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Close affiliation. Family can now be legally affiliated.

31.05.2011 22:01 / gazeta.ru

Letting relatives qualify as affiliates, more freedom to non-public companies, more responsibility for corporate management and between shareholders — these are some of the amendments to the Civil Code proposed by MIFC Taskforce. These measures are crucial to the improvement of the investment climate in Russia, say Taskforce experts.

“Friendly laws will help us draw investors. The Russian law should not be as good as the US, German or French. It should be better, more attractive. While it may take years, maybe generations to change the investment climate, friendly law will provide Russia with a competitive advantage in no time”, — said MIFC Taskforce Head Alexander Voloshin on Tuesday.

The Taskforce is currently drafting amendments to the Civil Code. The amendments were originally introduced by the Codification Council, where some of Higher Arbitration Court judges collaborated. However, the amendments were opposed by the Ministry for Economic Development, MIFC Taskforce and the business. They say a number of amendments restrict freedom of enterprise and cripple business activity. This is a key issue for MIFC development and setting Russian economy on the path to innovation, stated the Ministry for Economic Development. Most of the debate is focused on company foundation and business activity norms. Amendments included a threefold increase in charter capital to combat fly-by-night operations, and a charter analysis procedure during company registration.

MIFC Taskforce proposes different measures to counter fly-by-night firms: improving liability norms for damages caused by top managers, introducing personal responsibility.

“This means fighting actual consequences of mismanagement instead of formal company attributes which in and as of themselves do not cause third party damages”, —the Taskforce draft underscores. Today liability is not applicable to private individuals. Besides, the norm is easily avoided as it only covers mandatory orders. MIFC Taskforce proposes to make liability evasion through subsidiaries a punishable offence. The Taskforce also considers it necessary to introduce liability between shareholders, to make them accept damages caused by misconduct.

The notion of affiliation should also be amended to include private individuals – spouses, parents, children, brothers and sisters, adopted and adoptees, grandparents and grandchildren of company managers – as well as companies, according to Taskforce experts.

The public/non-public division of companies should also be amended. This is now determined by the shares being listed or not. Taskforce experts say that norms for public companies should only apply to those with over 50 shareholders. “These companies were formed during state entities privatization. There is a large number of shareholders and the shares are in circulation – though not traded publicly – giving such companies a de facto public status”, says the Taskforce draft. Other companies should be given freer reign of company matters (by unanimous shareholder vote).

“We propose liberalizing private companies with a limited amount of shareholders — and tightening control over public companies and entities with a large number of shareholders”, says Taskforce member and Prosperity Capital Management Director Alexander Branis.

MIFC Taskforce hopes that their drafts will be incorporated in the Civil Code amendments prior to submission to the State Duma, otherwise the debated issues will be finalized by the second reading.

Olga Tanas

http://www.gazeta.ru/financial/2011/05/31/3634341.shtml

Project Group №2Alexander BranisAlexander Voloshin