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News

Company & Commercial - Russia

 

The passing of the Federal Law Amending the Law on Joint Stock Companies (115-FZ) on June 3 2009 gives shareholders' agreements a basis in Russian legislation. The innovation will be welcomed by businesses and by legal practitioners, who have long argued for the formal introduction of such agreements in order to strengthen the legal foundations of joint stock companies and improve their corporate governance.

 

Concept and Substance of Shareholders' Agreements

 

The Federal Law on Joint Stock Companies has been amended to include a new article on shareholders' agreements. It stipulates that a 'shareholders' agreement' is an agreement on the execution of rights certified by shares or on special features associated with the execution of rights in respect of shares. The parties to such an agreement undertake to execute rights to shares or rights certified by shares, or to refrain from executing such rights. It may require parties to:

 

  • vote in a certain way at a shareholders' general meeting;
  • align their voting with that other shareholders;
  • acquire or alienate shares at a predetermined price or in certain circumstances;
  • refrain from alienating shares, except in certain circumstances; or
  • carry out other activities associated with the company's management, as well as with company's activities, reorganization or liquidation.
  • However, a shareholders' agreement may not require a party to vote as directed by the managing bodies of the company whose shares are the subject of the agreement.

 

Shareholders' agreements must apply to all shares belonging to the parties.

 

A shareholders' agreement must be executed in writing as a single document signed by the parties.

 

Consequences of Violating a Shareholder's Agreement

 

Infringement of a shareholders' agreement is insufficient grounds for recognizing decisions by a company's managing body as null and void. However, a shareholders' agreement concluded by a party to the agreement in violation thereof can be nullified by a court of law pursuant to a claim by an interested party to the agreement, provided that it can be shown that the party in violation knew or should have known of the restrictions provided for therein.

 

The rights of the parties to a shareholders' agreement that are based on the terms thereof are subject to judicial protection. This includes rights to claim for the reimbursement of losses caused by infringement of the agreement or by the application of other measures in connection with such infringement. The law establishes that parties can stipulate enforcement mechanisms and civil liability measures.

 

Disclosure Requirements

 

In order to ensure the protection of shareholders' rights and interests, the law imposes a responsibility to disclose information on the acquisition of the right to determine voting preferences at shareholders' general meetings involving the shares in the company that were issued when the prospectus was registered.

 

The list of corporate documents that must be kept by the company at all times has been expanded to include notices of the conclusion of shareholders' agreements forwarded to the company and lists of parties that have entered into such agreements.

 

The Federal Law on the Securities Market has been amended to include provisions on the disclosure of essential information when an entity acquires shares in a company. The requirement applies when the securities in question were issued when the prospectus was registered, and to rights under the shareholder agreement to determine voting preferences in respect of such shares at the shareholders' general meeting if, as a result of such acquisition, the entity alone or with affiliated parties directly or indirectly acquires control over 5%, 10%, 15%, 20%, 25%, 30%, 50% or 75% of voting stock in a joint stock company.

 

Such information must be disclosed in a notice to the company detailing the rights relating to the shares that were acquired, including those under a shareholders' agreement, and to the federal executive agency responsible for supervising the securities market (or the body that registered the securities issue in question, if different). This requirement must be fulfilled within five days of adding the relevant entry to the depositary account or from the time at which the right to control votes at shareholders' general meetings, including the rights based on the agreement, is acquired.

 

 

 



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