The Law On Limited Liability Companies allows for situations where a shareholder’s share may be transferred to the company for one reason or another, and the shareholder ceases to hold a share in the company. In such a case, the company must pay the shareholder the actual value of the shareholder’s share. For example, this situation arises in the following cases[1]:

• if a shareholder is permitted to withdraw from the company (as is expressly provided for in the company’s charter), and the shareholder has applied for withdraw;
• if a shareholder requires the company to acquire the shareholder’s share, provided that the company’s charter prohibits a shareholder from withdrawing from the company and from selling his share to a third party, and the other shareholders have refused to purchase the shareholder’s share;
• if the company’s charter provides that the heirs of a shareholder may not become shareholders of the company, or other shareholders’ consent is required to do so, and such consent has not been given; or
• if, at the request of creditors, the share, or a portion thereof, owned by a shareholder of the company becomes the subject of execution proceedings.

The actual value of the share corresponds to a portion of the value of the company’s net assets that is proportional to the size of the shareholder’s share. The value of the company’s net assets is calculated on the basis of the company’s financial statements. For this reason, the actual value of a share may differ from its market value. Often it may be lower.

There have been previously court disputes  in which the plaintiffs have attempted to bring the actual value of a share closer to its market value. The courts in a number of cases have argued that the market value of real estate, rather than its accounting residual value[2], should be used to calculate the value of the company’s net assets and the actual value of a share.

At the end of March 2025, a draft law was submitted to the Russian State Duma, according to which the actual value of a share is to be determined and paid at its market value, if the person, to whom the actual value of a share, or a portion thereof[3] is to be paid, so declares. An appraiser will be engaged to determine the market value of a share. At the same time, the draft law states that if the person, to whom the actual value is to be paid, requests that the market value of a share be paid, it will not be permitted to use any value, except the market value.

These changes could result in significant risks to joint ventures if a shareholder withdraws, as the market value of a share may be much higher than its actual value, which could create significant risks to the very existence of the company.

We recommend reviewing your company’s charter to determine whether it prohibits a shareholder from withdrawing from the company and making other changes to the charter that will protect your company’s activities if a shareholder decides to withdraw.

We will be happy to draft amendments to your company’s charter for you that will meet your needs and minimize the risks associated with the withdrawal of shareholders.

Do you have any questions or would like to discuss something? Please send an email to Anton Kabakov or Alexandra Yudina.

[1] Article 23 of Federal Law No. 14-FZ dated February 8, 1998 On Limited Liability Companies.

[2]Resolution No. 15787/04 of the Presidium of the Russian Supreme State Commercial Court dated June 7, 2005 in Case No. А53-15243/02-С4-11, Resolution No. 5261/05 of the Presidium of the Russian Supreme State Commercial Court dated September 6, 2005 in Case No. А50-10328/2004-Г25, Resolution No. 16191/11 of the Presidium of the Russian Supreme State Commercial Court dated April 17, 2012 in Case No. А40-18600/05-134-138, and Ruling No. ВАС-5228/13 of the Russian Supreme State Commercial Court dated May 6, 2013 in Case No. А54-329/2010.

[3] Draft Federal Law No. 876952-8 On the Introduction of Amendments to the Federal Law ‘On Limited Liability Companies’.

 

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Forte Tax & Law would like to remind you of the importance of holding an annual meeting of shareholders (members) of your company and of drawing up minutes of the meeting. This year, meetings are to be held in accordance with the updated rules, which requires more attention to avoid mistakes.

LLCs must hold an annual meeting by April 30, 2025, and JSCs must do so by June 30, 2025. Failure to hold a meeting or to meet the deadline could potentially result in substantial fines.

The mandatory matters to be decided at the annual meeting are:

• the approval of the balance sheet and the statement of financial performance;
• the approval of a company annual report.

Depending on the structure of your company’s management bodies and the provisions of the charter, the annual meeting must also adopt resolutions, in particular, on the formation of the board of directors and on any other matters, for example, on the distribution of dividends, approval of transactions, conduct of an audit, etc. The notice of the meeting must contain all matters proposed for discussion at the general meeting of shareholders (members), along with the relevant documents.

