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Covid-19: timeframes for disclosing consolidated financial statements in 2020; Internal auditing and the public regime of a public joint-stock company

06.04.2020
10 min read
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Pepeliaev Group advises that amendments are pending adoption to a number of legal provisions regulating individual aspects of the activities of a public joint-stock company, and the procedure and timeframes for submitting and disclosing consolidated financial statements against the backdrop of the COVID-19 pandemic

On 1 April 2020, the Russian State Duma adopted the Federal Law “On amending individual items of Russian legislation with respect to the unification of the contents of annual reports of state corporations (companies) and public companies, and with respect to establishing the specifics of the regulation of corporate relationships in 2020, and on suspending the effect of the provisions of individual items of Russian legislation” (the “Law”). At the moment the Law is under consideration by the Federation Council, and it is expected that the upper chamber of parliament will adopt the Law and the President will sign it in the near future[1].

1. Aspects of the functioning of the board of directors and the organisation of internal auditing in a public joint-stock company

The Law introduces a regulation extending the timeframes for the following provisions of the Law on joint-stock companies to enter into force (the entry into force of these provisions has been postponed from 1 July 2020 to 1 January 2021):

  • provisions that the board of directors (supervisory board) of a public joint-stock company has to establish an audit committee for the purposes of: (1) overseeing the financial and business activities of the public joint-stock company; (2) checking whether the auditor of the public joint-stock company is acting independently and whether such auditor has a conflict of interests; (3) assessing the quality of the audit carried out in relation to the accounting (financial) statements of the public joint-stock company[2];
  • provisions laying down the following: (1) the obligation of a public joint-stock company to carry out internal auditing; (2) the requirement that the board of directors (the supervisory board) of a public joint-stock company should approve internal documents determining the policies of the public joint-stock company in the area of organising and conducting internal auditing; (3) the procedure for appointing a person responsible for the organisation and conducting of the internal auditing of a public joint-stock company; and (4) other issues relating to the organisation and conducting of such auditing in a public joint-stock company[3].

Therefore, the obligations of a public joint-stock company to implement the above requirements enter into force starting from 1 January 2021.

2. Extending the timeframes for a joint-stock company to decide on its public regime

In accordance with the requirements of legislation in effect[4], if, as at 1 July 2015, the articles of association and the name of a joint-stock company established before 1 September 2014 contained a reference that such joint-stock company is public (i.e. its corporate name contained the abbreviation PJSC (‘PAO’ in Russian)) but did not feature any of the signs provided for by legislation that the company has public status[5], then, prior to 1 July 2020, such joint-stock companies should have chosen their regime of activities (public or non-public).

For instance, if a joint-stock company wishes to pursue its activities as a non-public joint-stock company, it should amend its articles of association to eliminate any reference to the public status of the company from its corporate name. If, conversely, a joint-stock company intends to become public, it should, prior to the date mentioned above, file a petition with the Bank of Russia for the share prospectus of such joint-stock company to be registered.

The provisions of the new Law extend from 1 July 2020 to 1 January 2021 the timeframes for a joint-stock company, which meets the above criteria, to carry out the statutory actions to confirm its public status or to reject it[6].

Thus, the relevant companies are granted an additional six-month period to decide whether they confirm the public regime of their activities or reject it and maintain their non-public regime.

3. Extending the timeframes for submitting and disclosing consolidated financial statements

The Law sets out[7] new (extended) timeframes for consolidated financial statements (both annual and interim) to be submitted and disclosed in 2020 by companies which, in compliance with Russian legislation, are obliged to draw up and disclose such statements[8].

According to the new rules:

In 2020, annual financial statements should be submitted no later than 180 days after the end of the reporting year for which the relevant statements have been prepared*.

* according to the current legal requirements, such statements should be submitted no later than 120 days after the end of the reporting year for which the relevant statements have been prepared[9]

In 2020, interim financial statements should be submitted no later than 150 days after the end of the reporting period for which the relevant statements have been prepared*.

* according to the current legal requirements, such statements should be submitted no later than 60 days after the end of the reporting period for which the relevant statements have been prepared[10]

- An entity should disclose its consolidated financial statements no later than 30 days after the deadline has expired for such statements to be submitted in compliance with the new timeframes set out above for submitting such statements.

- Issuers who are obliged to disclose their consolidated financial statements in compliance with legislation on the securities market[11] should disclose the following, according to the new rules:

  • the issuer's annual consolidated financial statements or its annual financial statements for the year 2019, together with an auditor's report regarding these statements, within three days following the date of the auditor’s report but no later than 210 days after the end of the reporting year*;

* according to the rules in effect, such annual statements should be disclosed within three days following the date of the auditor’s report but no later than 120 days after the end of the relevant reporting year[12]

  • the interim consolidated financial statements or the interim financial statements of the issuer for six months of the year 2020, together with an auditor’s report or another document drawn up further to the audit of such statements carried out in accordance with the relevant auditing standards with regard to such statements, within three days following the date of the above auditor's report or other document but no later than 180 days after the end of the reporting period for which such statements have been prepared*.

