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Ministry for Economic Development May Add Affiliation Criteria to Companies law

11.08.2014 14:38 / PRIME

The Ministry for Economic Development is looking into the possibility of introducing amendments regulating affiliation and liability of controlling shareholders into Joint-Stock Companies Act and Limited Liability Companies Act, according to MIFC Roadmap Progress Report.

“We are considering adding these stipulations in bills on companies ”, says the MIFC document.

The office of MIFC Taskforce Head Alexander Voloshin declined comment until the official release of the paper.

Affiliation criteria and regulation of controlling shareholders’ liability were added to the 2012 draft amendments to Section 4 part 1 of the Civil Code, however heated Government-business debate led to the exclusion of these amendments at the State Duma. The remaining amendments were signed off by the President in April 2014.

The new affiliation rules were drafted with a view to replace the 1991 version and bring them up to date. As stated in the draft memo, the condition of affiliation is to be established both de jure and de facto, which would prevent abuse.

For instance, as proposed, the term ‘affiliated’ refers to controlling and controlled companies, companies and individuals performing executive functions, companies owning or co-owning directly or indirectly over 25% of the company. Affiliation also covers an individual and his closest relations (spouse, parents, children, brothers/sisters and step-brothers/step-sisters, foster parents and adopted children, grandparents, grandchildren, cousins, uncles/aunts etc.)

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