Change in the legislation concerning joint stock companies: new procedure and timeframes for a company to keep documents

Pepeliaev Group notes that 2 March 2011 saw the publication on the official website of Russia’s Federal Financial Markets Service (the “FFMS”) of the FFMS’s Order “On approving the Regulations on the procedure and timeframes for a joint stock company to keep documents”, which stipulates changes to the list of documents which must be kept and the time periods for which they must be kept.

Regulation of keeping documents

The above draft Order of the FFMS has been developed under the provisions of clause 2, article 89 of Federal Law No. 208-FZ dated 26 December 1995 “On joint stock companies”. These provisions give the FFMS the right to determine the procedure according to which and the time period for which a company must keep documents.
The FFMS’s draft Order is intended to replace Resolution No. 03-33/ps of the Federal Securities Market Commission (the “FSMC”) dated 16 July 2003, which is currently in force.

The bulk of the provisions contained in the FFMS’s draft Order duplicate the existing requirements for keeping documents contained in the FSMC’s Resolution. However, the draft Order also contains a series of new provisions which joint stock companies will have to take account once the Order comes into force.

Changes to the list of documents which must be kept

In connection with the recent changes in the law, the list of documents which there is a compulsory requirement to keep has been extended. In particular, joint stock companies are now obliged to keep notifications of shareholder agreements and lists of the persons who have concluded such agreements. Further, judicial acts on disputes connected with the company’s formation, its management or membership must also be kept. These documents must be kept for at least 3 years.

Moreover, it is proposed to introduce a separate obligation to keep not only annual, quarterly and monthly financial reports but also consolidated half-yearly reports (for no less than five years).

Changes to the procedure and time periods for keeping documents

The timeframes for keeping specific types of document have been amended. The time period for which ballot papers for voting at the general shareholders meeting and powers of attorney for participating in the meeting has been shortened to five years, as has that for an issuer’s quarterly reports. Moreover, it is specifically stipulated that a company must keep communications on material facts for no less than three years.

The draft Order also establishes that the procedure and time periods for keeping documents which confirm the right to a company’s property shall be determined in accordance with the recently adopted List of Model Management Documents Generated in the Course of the Activity of State Authorities, Local Authorities and Organisations. This was approved by Order No. 558 of the Russian Ministry of Culture dated 25 August 2010. The List previously in force was that approved by the Russian Federal Archive Service on 6 October 2000. Now no longer in force, it contained similar provisions.

Conclusions and recommendations

Please remember that, under article 13.25 of the Russian Сode of Administrative Offences, breaches relating to keeping a company’s documents are punishable by an administrative fine of up to RUB 300,000 on a legal entity and of up to RUB 10,000 on individual officers.

In connection with this, we recommend that organisations and their single-member executive bodies:

- check whether the current procedure for keeping documents in the company complies with the requirements of the legislation;

- ensure that they receive or restore documents which need to be kept but which the company does not have;

- if necessary, designate a specific person duly authorised to answer for the keeping of documents.

For further information, please contact:

in Moscow – Nikolai Solodovnikov, Head of Corporate Practice, at: (495) 967-0007 or by n.solodovnikov@pgplaw.ru

in St Petersburg - Andrey Pekhovsky, Head of Corporate Practice (St. Petersburg), at (812) 640-60-10 or by a.pekhovsky@pgplaw.ru; Olesya Shestakova, Attorney, at (812) 640-60-10 or by o.shestakova@pgplaw.ru