* according to the rules in effect, such interim statements should be disclosed within three days following the date of the above auditor’s report or other document but no later than 60 days after the end of the reporting period for which such statements have been prepared[13]

As longer timeframes have been established for entities to submit and draw up consolidated financial statements, the Law suspends, up to 31 December 2020, the effect of the provisions of Russian legislation[14] which provide for longer timeframes for submitting and disclosing the relevant statements and which are currently in effect.

4. Timeframes for disclosure by financial institutions

Please be advised that the Board of Directors of the Bank of Russia may pass a resolution in 2020 establishing other timeframes for the disclosure of information and the submission of statements in relation to credit and non-credit financial institutions.

According to the provisions of the new Law[15], in 2020 the Bank of Russia may establish for credit and non-credit financial institutions:

  • the timeframes for disclosing the relevant information in the form of the issuer’s report, the issuer’s accounting (financial) statements, and lists of affiliates;
  • the timeframes (and the procedure) for drawing up and submitting the statements;
  • the timeframes for drawing up and submitting other information provided for by federal laws

exceeding the timeframes for disclosing, drawing up and submitting the relevant statements and information set out in the regulations of the Bank of Russia. These decisions of the Board of Directors of the Bank of Russia are published, on a mandatory basis and in official outlets, under the procedure stipulated by the Federal Law “On the Central Bank of the Russian Federation (Bank of Russia)” within 10 days after such decisions have been passed. These rules have been introduced by virtue of the new Law and further to the measures previously announced by the Bank of Russia to support credit institutions for the period of the COVID-19 pandemic.

What to think about and what to do

Under the current circumstances, entities registered as public joint-stock companies are advised to rely on the longer timeframes established by the Law in relation to the actions envisaged by it, while pursuing business activities, planning business processes and transactions, and carrying out corporate procedures. If the internal documents, regulations or local policies of an entity provide for specific timeframes for preparing and disclosing consolidated financial statements, establishing a system of internal audit, etc., and if such timeframes were determined in accordance with the rules regarding the timeframes which are currently in effect (i.e. until the Law enters into force), it is recommended that these documents be amended taking into account the longer timeframes.

Help from your adviser

Pepeliaev Group's lawyers are keeping track of changes in corporate legislation and are ready to provide legal support with respect to corporate procedures in public joint stock companies and other organisations, as well as to comment on contentious matters connected with applying the new items of legislation. Among other things, we will reach out to the Bank of Russia and other state authorities for official clarifications on issues stemming from the performance of regulatory acts regarding corporate relationships.


[1] The provisions of the Law will come into force on the date of its official publication.

[2] Article 64(3)(2) of Federal Law No. 208-FZ “On Joint-Stock Companies” dated 26 December 1995; article 2(3) of Federal Law No. 209-FZ “On amending the Federal Law ‘On Joint-Stock Companies’”

[3] Article 87.1(2) of Federal Law No. 208-FZ “On Joint-Stock Companies” dated 26 December 1995; article 2(3) of Federal Law No. 209-FZ “On amending the Federal Law ‘On Joint-Stock Companies’”

[4] Article 27(7) of Federal Law No. 210-FZ “On amending individual items of the legislation of the Russian Federation and repealing individual items of the legislation of the Russian Federation” dated 29 June 2015

[5] According to article 66.3(1) of the Russian Civil Code No. 51-FZ dated 30 November 1994, a public joint-stock company is a joint-stock company whose shares and securities (converted into the shares of such company) are publicly listed (via an open subscription) or are publicly traded on the conditions set out by laws on securities

[6] Article 7 of the Law

[7] Article 12(7) of the Law

[8] In compliance with article 2 of Federal Law 208-FZ “On consolidated financial statements” dated 27 July 2010, the preparation of consolidated financial statements is mandatory for (without limitation) credit, insurance, and clearing companies; joint-stock companies whose shares are in federal ownership; organisations whose securities are admitted to organised bids by being listed, except for special-purpose vehicles and mortgage agents

[9] Article 4(7) of Federal Law No. 208-FZ “On consolidated financial statements” dated 27 July 2010

[10] Article 4(7) of Federal Law No. 208-FZ “On consolidated financial statements” dated 27 July 2010

[11] Article 30 of Federal Law No. 39-FZ “On the securities market” dated 22 April 1996

[12] Article 30(12) of Federal Law No. 39-FZ “On the securities market” dated 22 April 1996

[13] Article 30(12) of Federal Law No. 39-FZ “On the securities market” dated 22 April 1996

[14] The Law has suspended the effect of article 30(12) of Federal Law No. 39-FZ “On the securities market” dated 22 April 1996, as well as of article 4(7) and article 7(5) of Federal Law No. 208-FZ “On consolidated financial statements” dated 27 July 2010

[15] Article 8 of the Law

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