form used for larger enterprises in Russia, particularly those seeking public capital markets or requiring the flexibility to issue shares. Governed primarily by Federal Law No. 208-FZ of 26 December 1995 on Joint-Stock Companies and Part I of the Civil Code, the AO law distinguishes between public and non-public companies, establishing different regulatory regimes for each.

Public and Non-Public Joint-Stock Companies

The 2014 Civil Code reforms introduced the distinction between public and non-public joint-stock companies, replacing the earlier distinction between open (OAO) and closed (ZAO) joint-stock companies. A public joint-stock company (publichnoye aktsionernoye obshchestvo, PAO) is one whose shares and equity securities convertible into shares are publicly placed or publicly traded under the securities laws. A non-public joint-stock company (nestatutarnoye aktsionernoye obshchestvo, NAO or simply AO) is one whose shares are not publicly traded. The distinction has significant regulatory implications. Public companies are subject to additional disclosure requirements, stricter corporate governance standards, and mandatory registration of share issues with the Central Bank. Non-public companies have greater flexibility in governance structure, including the possibility of limiting the number of shareholders, restricting the transfer of shares, and establishing special procedures for approval of major transactions.

Charter Capital and Shares

The charter capital of a joint-stock company consists of the aggregate par value of the company’s shares. The minimum charter capital for a public company is 100,000 rubles; for a non-public company, it is 10,000 rubles. The company may issue ordinary shares (obyknovennyye aktsii) and preferred shares (privilegirovannyye aktsii). Ordinary shares confer the right to vote at the general meeting of shareholders, the right to receive dividends, and the right to receive the liquidation balance. Preferred shares do not confer voting rights (except in specified circumstances) but give the right to a fixed dividend and priority in the distribution of profits and liquidation proceeds. The par value of preferred shares may not exceed 25% of the charter capital. The company may also issue bonds (obligatsii) and other equity securities. The issue of shares and bonds is subject to state registration with the Central Bank of Russia.

Shareholder Rights

Shareholders of a joint-stock company enjoy a comprehensive set of rights under the AO Law. The right to participate in the general meeting of shareholders (obshcheye sobraniye aktsionerov) and to vote on matters within its competence is the primary governance right. One ordinary share confers one vote. Shareholders have the right to receive dividends (dividendy) from the company’s net profit, as declared by the general meeting on the recommendation of the board of directors. The right to receive information about the company’s activities includes access to the company’s accounting documents, minutes of general meetings, and lists of affiliated persons. Shareholders holding at least 1% of voting shares may bring derivative actions (action in the interests of the company) against members of the board of directors and the executive body for losses caused to the company. Shareholders holding at least 2% of voting shares may propose items for the agenda of the general meeting and nominate candidates to the board of directors. The right of pre-emptive purchase of additionally issued shares protects shareholders from dilution.

Board of Directors

The board of directors (sovet direktorov or nablyudatelny sovet) is a mandatory body in public joint-stock companies with 50 or more shareholders. In non-public companies, the board is optional; its functions may be performed by the general meeting of shareholders. The board is elected by the general meeting for a term determined by the charter (not exceeding one year between annual general meetings). The board oversees the company’s strategic direction, approves the business plan, recommends dividends, convenes the general meeting, and supervises the executive bodies. Certain matters fall within the exclusive competence of the board, including the determination of priority areas of activity, the increase of charter capital within the limits of authorised shares, the placement of bonds and other securities, and the approval of major transactions. Members of the board must act in the interests of the company in good faith and reasonably, and they may be held liable for losses caused to the company by their actions or omissions.

General Meeting of Shareholders

The general meeting of shareholders is the supreme governing body of the company. The annual general meeting must be held annually, not earlier than two months and not later than six months after the end of the financial year. Extraordinary general meetings may be convened by the board of directors, the executive body, or shareholders holding at least 10% of voting shares. The competence of the general meeting includes amendments to the charter, reorganisation and liquidation, election of the board of directors and the audit commission, approval of the annual report and financial statements, distribution of profits and declaration of dividends, approval of major transactions, and approval of interested party transactions. Decisions are adopted by a simple majority of votes of shareholders present (for most matters) or a qualified majority of three-fourths of voting shares (for amendments to the charter, reorganisation, and liquidation).

Dividends

The distribution of dividends is governed by Article 42 of the AO Law. Dividends may be paid from the company’s net profit after the payment of taxes and after the formation of the reserve fund. Dividends on preferred shares are paid before dividends on ordinary shares. The decision to declare and pay dividends is made by the general meeting of shareholders on the recommendation of the board of directors. The amount of dividends may not exceed the amount recommended by the board. Dividends may be paid in cash or, subject to the charter, in other property. The company may not pay dividends if its net assets are below the charter capital and reserve fund, or if the company has signs of insolvency or would have such signs after payment of dividends.

Reorganisation

A joint-stock company may be reorganised by merger (sliyaniye), acquisition (prisoyedineniye), division (razdeleniye), spin-off (vydeleniye), or transformation (preobrazovaniye). Reorganisation is governed by the Civil Code and the AO Law. A decision on reorganisation is adopted by the general meeting of shareholders, usually by a qualified majority of three-fourths of voting shares. The reorganisation procedure includes notification of the tax authorities, publication of the reorganisation notice in the State Registration Journal, notification of creditors (who have the right to demand early performance or termination of obligations and compensation of losses), and state registration of the resulting legal entities. The spin-off form is frequently used for corporate restructuring in Russia, including the separation of non-core assets.

Significance

The Russian joint-stock company form provides a sophisticated legal framework for enterprises requiring access to capital markets or complex governance structures. The distinction between public and non-public companies allows regulatory proportionality, with lighter requirements for closely held companies and stricter standards for companies with public shareholders. The governance structure — general meeting, board of directors, executive bodies — follows international best practices while incorporating features specific to Russian corporate law, including the mandatory audit commission, the rules on major transactions and interested party transactions, and the derivative action mechanism. The Central Bank’s regulation of public companies and the Moscow Exchange’s listing requirements impose additional governance standards, bringing Russian public companies increasingly into alignment with international corporate governance norms.