Guide to the Russian Law on Joint Stock Companies

by Black, Bernard S.; Kraakman, Reinier; Tarassova, Anna S.

• ISBN13: 9789041106063
• ISBN10: 9041106065
• Format: Hardcover
• Copyright: 1998-05-01
• Publisher: Kluwer Law Intl

Summary

The Russian Law on Joint Stock Companies, together with the Civil Code, Is the principal law regulating the activities of joint stock companies in Russia today. Author Anna Tarassova was its primary Russian drafter; authors Black and Kraakman served as advisors during the drafting process. Guide To The Russian Law on Joint Stock Companies is their definitive examination and analysis of Russian Company Law. The authors have bolstered their own expert, first-hand perspective with the advice and guidance of practicing attorneys who work with this law on a daily basis. Their treatment includes numerous practical components that provide invaluable assistance to practitioners: detailed explanations of Company Law provisions, including the interplay between various sections, and between the Company Law And The Civil Code; discussion of ambiguous provisions of the law and how best to interpret these provisions; practical solutions to troublesome features of the law; table of differences between the treatment of open and closed joint stock companies; step-by-step guide to implementing different forms of reorganizations; and how-to guide for corporate planners on creating a company with only the minimum charter capital permitted by the law.

Table of Contents

PREFACE	1	(8)
Technical Notes	5	(4)
INTRODUCTION	9	(5)
Legal Precursors to the Company Law	9	(1)
Political History of the Company Law	10	(4)
PART I: A SELF-ENFORCING MODEL OF COMPANY LAW FOR EMERGING MARKETS	14	(84)
CHAPTER 1: OVERVIEW OF THE SELF-ENFORCING MODEL	14	(8)
CHAPTER 2: THE NATIONAL CONTEXTS THAT SHAPE COMPANY LAW	22	(9)
A. Company Law in Developed Economies	22	(1)
B. The Goals of Company Law in Emerging Economies	23	(4)
C. Legal and Market Controls in Emerging Economies	27	(2)
D. Cultural Norms for Manager and Large Shareholder Behavior	29	(2)
CHAPTER 3: ALTERNATIVE APPROACHES TO COMPANY LAW	31	(15)
A. The Prohibitive Model	31	(2)
B. The Self-Enforcing Model	33	(6)
1. Structural Constraints	34	(2)
2. Simple, Bright-Line Rules and Strong Remedies	36	(3)
C. The Limits to the Self-Enforcement Approach	39	(3)
D. Can Law Function Without Official Enforcement?	42	(4)
CHAPTER 4: GOVERNANCE STRUCTURE AND VOTING RULES	46	(13)
A. Allocation of Decisionmaking Power	46	(2)
B. Allocation of Voting Power: One Common Share, One Vote	48	(2)
C. Voting for Directors: Cumulative Voting	50	(4)
D. Voting Procedures: Universal Ballot	54	(1)
E. Ensuring Honest Voting	55	(1)
F. Providing Information to Shareholders	56	(1)
G. Fiduciary Obligations of Directors and Officers	57	(2)
CHAPTER 5: STRUCTURAL CONSTRAINTS ON PARTICULAR COMPANY ACTIONS	59	(26)
A. Reorganizations and Major Transactions	59	(7)
1. Shareholder Approval	60	(3)
2. Redemption Rights	63	(2)
3. Determining Market Value	65	(1)
B. Conflict-of-Interest Transactions	66	(3)
C. Control Transactions	69	(5)
D. Issuance and Repurchase of Shares	74	(6)
1. Share Issuances	74	(1)
2. Preemptive and Participation Rights	75	(3)
3. Repurchase of Shares	78	(2)
E. Protecting Creditors and Preferred Shareholders	80	(3)
F. The State as Part-Owner	83	(2)
