The Civil Code amendments were introduced to the State Duma in April 2012 by President Dmitry Medvedev. The amendments – essentially, a new Civil Code – were passed in the first reading on 27 April 2012. Since then, the amendments were split into several bills. The bill that introduces affiliation into the Civil Code sparked massive controversy.

“The meeting (in early December) with First Deputy Prime Minister Igor Shuvalov was initiated by the Russian Union of Industrialists and Entrepreneurs, and there we came to an agreement that a panel will be formed to review test cases: how the new Civil Code norms may affect companies. Not only oil and gas companies, other sectors as well, metallurgy for instance”, said President of the Russian Union of Industrialists and Entrepreneurs Alexander Shokhin.

It is expected that the panel will be selected from a pool of legal advisors. The three parties – the business, the Government and the SAC – will be represented by two candidates each.

“We would like the authors of the bill – the Legislative Council, the SAC and others – to measure the impact of these Civil Code amendments, that can cause serious problems in day-to-day business – in trades that are based on established practices”, stressed Shokhin.

He stated that companies are concerned not only with related party transactions, but also changes in form of incorporation, along with other issues.

“Our concern is not merely affiliation, but changes in form of incorporation, which means switching from ZAO to public and non-public companies. Plus the authority of the Board. Many companies fear the proposed delegation of many issues to GSM level – the ones currently handled by the Board of Directors. Transitional mechanisms have been provided in order to ease the pressure on day-to-day business practice, and hopefully we can have them worked out in January”, Shokhin said.

“Many members of the Russian Union of Industrialists and Entrepreneurs are trying to convince the Government that what is needed here are sufficiently long transitional periods or mild terms that would allow transparency in related party transactions without obstructing business in today’s difficult economy”, says the President of the nation’s largest business association.

The Russian Union of Industrialists and Entrepreneurs expects the compromise draft of Civil Code amendments to be ready by March.

“There is no denying that we should follow the course set out by the Legislative Council in the Civil Code amendments. However, our point is doing it step by step so that we do not overload companies”, said Shokhin.

Corporate and contract law, Project Group №2