Reforms to Russian Civil CodeAug 14, 2014
Countries across the globe are continuously making substantial changes to their trading laws to facilitate higher levels of competitiveness and ensure increased compliance. Chapter 4 of Civil Code scheduled to take effect from 1st September, 2014 is one of the key reforms to the Russian Civil Code for Legal Entities. This law has undergone several amendments in the past with the last major amendment taking place in December 8, 2011. The Russian Civil Code for Legal Entities contains four parts I, II, III and IV with the last part having been adopted by Federal Law No. 230-FZ of December 18th, 2006.
In order to revamp civil and commercial laws, Russia has embarked on facilitating continuous reforms to improve the business environment. The highlights of amendments to Chapter 4 of Civil Code whose main aim is to offer governance has now categorised all legal entities as corporate entities with complete shareholding structures. This move in essence aims to strengthen local entities, and this means multinational companies operating in Russia might have to brace themselves for higher competition levels from the domestic market.
The amendments to this law touch on important aspects and structures that govern business structures and operations. OAO (Open Stock Companies) and ZAO (Closed Stock Companies) as defined by Russian law have been given a transition period under which firms should change names, charters and review their governing documents to ensure compliancy with the new regulation.
A lot of changes particularly regarding shareholding voting rights, obligations and new clauses on the right to expel shareholders give power to LLC participants to demand withdrawal of individuals who breach their obligations. Furthermore, rights of board members have been defined with an aim of improving corporate governance by having access to key company information and review of accounts. Changes in corporate reorganisation now allow stock companies to merge into LLC, a procedure that was previously challenging to undertake. For charter capital, company founders are required to deposit three quarters of initial charter fee to facilitate registration.
Looking at some of the above changes, multinationals doing business in Russia has to embrace certain changes in order to satisfy local compliancy rules. In addition, Chapter 4 of Civil code is expected to bring in major changes of how firms compete and do business in a highly competitive environment. Changes in shareholding meetings have seen the introduction of new requirements to document forums. New rules regarding mandatory audits require company financial records to be independently reviewed by a licensed auditor.
These reforms have wide implications both for local and multinational companies operating in Russia. It’s good to get advice from professionals who will then be able to advise on organisational changes that need to be implemented to ensure compliancy. Multinational companies that require more information on these Russian reforms and how they’ll affect their businesses and / or legal entities in Russia can contact us: email@example.com