If your company’s charter (relevant for LLCs and non-public JSCs) has not been amended to allow annual meetings to be held fully in absentia, these meetings must be held in person—i.e., in the joint presence of shareholders (members) or in person/absentia (when some participants are present in person while others are in absentia). Where shareholders (members) are to be represented by proxies in a meeting, it is essential that these proxies must be issued with powers of attorney that can prove their authority. Powers of attorney issued in foreign countries must be apostilled or legalized and accompanied by a Russian translation.

In addition to the in-person format, an annual meeting can also be held remotely.

All the results of the meeting must be recorded in minutes signed as required by the charter. Please note that if the meeting elects an executive body, such a resolution must be notarized, irrespective of the provisions of the charter.

We would be pleased to assist you with holding meetings and drawing up all necessary documents as prescribed by the new rules.

If you have any questions or you would like to discuss something, please send an email to Julia Talagaeva or Alexandra Yudina.

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On January 21 and 29, 2025, the Russian State Duma passed in the first reading draft laws clarifying the rules for exercising a preemptive right to purchase an interest in a limited liability company (the “Draft Laws”) .

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From March 1 to April 30, 2025, members of limited liability companies must approve the annual results for 2024 at a general meeting, with participants required to attend in person or through authorized representatives. While remote voting for annual meetings has been allowed in recent years, this practice will be limited starting March 1, 2025. Instead, companies will be able to hold hybrid meetings, where both in-person and remote participation is allowed, provided the company’s charter or unanimous participant decision allows it. It is recommended to amend the charter in advance if necessary and ensure the company has an internal document outlining the procedure for remote voting.

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Article by Artem Eretenko for the Clerk Magazine

Federal Laws Nos. 287-FZ and 305-FZ[1] introduced several key changes in corporate laws, some of which took effect as early as September 1, 2024. The changes, among other things, have affected the mandatory notarization of corporate resolutions adopted by an LLC on the appointment of a permanent executive body, the holding of remote meetings, and the redistribution of powers between the management bodies in an LLC and a non-public JSC. Since the legislative changes are aimed at improving corporate governance mechanisms, it is necessary to pay special attention to correct paperwork in order to avoid corporate conflicts and difficulties that may arise with the registration authority. However, the new rules will inevitably raise new questions relating to the preparation of corporate documents, and we will try to come up with answers to those questions below.

To what situations do the new rules for executing resolutions on the appointment of the CEO of an LLC apply?

Important changes in the procedure for appointing the CEO of an LLC took effect on September 1, 2024. From now on a resolution on the election or appointment of the CEO of a company requires mandatory notarization[2]. These rules will apply regardless of who adopts a resolution—whether the general meeting of members or the board of directors—and of the form in which a resolution on the appointment of the CEO is adopted. Notarization of resolutions on the appointment of the CEO of an LLC is required even if the company’s articles of association do not require notarization of the adoption of a resolution. The requirements for notarization apply only to the appointment of the CEO—i.e., an individual. These rules will not apply to appointing a collegial executive body or transferring powers to a manager. In practice, this may raise several questions about how the new rules for executing resolutions on the appointment of the CEO of an LLC will apply to various situations.

