Russian Corporate Law

Sources of Russian Corporate Law

Russian corporate law is derived principally from the Civil Code of the Russian Federation, Part One, which contains the general provisions on legal entities, including the classification of commercial and non-commercial organisations. The Joint-Stock Companies Law (Federal Law No. 208-FZ of 26 December 1995) governs the formation, operation, and dissolution of joint-stock companies, while the Limited Liability Companies Law (Federal Law No. 14-FZ of 8 February 1998) governs limited liability companies. The Corporate Governance Code, recommended by the Central Bank of Russia in 2014, provides non-binding best practice standards for publicly traded companies, operating on a comply-or-explain basis. The Federal Law on the Securities Market (No. 39-FZ of 22 April 1996) regulates the issuance and trading of securities. The Federal Tax Service performs the function of state registration of legal entities, while the Central Bank of Russia regulates the securities market and supervises listed companies.

Forms of Commercial Legal Entities

Russian law distinguishes between public and non-public companies. The public joint-stock company (публичное акционерное общество, ПАО) is characterised by the public offering of shares and the obligation to disclose information in accordance with securities regulations. A ПАО must have at least five members of the board of directors and is required to have independent directors. The non-public joint-stock company (акционерное общество, АО) may not offer shares to the public, is subject to reduced disclosure obligations, and is not required to have a board of directors if the number of shareholders is fewer than fifty. The limited liability company (общество с ограниченной ответственностью, ООО) is the most common form of legal entity in Russia, used by approximately 90% of commercial organisations. Participants in an ООО hold participatory interests (доли) rather than shares, and the company’s charter (устав) serves as the constituent document. The additional liability company (общество с дополнительной ответственностью, AOD) was abolished in 2014, and existing AODs were required to convert to ООО or АО status.

Formation of a Legal Entity

All legal entities in Russia must undergo state registration with the Federal Tax Service. The registration process requires submission of the charter, a decision to establish the company, and payment of the state duty. The charter must contain the company’s name, legal address, business purpose, charter capital, the rights and obligations of participants, and the governance structure. The minimum charter capital is 10,000 RUB for ООО and 100,000 RUB for АО. Contributions to charter capital may be made in cash, property, or property rights, and independent valuation is required for non-cash contributions exceeding 20,000 RUB. The registration process typically takes three to five business days.

Corporate Governance Structure

The general meeting of shareholders (for АО) or participants (for ООО) is the supreme governing body of the company. The general meeting has exclusive authority to amend the charter, approve the annual accounts, declare dividends, elect the board of directors and the audit commission, and resolve on liquidation and reorganisation. The board of directors (совет директоров) is mandatory for public АО and must have at least five members. The board may be formed in non-public АО with more than fifty shareholders. For ООО, a board of directors is optional. The sole executive body (единоличный исполнительный орган), typically the general director (генеральный директор), manages the current activities of the company. Large companies may also establish a collegial executive body (правление or дирекция). The audit commission (ревизионная комиссия) is mandatory for АО with more than fifty shareholders and performs internal oversight functions.

Duties of Directors and Officers

Directors and officers must act in good faith and reasonably in the interests of the company. The Civil Code and the Joint-Stock Companies Law impose liability for losses caused to the company by the actions or omissions of directors and officers. The standard of liability is fault-based, and the plaintiff bears the burden of proving that the director failed to act in the best interests of the company. Shareholders holding at least 1% of shares may bring a derivative action against directors for damages caused to the company. The tax authorities may seek disqualification of directors, barring them from holding management positions in legal entities for a period of up to three years, for repeated tax violations or failure to file for bankruptcy.

Shareholders’ Rights

Shareholders in АО and participants in ООО have the right to receive dividends declared by the general meeting. The right to information includes access to the company’s financial statements, minutes of general meetings, and other corporate documents. In ООО, participants have a pre-emptive right to acquire interests sold by other participants at the price offered to a third party. Shareholders dissenting from certain fundamental transactions, including reorganisation, major transactions exceeding 50% of the company’s asset value, and amendments to the charter restricting shareholder rights, are entitled to require the company to repurchase their shares at fair value.

Securities Regulation

The Central Bank of Russia is the regulator of the securities market and oversees the issuance and trading of securities. Issuers must register a securities prospectus with the Central Bank for public offerings. Listing on the Moscow Exchange requires compliance with listing rules, including disclosure obligations and corporate governance standards. The Securities Market Law imposes liability for market manipulation and insider trading, with administrative and criminal penalties. The mandatory tender offer rules require a person acquiring more than 30% of the voting shares of a public company to make an offer to acquire shares from all other shareholders at a price not lower than the average weighted price for the preceding six months.