Corporate legal addresses – new rules

From June 30, 2013, a law[1] will amend provisions of the Civil Code and the Law “On the state registration of legal entities and sole traders” with regard to the company’s legal address.

Pursuant to revised Article 51 of the Civil Code a person in good faith relying on the data from the Unified State Register of Legal Entities (the Register) has the right to consider it corresponding to actual facts. A legal entity must reimburse any loss incurred by other parties to civil transactions due to any inaccurate data on it in the Register.

The data on the legal address of a company is registered by tax authorities and recorded in the Register. According to the amendments legal entities must ensure that the actual company’s address corresponds to the address stated in the Register. The Supreme Commercial Court (SCC) has issued a decree[2] defining the new provisions of the law in order to form a common judicial and arbitration practice.

Pursuant to the SCC official position a legal entity must bear the risk arising from the failure to receive legally significant messages coming to its registered address, as well as the risk resulting from the failure to have its representative at this address. If the company fails to receive the message or there is no representative of the legal entity at the legal address and as a result any person incurs any losses due to the failure to receive the message, these losses must be compensated to the latter. The presumption of accuracy of the data entered into the Register that has been introduced by the lawmaker enables any person to rely on the data from the Register unless proven otherwise.

The amendments make legal entities responsible for the accuracy of the declared legal address. If there is no representative of the legal entity at the legal address and as a result any person incurs any losses due to the failure to receive any message, these losses must be compensated to the latter. The presumption of accuracy of the data entered into the Unified State Register of Legal Entities that has been introduced by the lawmaker enables any person to rely on the data from the register unless proven otherwise.

The new law provides an additional reason to decline the state registration of a legal entity if it has been proven that the declared legal address is not accurate. But, at the same time, the registration authority still cannot oblige the company to prove the submitted data is accurate and ask for additional documents not stipulated in the law, such as letters of guarantee of real estate owners.

These changes are not entirely new; relevant approaches have been developed in the course of judicial practice. But previously judges had no common or firm position, and the practice of disputes involving the registration authority varied seriously.

Moreover, from July 4, 2013, new application forms are used to register Russian companies. As compared to the forms used previously, the new ones require all members of a company to sign the form for the company’s registration. The signatures and powers of the signatories must be still certified by a notary. At the same time the person signing the form cannot act on the basis of a power of attorney issued by a member. A very important feature of the new rules is the possibility to submit documents for the company registration by proxy. Now a proxy may submit documents and obtain a certificate of the state registration[3].

Pursuant to the new position of the SCC of Russia[4] the registration authority may decline the state registration of a company stating that submitted data is not accurate, in the following cases:

• the declared address is a registered address of numerous legal entities, and most of these entities are out of reach;
• the declared address does not exist or the real estate has been destroyed;
• the declared address is a cover address and is assigned to a building under construction;
• the declared address is known to be inappropriate for use as, for example, it is an address of public bodies, and etc.
• the real estate owner forbids to use this address for registration.

In any of the above cases the data is considered inaccurate unless the company proves otherwise. But the above list is not exhaustive.

Pursuant to the chosen arbitration practice the SCC of Russia points out that the registration authority has no right to a decline of registration justified by any obvious mismatch between the declared activity of the company and its location address, for example, when a concrete making plant is registered in an office centre. The court indicates that the declared address may accommodate the company’s management body or representative. However, to register a company in residential real estate, a consent of the real estate owner is required.

Due to different positions that existed previously, the SCC of Russia announces that the owner of the real estate can apply to court to make the legal entity cease using the owner’s address as its registered address. In this case only the legal entity and not the registration authority would be the defendant. After the court decision the legal entity would be provided with a period of time to change the legal address and the entity would be fined at the end of this period. In accordance with this decision the registration authority cannot amend the entry in the register at its own discretion but must add relevant comments to it. Should the company fail to follow the court decision, it will be possible to liquidate this company if the registration authority requires so.

Consequently, new norms concerning the legal address of a company ensure a stricter state control over the accuracy of the submitted data. A company using a location address that differs from the actual one may be made to pay out losses of any person who incurred them due to this violation. The new rules include also a positive aspect: the judicial practice that has not been unified previously will now be formed in accordance with a single approach.

The change in the procedure for certifying and submitting new forms of application for the state registration, on the one hand, will cause difficulties due to the requirement to have the form signed by each member, but, on the other hand, will make it easier for a proxy to submit documents to the registration authority.