1. Notarization of a resolution on the appointment of the CEO. First of all, the question remains whether resolutions on the appointment of the CEO upon the formation of an LLC should be notarized, and whether this implies mandatory notarization of any resolutions on the formation of an LLC. On the one hand, applicable laws formally require this, without making exceptions for a resolution on the formation of a company. On the other hand, notaries do not currently require notarization of a resolution on the formation of an LLC, at the time when a resolution on the appointment of the CEO is adopted. One can agree with their approach, because at the time of the adoption of a resolution, a company is not yet considered formed. The notary cannot certify the adoption of such a resolution. This problem also poses a question of whether corporate resolutions can be executed abroad. Notaries, the registration authority, and banks may have questions about a resolution of the general meeting of members that is de facto adopted in the presence of a foreign notary outside Russia. Foreign notaries do not certify the adoption of a resolution, but as a rule, they only certify the authenticity of the signatures affixed by the members to the minutes. Furthermore, the legislation on notaries provides that a certificate[3] is to be issued evidencing the legitimacy of a resolution. Applicable laws do not provide for any alternative methods of certifying resolutions. Therefore, it appears impossible to execute corporate resolutions abroad, including at consulates that do not perform notarial acts to certify corporate resolutions[4].
2. Form of adoption of a resolution on the appointment of the CEO. The notarization requirement applies regardless of form. It should be emphasized that in practice, notarization of the adoption of a resolution at a meeting in the form of absentee voting is not possible, because to perform this notarial act, the notary needs the members to be physically present[5]. However, this does not exclude the possibility of establishing in the future the procedure for notarization of the adoption of a resolution at the meeting in the form of absentee voting.
3. Notarization where the CEO’s powers are extended. In addition, there is another practical question: Will notarization be required to have the CEO’s powers extended? Considering that the extension of powers actually means the re-election of the executive body for a new term, and applicable laws do not recognize the extension of powers as a separate action, the provision on mandatory notarization should also apply to such re-election.
4. Changes in filing applications. In conclusion, as regards the provisions on the election of the CEO, it should be noted that changes have been made to the procedure for filing applications for the state registration of the change of the CEO. While previously, it was the CEO to be appointed that acted as an applicant who would sign an application to be filed with Russian tax authorities, from now on, starting from September 1, 2024, this duty has passed to the notary that acts as an applicant filing documents with Russian tax authorities necessary for the registration of relevant changes in the Unified State Register of Legal Entities (“USRLE”)[6]. It is understood that these changes will help reduce the incidence of illegal appointments in companies, preventing the so-called ‘hostile takeovers’ of companies. However, it remains unclear how to avoid abuse by persons (potential participants/members of management bodies) who may appoint new managers without their knowledge, especially given the fact that starting from September 1, 2024, a new manager is no longer an applicant—i.e., he is not required to visit a notary. In practice, this can create difficulties for persons appointed as CEOs without their consent. These persons will at least need to inform the registration authority that inaccurate data have been entered into the USRLE. Additionally, the risk of emerging so-called ‘abandoned’ companies due to the appointment of nominal directors in them is increasing. As a result, these changes to the procedure for filing applications for state registration are aimed at protecting companies from illegal actions by third parties. However, the new rules raise some questions about the risk of abuse in appointing CEOs without their consent, which requires increased attention to the procedure for appointing such CEOs.

What do you need to know about holding meetings remotely and doing related paperwork?

The changes related to holding general meetings of shareholders (members) remotely will take effect on March 1, 2025. Effectively, these changes will incorporate in the Law On Limited Liability Companies[7] and the Law On Joint-Stock Companies[8] the provisions that have previously existed in the general civil law provisions, but in a more detailed form. As you may remember, now a company may hold a general meeting of members (shareholders) remotely, if that is provided for by law or its articles of association. This option is now available to all companies, regardless of their legal form. Furthermore, LLCs and non-public JSCs have the right to set out in their articles of association their own rules for holding general meetings remotely that may differ from generally accepted statutory rules, provided that those rules do not deprive eligible voters of the opportunity to participate in adopting resolutions and receive information about the meeting[9]. The key adopted provisions governing holding general meetings remotely include:

1. Identification of participants (members) of a body of a legal entity. From now on the articles of association may provide for methods of identification of participants in the bodies of a legal entity and for methods of signing ballots for electronic voting as long as these measures do not impose any restrictions on persons who have a right to vote as regards participation in adopting resolutions and receiving information about meetings to be held. Effective from March 1, 2025, a notice of a meeting must, among other things, include information on the procedure for accessing remote participation, including methods of identification. Effective from September 1, 2027, remote participants may be identified using an enhanced qualified electronic signature (EQES). However, before that date, the articles of association can provide for the use of an enhanced unqualified signature, identification through the Russian Public Services Portal (Gosuslugi) or the Unified Biometric System. Proxies will be required to be identified and present a power of attorney or another document of his authority in electronic form in machine-readable form. The law provides that in case of remote participation in a meeting, the notary will confirm the identity with the use of an EQES with trusted timestamping, and the powers of a proxy and his right to participate in a meeting, through the verification of electronic documents signed with an EQES that are sent to the notary through the notary’s unified information system[10]. This brings up a question: Will the notary be able to notarize a resolution adopted at a remote meeting, if the participants do not have an EQES? It is understood that the notary will not be able to do so, because now the law does not provide for any other methods of identification and submission of documents (without the use of an EQES).
2. Broadcasting of meetings. All persons who have a right to vote should be able to participate in a meeting in real time via broadcast.
3. Voting information. The company’s articles of association may provide for mandatory access to information about the voting process in real time to all participants in a meeting.
4. Keeping of records. Companies are required to keep records of broadcasts of meetings along with their minutes, and the law does not establish requirements for any medium on which to keep such records. It should be noted separately that the rules for holding general meetings remotely will also apply to meetings of the board of directors and the management board.

