The new specifics of the regulation of corporate relationships in 2020

Pepeliaev Group advises that the new specifics of regulating corporate relationships in 2020 have been established

On 31 July 2020, Federal Law No. 297-FZ[1] (the “Law”) came into force, which provides for the amendment of 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”[2].

Absentee voting in an LLC

Initially the federal law to which the Law provides for amendments suspended the effect of the provisions of the Law on JSCs[3] restricting the possibility to conduct a general shareholders' meeting in to form of absentee voting on a number of issues (approval of the annual report, annual financial statements, etc.). For more details please read Pepeliaev Group's alert.

Unlike joint stock companies, no such specifics were stipulated for LLCs. This discrepancy has been eliminated by adopting the Law. The Law provides for the suspension until the end of 2020 of the effect of article 38(1) (2) of the Law on LLCs[4].

Therefore, in 2020 a resolution of the general participants' meeting of an LLC concerning the approval of annual reports and annual balance sheets, based on the resolution of the sole executive body, can be adopted by absentee voting.

The extension of the deadline for performing corporate procedures in a JSC

The Law also provides for extending the deadlines for performing certain corporate procedures in joint stock companies.

Until the end of 2020 the Law provides for other deadlines for performing the following actions

• 6 business days (instead of 3 business days) once the general shareholders' meeting is closed (or from the deadline for accepting voting ballots when the meeting is held in the form of an absentee meeting) to prepare the minutes of the voting results;
• 8 business days (instead of 4 business days) once the general shareholders' meeting is closed (or from the deadline for accepting voting ballots when the meeting is held in the form of an absentee meeting) to send a report on the voting results;
• 6 business days (instead of 3 business days) once the general shareholders' meeting is closed to draw up the minutes in two counterparts;
• 6 days (instead of 3 days) once a meeting of the board of directors is held to draw up the minutes of the meeting.

New rules for preparation for a general shareholders' meeting

When preparing for a general shareholders' meeting in 2020 the board of directors must set the date (at least 27 days before the date of the general shareholders' meeting) before which proposals will be accepted from shareholders to add issues to the agenda of the meeting and to propose candidates for the bodies of a joint stock company.

Shareholders which in aggregate own more than 2% of the voting shares are entitled to put forward the above proposals in addition to previously received proposals, and shareholders who have directly sent such proposals are entitled to amend them by sending new proposals, with the previous proposals being deemed revoked.

The above proposals of shareholders must be received by the company at least 27 days before the date of the general shareholders' meeting.

Please note that the rules specified in this section do not apply to general shareholders' meetings about the holding of which communications were made before 31 July 2020.

What to think about and what to do

Taking into account the current circumstances associated with the spread of the coronavirus infection, we recommend using the possibility provided for by the Law and to pass a resolution of the general meeting of an LLC to approve the annual report and the annual accounting balance sheet in the form of absentee voting.

For a JSC we recommend taking into account the specifics established by the Law when holding a general shareholders' meeting.

Help from your adviser

Pepeliaev Group’s experts are promptly monitoring the amendments in corporate legislation and are ready to provide any legal support related to holding general meetings of JSCs and LLCs, and to provide recommendations on how to choose the optimal business solutions for any issues of corporate law.