Certain Russian Companies Will Be Able to Make Decisions Without Calculating Votes of Minor Shareholders Associated with Unfriendly Foreign States

On 17 January 2023, the Decree of the President of the Russian Federation "On the temporary procedure for decision-making by the bodies of some business companies" (Decree)1 was signed and published. It introduces several changes in decision-making for a number of large Russian companies.

Starting from the date of the official publication of the Decree and up to 31 December 2023, company’s managing body – the general meeting of shareholders/participants, the board of directors, the collective executive body (board of management, directorate) – сan determine quorum and voting results on the agenda without calculating votes of shareholders from unfriendly foreign states and persons appointed (elected) to the managing body by persons of unfriendly foreign states.

This procedure applies to companies that simultaneously meet the following criteria:

a) field of activity: energy, mechanical engineering and/or trade

b) restrictive measures have been introduced by an "unfriendly" foreign state against the beneficial owner of a Russian company.

c) the share of an "unfriendly" foreign person in a Russian company does not exceed 50%;

d) the volume of revenue of the Russian company for the previous year exceeds 100 billion rubles.

Thus, Russian companies controlled by persons included in the sanctions lists of unfriendly states have the right to completely ignore the votes of shareholders/members from unfriendly foreign states, as well as members of the collective executive bodies of the company elected or appointed by such shareholders/members. The most likely object of regulation of the Decree is joint ventures of well–known Western companies representing the relevant sectors of the economy - such as, for example, Siemens.

The Decree is a "retaliatory" measure taken in opposition to the EU restrictive measures imposed on sanctioned Russian companies, which similarly restrict their corporate rights in EU jurisdiction2.

1 http://publication.pravo.gov.ru/Document/View/0001202301170007
2 Consolidated FAQs on the implementation of Council Regulation No 833/2014 and Council Regulation No 269/2014 (upd 21.12.2022): https://finance.ec.europa.eu/system/files/2022-12/faqs-sanctions-russia-consolidated_en_3.pdf