This time of the year all Russian companies should hold annual shareholders meetings. Even when a formal meeting is not held it is important to make proper records and documentation of all shareholders’ decisions. Unfortunately, corporations frequently fail to pay enough attention to these issues which leads to unnecessary risks and omissions pertinent to internal control, legal relations with business partners and Russian official requirements (e.g. taxation, labor and corporate laws).

In our Russian legal practice we have very often come across situations where companies have suffered from failing to formally document corporate decisions by producing minutes of shareholders’ meetings, board meetings, company policies, and authorizations. Another requirement that is often omitted by companies is the need to properly register shares.

In this connection we want to draw your attention to the actions necessary to document the annual meeting of shareholders properly.

Annual meeting of shareholders/participants

The laws on Joint-Stock Companies (JSC) and Limited Liabilities Companies (LLC) provide for the obligation to conduct annual meeting of shareholders (meeting), and set time-limits and minimum requirements for the agenda thereof.

The meeting of a JSC (AO in Russia) has to be held between the 1st of March and the 30th of June. The meeting of an LLC (OOO in Russia) has to be held between the 1st of March and the 30th of April.

The obligatory issues to be resolved during the meeting are the approval of the annual results of the company’s activity and other matters stipulated in the Law on JSC’s or in the Law on LLC’s. In addition, the company charter may contain other issues that have to be addressed during the meeting. Usually, such issues as election of the Board/General Director, profit distribution and appointment of the auditor are also resolved during the annual meetings.

It is very important to make the proper documentation of all the procedures related to the organization of the meeting. Please note that proper documentation has to be done when:

  1. calling the Board meeting to convene the meeting;
  2. preparing additional information for the meeting participants;
  3. calling the meeting;
  4. conducting the meeting.

It is also important that companies with no outside shareholders (100% subsidiaries) also hold such a meeting. The requirements are set out by law.

Please note that now the signature of shareholders on decisions/minutes must, in a number of cases, be certified by a notary or the company maintaining the register of shareholders (registrar). We therefore recommend not postponing the annual general meeting so that there is sufficient time to visit a notary or registrar to sign the decisions/minutes by the deadlines prescribed by law.

In case of violations when calling, preparing and conducting the meeting, a JSC or LLC could be held administratively liable under Article 15.23.1 of the Code of Administrative Offenses (CAO). Administrative liability under Article 15.23.1 of the CAO can also arise when the meeting is not conducted or when there is no proper documentation available. The company itself and its officers (for example, the general director, members of the Board of Directors, etc.) are directly responsible for such violations and can be held liable. In such case, an administrative fine of up to RUB 700,000 (around EUR 10,200 as of March 1, 2015) will be imposed on companies and up to RUB 30,000 (EUR 436 as of March 1, 2015) on company officers. Instead of being fined, company officers can be dismissed (i.e., denied the right to keep their position) for a period of up to one year.

Our Services

We are pleased to offer our services in complying with these requirements and in drafting the proper documentation.
If you have any questions or need additional information, please contact our office. We look forward to the opportunity to cooperate with you further.

By: Givi Enukidze