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Procedure for information disclosure to companies’ shareholders has changed


On July 30, 2017 the Federal law No. 233-FZ dated 29.07.2017 "On amendments to the Federal law “On joint stock companies” and article 50 of the Federal law “On limited liability companies” (hereinafter — “233-FZ”) entered into force, that amended the procedure for providing information by joint stock companies and limited liability companies to the owners of their shares.

In joint stock companies the following information is now available only to shareholders owning at least 1 % of the shares:

  1. information about major transactions and interested party transactions;
  2. minutes of the board of directors meetings;
  3. appraisers’ reports on property valuation in respect of which major transactions and interested party transactions took place.

For the 25 % shareholders the same information as before is available (minutes of the management board, accountant documents, other documents available to shareholders with smaller batch of shares), however now shareholder shall specify the business purpose to receive such information, which is “a legitimate interest of the shareholder in obtaining information and documents reasonably required and sufficient for proper implementation of the shareholder rights”. This means that joint stock companies will be entitled to reject the provision of information to the 25 % shareholders, if it considers that the shareholder is acting in bad faith, his interest is not justified or considers shareholder as a competitor of the company. In the latter case, joint stock company may not provide information if it is confidential, and it could harm the commercial interests of the company.

In the meantime, 233-FZ imposes restrictions not only for the 25 % shareholders, but also for all other shareholders. More specifically, company can deny access (specifying the grounds for such denial) to documents and information for the shareholder, if:

  • they have been already published on the company’s website in the Internet or disclosed under securities laws;
  • the shareholder has already requested the same document within the last 3 years;
  • the document refers to the events that took place more than 3 years ago;
  • the document refers to the period when the shareholder did not own shares of the company (unless the transaction is concluded before the purchase of shares by the shareholder, and is executed after).

Within 7 working days from serving of the relevant requirement, the company must provide the requested documents to the shareholder for reviewing in the premises of the executive body of the company or elsewhere as per the charter or internal document of the company approved by the general meeting or the board of directors and published on the company’s website.

Public joint stock companies shall mandatorily comply with rules and restrictions established by 233-FZ and related to granting access for shareholders to company’s documents. As to non-public joint stock companies, rules and limitations established by 233-FZ apply only unless the other conditions and (or) the procedure are enshrined in the charter of such companies.

Similar rules are fixed in 233-FZ in respect of limited liability companies. At the request of LLC shareholder, the company must provide him access to constituent and internal documents of the company, other documents under the legislation, charter, internal documents and decisions of the company within 5 working days from serving of the relevant requirement by the LLC shareholder. Similarly, 233-FZ establishes analogous grounds for denial of providing documents to the LLC shareholder:

  • the requested document has been already published on the company’s website in the Internet or disclosed under securities laws;
  • the LLC shareholder has already requested the same document within the last 3 years;
  • the document refers to the events that took place more than 3 years ago.

Thus, the provisions of 233-FZ regulate the procedure for granting to companies’ shareholders of the documents and information relating to the activities of a company in more details and anchor, in terms of legislation, the ability of a company to deny access to such documents and information. Case law has already established such position: the Presidium of the Russian Supreme Arbitration Court1 has highlighted the cases where companies may not satisfy the shareholders’ requests of information. These cases include, particularly, abusing of rights in the actions of the shareholder, serving repeated requests by the shareholder of the same documents from the company, serving requests for information and documents pertaining to past periods of activity of the company.  

Apparently, the legislator intends to limit shareholders’ requests in order to exclude the cases, when such shareholders are hindering the performance of companies by their queries. Therefore, provisions of 233-FZ accumulate and consolidate at the legislative level current experience in the consideration of issues on the provision of information to companies’ shareholders.

_____

1The Information letter of the Presidium of the Russian Supreme Arbitration Court No. 144 dated 18.01.2011



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