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Two draft laws for annulment of excessive requirements for the content of the Joint Stock Company Charters have been proposed


 
To prevent the direct implementation of provisions of the Joint Stock Companies (hereinafter-JSC) legislation in the Charters, draft laws that soften the requirements for Charters were introduced to the State Duma of the Russian Federation:
 
Draft law No. 1087244-7 "On Amending the Part One of the Civil Code of the Russian Federation with regard to the Annulment of Excessive Requirements for the Content of the JSC Charter " (hereinafter – Draft law No. 1087244-7);
Draft law No. 1087682-7 "On Amending the Federal Law "On Joint Stock Companies" regarding the Annulment of Excessive Requirements for the Content of the JSC Charter" (hereinafter-Draft law No. 1087682-7).
 
Currently, both drafts are at the first reading stage in the State Duma.
 
Provisions of the draft laws do not apply to the Charters of public joint-stock companies. Such documents should still include all information required by the civil legislation and the Federal Law "On Joint Stock Companies".
 
In respect of non-public Joint Stock Companies (hereinafter – NJSC) both draft laws provide possibility to specify certain information not only in the Charter, but in the shareholder agreement, if it is signed between all NJSC’s participants.
Also, Draft law No. 1087244-7 proposes the amendments to the Civil Code of the Russian Federation. To prevent duplication of the civil legislation in the NJSC’s Charter, it is proposed to exclude information about the following from the list of mandatory requirements: :
 
shareholders' rights;
competence of the company's bodies;
the procedure of making decisions in the company (including issues that should be approved unanimously or by a qualified majority of votes).
 
Additionally, crucial amendments to the content requirements of the NJSC Charter are proposed by Draft law No. 1087682-7. It sets out a list of issues that should be included in the company's charter only if they are supposed to be regulated differently from the law. The information is as follows:
 
data on the shareholders’ rights;
structure and competence of the management bodies;
the procedure for making decisions in the company;
the procedure for preparing and holding the general meeting of shareholders;
a list of issues on which decisions are taken by the company's management bodies by a qualified majority or unanimous vote.
 
Moreover, Draft law No. 1087682-7 establishes a set of default provisions for the NJSC Charter, which do not require a mandatory implementation into the Charter, for example:
 
the reserve fund will be created in the amount of 5 % of the authorized capital, and the amount of annual deductions will be equal to 5% of the net profit;
the annual general meeting of shareholders is held no earlier than two months and no later than six months after the end of the reporting year;
the number of members of the board of directors should be five, seven or nine, depending on the number of shareholders;
the quorum for holding a meeting of the Board of directors must be at least half of the members of the Board of Directors;
the quorum for holding a meeting of the company's collegial executive body is not less than half of the elected members of the collegial executive body.
 
It is also remarkable, that draft laws provide that the rights of ordinary shareholders don't need to stipulate in the charter, whereas the rights of preferred shareholders (if any) should still be reflected in it compulsorily.
 
Thus, in general, the draft laws simplify the requirements for the content of the NJSC Charters, if this information repeats with the provisions of the legislation. Their approval will help to avoid duplication of the provisions of the legislation in the constituent documents of the companies. However, it may have a certain adverse effect in complication of the procedure for counterparties due diligence, since in addition to analyzing the provisions of the charter, it will be necessary to additionally check the current provisions of the legislation.
 


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