CHAPTER 6: REMEDIES	85	(4)
CONCLUSION: SELF-ENFORCING LAW IN EMERGING ECONOMIES	89	(3)
APPENDIX TO PART I: SURVEY OF COMPANY LAW IN EMERGING MARKETS	92	(6)
PART II: CHAPTER-BY-CHAPTER ANALYSIS OF THE LAW	98
Concept of a Joint Stock Company under the Civil Code	98	(1)
General Scope of the Company Law	99	(1)
CHAPTER 1: GENERAL PROVISIONS OF THE LAW	100	(31)
Scope of the Company Law (Article 1)	100	(5)
Meaning of the Terms "Laws," "Legal Acts," and "Other Legal Acts"	103	(2)
Legal Status of a Joint Stock Company (Article 2)	105	(1)
Liability of a Company, Its Investors and Controlling Persons (Article 3)	106	(2)
Company's Name and Location (Article 4)	108	(1)
Branches and Representations (Article 5)	109	(2)
Subsidiary and Dependent Companies, Liability of Principal Economic Society (Article 6)	111	(11)
When is a Company a "Subsidiary"?	112	(3)
When is a Principal Economic Society (Partnership) Liable for a Subsidiary's Obligations?	115	(4)
Dependent Companies	119	(3)
Open and Closed Companies (Article 7)	122	(9)
Differences Between Open and Closed Companies	124	(2)
Regulation of Open Companies	126	(1)
Regulation of Closed Companies	127	(4)
CHAPTER 2: CREATION, REORGANIZATION, AND LIQUIDATION OF A COMPANY	131	(75)
Creation of a Company (Article 8)	131	(1)
Foundation of a Company (Article 9)	132	(7)
Companies with a Single Founder or Shareholder	133	(3)
Companies with Multiple Founders: Contract on the Company's Creation and Founding Meeting	136	(2)
Issuance of Shares; Manner and Timing of Payment	138	(1)
Founders of a Company (Article 10)	139	(5)
Charter of a Company (Article 11)	144	(14)
Other Items that Must be Included in a Company's Charter	148	(7)
Limits on Ownership of Shares and Voting Rights	155	(3)
Changes and Additions to a Company's Charter (Article 12)	158	(5)
State Registration of a Company (Article 13)	163	(2)
Consequences of Defective Registration	164	(1)
State Registration of Changes and Additions to a Company's Charter and a New Version of a Company's Charter (Article 14)	165	(1)
Reorganization of a Company (Article 15)	166	(8)
Voting and Redemption Rights During a Reorganization	169	(1)
Protection of Creditors During a Reorganization	170	(4)
Merger of Companies (Article 16)	174	(5)
Accession of a Company (Article 17)	179	(6)
Division of a Company (Article 18)	185	(4)
Separation of a Company (Article 19)	189	(5)
Transformation of a Company (Article 20)	194	(3)
Voluntary Liquidation of a Company (Article 21)	197	(3)
Procedure for Paying Creditors During Liquidation (Article 22)	200	(4)
Distribution of Liquidating Company's Property Among Shareholders (Article 23)	204	(1)
Completion of a Company's Liquidation (Article 24)	205	(1)
CHAPTER 3: CHARTER CAPITAL; SHARES AND OTHER SECURITIES	206	(51)
The Concept of Charter Capital	206	(6)
The Weakness of Charter Capital as a Regulatory Tool	207	(5)
Charter Capital and Categories (Types) of Shares (Article 25)	212	(6)
Registered or Bearer Shares	214	(4)
Minimum Charter Capital (Article 26)	218	(1)
Issued and Announced Shares (Article 27)	219	(5)
Increase in a Company's Charter Capital (Article 28)	224	(4)
Issuance of Shares to Cover Losses	227	(1)
Decrease in a Company's Charter Capital (Article 29)	228	(2)
Consequences of a Decrease in Charter Capital (Article 30)	230	(1)
Rights of Common Shareholders (Article 31)	231	(2)
