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Corporate Playset

14.07.2011 / Vedomosti / 128 (2894)

Joint-stock companies may soon be free to set their own rules: varied par value for different share issues, unequal voting rights for the Board of Directors, retaining one management body.

The Ministry for Economic Development has circulated among ministries a draft bill introducing different corporate governance procedures for open and closed joint-stock companies. The bill constitutes amendments to the Civil Code, the Joint Stock Companies Act and several other laws. “We will hopefully submit this to the Government by end-Summer”, says Head of Corporate Governance Department at the Ministry for Economic Development Ivan Oskolkov.

The amendments reinforce strict regulation of corporate affairs in public companies, while non-public are allowed almost free reign. Closed Joint Stock Companies will be allowed to differentiate the par value of shares, give bonus rights to shareholders, the Board of Directors will be given substitute rights as the executive body, and the split of voting rights among Directors may be unequal.

Public companies’ corporate procedures will also change. The Boards of Directors will be able to take potestative decisions (like approving a deal on condition that the company receives a loan), elect a collegiate executive body, cancel previous decisions, if they do not affect third party rights (there is currently no court precedent for this).

An open joint-stock company may become closed if all shareholders agree and their number does not exceed 50 (today, there are no such limitations). Listed companies cannot transform into closed companies.

If the amendments are passed, this would mean a revolution in corporate governance, says Dmitry Stepanov of Egorov, Puginsky, Afanasiev & Partners: “A joint-stock company may become more closed than a limited liability company, given the go-ahead from all members”. This is a flexible means for creating joint ventures, which is important for an IFC, he adds: for instance, the difference in par value allows easy redistribution of power and dividend rights.

The Presidential Codification Council has come up with a completely opposite initiative for Civil Code amendments: stricter corporate procedures. The bill is hanging on the adopted general line of Civil Code reform, admits Oskolkov.

 

Dmitry Kazmin

Project Group №2Project Group №2Ivan OskolkovDmitry Stepanov