On 19 July amendments to the Federal law On joint stock companies (JSC Law) came into effect aiming to fix general principles of internal audit implementation in joint stock companies. Here we describe this and other important changes.
Board of directors is not competent to define general principles of internal audit and control organization (clause 1(9.2) article 65 JSC Law). Head of internal audit is entitled to call a BoD meeting (clause 1 article 68) and obtain minutes of management board meetings (clause 2 article 70).
Previously, the Code of corporate governance only recommended having this competence. Public corporations set up internal audit departments commonly — this is an obligation of companies listed in quotation lists I and II on the Moscow Stock Exchange.
One more recommendation of the Code of corporate governance (clause 2.8) has also been fixed in JSC Law: the board of directors’ right to set up committees for initial consideration of reserved matters (clause 3 article 64 JSC Law).
The same clause obliges public JSC to set up an audit committee for initial consideration of matters related to control over business activities of a company.
The general meeting’s quorum for related party transactions approval is not depended on the amount of arm’s length shareholders (clause 4 article 83 JSC Law).
Preferred shares owners can vote on issues, which need unanimous vote under JSC Law (clause 4 article 32): reconstruction into non-profit partnership, private placement of preferred shares of a particular type and a number of matters related to non-public JSC.
A general meeting notification should be done no later than 21 days prior to the meeting date (clause 1 article 52). Previously the term was 20 days.
A public JSC charter must contain information about an audit committee if it is created, while a non-public JSC charter — information about an audit committee or its absence (clause 3.2 article 11). If a non-public JSC creates an audit commission for certain occasions, such occasions must be described in its charter.