Rights of Preferred Shareholders (Article 32)	233	(9)
Voting Rights and the One Common Share, One Vote Principle	233	(3)
Voting Rights on Particular Company Actions	236	(2)
Voting Rights if Dividends Are Not Fully Paid	238	(1)
Dividend, Liquidation and Conversion Rights	239	(3)
Issuance of Bonds and Other Securities (Article 33)	242	(7)
Limits on the Amount of a Company's Bonds	245	(4)
Payment for a Company's Shares and Other Securities (Article 34)	249	(5)
Reserve and Other Funds; Minimum Net Assets (Article 35)	254	(3)
CHAPTER 4: ISSUANCE OF SHARES AND OTHER SECURITIES	257	(15)
Protection Against Below-Market Issuances	257	(1)
Regulation of Convertible Securities and Options	258	(2)
Issuance Price for a Company's Shares (Article 36)	260	(4)
Procedure for Converting a Company's Securities into Shares (Article 37)	264	(1)
Issuance Price for Convertible Securities (Article 38)	265	(1)
Manner of Issuance of Shares and Convertible Securities (Article 39)	266	(1)
Preemptive Rights During Issuance of Shares and Convertible Securities (Article 40)	267	(4)
Procedure for Exercising Preemptive Rights (Article 41)	271	(1)
CHAPTER 5: DIVIDENDS	272	(13)
Avoiding the Limitation of Dividends to the Current Year's Net Profits	274	(3)
The Meaning of the Concept of a "Dividend"	277	(1)
Procedure for Paying Dividends (Article 42)	278	(3)
Solvency-Based Limits on Dividend Payments (Article 43)	281	(2)
Need for "Fraudulent Conveyance" Rules	283	(2)
CHAPTER 6: SHAREHOLDER REGISTER	285	(9)
Shareholder Register (Article 44)	286	(3)
Entering Notations in a Company's Shareholder Register (Article 45)	289	(2)
Extract from a Company's Shareholder Register (Article 46)	291	(3)
CHAPTER 7: THE SHAREHOLDER MEETING	294	(69)
Shareholder Meeting (Article 47)	294	(3)
Competence of a Shareholder Meeting (Article 48)	297	(15)
Limits on the Competence of a Shareholder Meeting	309	(3)
Decisions by a Shareholder Meeting (Article 49)	312	(10)
Remedies for Violation of Shareholder Rights	318	(4)
Shareholder Decisions Adopted Through External Voting (Article 50)	322	(3)
Right to Participate in a Shareholder Meeting (Article 51)	325	(2)
Information about the Holding of a Shareholder Meeting (Article 52)	327	(5)
Proposals for the Agenda of a Shareholder Meeting (Article 53)	332	(6)
Preparation for Holding a Shareholder Meeting (Article 54)	338	(1)
Extraordinary Shareholder Meeting (Article 55)	338	(7)
Tabulation Commission (Article 56)	345	(3)
Shareholder Participation in Shareholder Meeting (Article 57)	348	(1)
Quorum of a Shareholder Meeting (Article 58)	349	(2)
Voting at a Shareholder Meeting: One Share, One Vote (Article 59)	351	(1)
Voting Ballot (Article 60)	352	(4)
Secret Voting	355	(1)
Counting Votes During Voting Effectuated with Voting Ballots (Article 61)	356	(1)
Record of Voting Results (Article 62)	357	(3)
Record of a Shareholder Meeting (Article 63)	360	(3)
CHAPTER 8: BOARD OF DIRECTORS AND EXECUTIVE ORGAN	363	(41)
Board of Directors of a Company (Article 64)	365	(4)
Competence of the Board of Directors (Article 65)	369	(14)
Division of Authority Between Board of Directors and Executive Organ	369	(4)
Issues Within the Exclusive Competence of the Board of Directors	373	(10)
Election of the Board of Directors and Cumulative Voting (Article 66)	383	(6)
Cumulative Voting	388	(1)
Chairman of the Board of Directors (Article 67)	389	(1)
Meetings of the Board of Directors (Article 68)	390	(4)
Remedies for Improper Decisions by the Board of Directors or the Executive Organ	393	(1)
Executive Organ of a Company (Article 69)	394	(5)
Collegial Executive Organ (Article 70)	399	(1)
Liability of Members of the Board of Directors, the Person Exercising the Powers of the Individual Executive Organ, the Members of the Collegial Executive Organ, the Managing Organization or Manager (Article 71)	399	(5)
The Duties of Loyalty and Care	400	(2)
Persons Liable; Amount of Liability; Shareholder Right to Sue	402	(2)
CHAPTER 9: ACQUISITION AND REDEMPTION OF SHARES	404	(18)
Acquisition and Redemption of Bonds and Other Securities (Other than Shares)	404	(1)
Company's Repurchase of Its Shares (Article 72)	405	(4)
Solvency-Based Limits on a Company's Acquisition of Shares (Article 73)	409	(2)
Consolidation and Splitting of a Company's Shares (Article 74)	411	(1)
Company's Redemption of Shares on Demand by Shareholders (Article 75)	412	(2)
Procedure for Exercising Redemption Rights (Article 76)	414	(2)
Determining the Market Value of Property (Article 77)	416	(6)
CHAPTER 10: MAJOR TRANSACTIONS AND CONTROL TRANSACTIONS	422	(22)
Large Acquisition or Alienation of Property	422	(4)
Large Issuance of Shares	426	(1)
Definition of a Major Transaction (Article 78)	427	(5)
Definition of Large Acquisition or Alienation of Property	427	(4)
Definition of Large Issuance of Shares	431	(1)
Approval Requirements for Major Transactions (Article 79)	432	(3)
Approval of Large Acquisition or Alienation of Property	432	(2)
Approval of Large Issuance of Shares	434	(1)
Protection of Third Parties and Creditors During a Completion of a Major Transaction	435	(1)
Control Transactions (Article 80)	436	(8)
CHAPTER 11: TRANSACTIONS INVOLVING A CONFLICT OF INTEREST	444	(19)
Interest in a Company's Completion of a Transaction (Article 81)	446	(3)
Information About an Interest in a Company's Completion of a Transaction (Article 82)	449	(2)
Procedure for Concluding an Interested Transaction (Article 83)	451	(9)
Consequences of Noncompliance with Conflict-of-Interest Rules (Article 84)	460	(3)
CHAPTER 12: CONTROL OVER A COMPANY'S FINANCIAL-ECONOMIC ACTIVITY	463	(11)
Inspection Commission (Inspector) (Article 85)	465	(5)
Auditor (Article 86)	470	(3)
Conclusions of the Inspection Commission or Auditor (Article 87)	473	(1)
CHAPTER 13: FINANCIAL ACCOUNTS AND INFORMATION DISCLOSURE	474	(15)
Bookkeeping Accounts and Financial Reporting (Article 88)	474	(3)
Safekeeping of a Company's Documents (Article 89)	477	(1)
Disclosure of Information by a Company (Article 90)	478	(1)
Disclosure of Information to Shareholders (Article 91)	478	(2)
Mandatory Publication of Information by a Company (Article 92)	480	(4)
Information About a Company's Affiliated Persons (Article 93)	484	(5)
CHAPTER 14: FINAL PROVISIONS	489
APPENDIX I: MODEL COMPANY LAW	I-1
APPENDIX II: MODEL CHARTER	II-1
APPENDIX III: LAW ON JOINT STOCK COMPANIES	III-1
Translators' Endnotes	III-78
APPENDIX IV: CIVIL CODE OF THE RF (EXCERPTS)	IV-1
APPENDIX V: SUPREME COURT/SUPREME ARBITRAGE COURT RESOLUTION NO. 4/8	V-1
SUBJECT INDEX	VI-1	(26)
INDEX: REFERENCES TO THE CIVIL CODE	VI-27	(4)
INDEX: REFERENCES TO THE RUSSIAN COMPANY LAW	VI-31	(9)
INDEX: REFERENCES TO THE MODEL COMPANY LAW	VI-40