Transfer of powers in LLCs and non-public JSCs: What is important to know and how to formalize it correctly?

As you may remember, as set forth in the JSC Law, as a general rule, matters that fall within the competence of the general meeting of shareholders may not be transferred to the executive body (management board) for consideration. However, the Russian Civil Code allows certain powers to be transferred to the board of directors or the management board. The latest changes are aimed at eliminating it, allowing the delegation of some of the powers to the board, including:

• Paying (declaring) dividends based on the results of the first quarter, the first six months, and the first nine months of the reporting year;
• Approving the company’s annual report and annual financial statements;
• Adopting a resolution for the company to participate in financial and industrial groups, associations, or other groupings of commercial organizations.

The changes also establish that the delegation of powers to the board of directors or the management board will deprive shareholders of the right to demand the redemption of their shares by the company. As you may remember, shareholders will have this right, e.g., if changes are made to the company’s articles of association that restrict the rights of shareholders, and where the general meeting of shareholders adopts resolutions on the reorganization of the company, the approval of a major transaction, the delisting of shares in the company or the termination of the public status of the company. In relation to an LLC, the changes have expanded a list of powers that may not be transferred to the board of directors, including, inter alia:

• Transferring additional rights and additional obligations for participants (including their termination);
• Approving monetary valuation as part of paying for interests in the statutory capital;
• Approving a major transaction if the value of the assets under such a transaction exceeds 50% of the company’s assets.

The matters that may not be transferred to the board of directors in accordance with the amendments may not be transferred to the collegial executive body of the company, either. It is planned that certain powers may be transferred to the board of directors (management board) of LLCs and non-public JSCs or excluded from the competence of those management bodies under a resolution adopted by the general meeting of members (shareholders) of the company unanimously. Furthermore, the provisions related to such a transfer may be provided for by company’s articles of association upon its formation or included in the articles of association by making appropriate amendments.

Conclusion

There has been a positive trend in the development of corporate laws. The changes are aimed at adapting the laws to modern realities. The regulation of remote meetings should clarify the procedure for decision-making by the management bodies of the legal entity. The delegation of certain powers at non-public companies should make it more flexible to take managerial decisions and to provide for the mandatory notarization of resolutions on the appointment of executive bodies at LLCs. At the same time, special attention should be paid to the preparation of documents taking into account the above changes so as to mitigate potential risks that may arise if documents are executed incorrectly.

[1] Federal Law No. 287-FZ dated August 8, 2024 On the Introduction of Amendments to the Federal Law On Joint-Stock Companies and Certain Legislative Acts of the Russian Federation and Federal Law No. 305- FZ dated August 8, 2024 On the Introduction of Amendments to Articles 48 and 66 of the Federal Law On Joint-Stock Companies and Certain Legislative Acts of the Russian Federation.

[2] This provision does not apply to companies that are lending institutions, non-lending financial institutions, or specialized companies formed under the applicable Russian laws on securities (para. 2 of Article 40(1) of Federal Law No. 14-FZ dated February 8, 1998 On Limited Liability Companies).

[3] para. 1 of Article 103.10, para. 1 of Article 103.10-1 of The Fundamentals of the Notarial Legislation of the Russian Federation.

[4] para. 2 of Order No. 20795 of the Russian Ministry of Foreign Affairs, Order No. 209 of the Russian Ministry of Justice dated September 29, 2022 On the Approval of Instructions for Consular Officials on How to Perform Notarial Acts.

[5] Article 67.1(3)(2) of the Russian Civil Code and para. 6.1 of Letter No. 2405/03-16-3 of the Russian Federal Chamber of Notaries dated September 1, 2014 On the Distribution of the Guidelines on the Notarization by a Notary of the Adoption by a General Meeting of Members of a Company of a Resolution and of the Composition of the Members of the Company who were Present at the Time of Adoption Thereof.

[6] para. 13 of Article 103.10, para. 3 of Article 103.10-1 of The Fundamentals of the Notarial Legislation of the Russian Federation.

[7] Federal Law No. 208-FZ dated December 26, 1995 On Joint-Stock Companies.

[8] Federal Law No. 14-FZ dated February 8, 1998 On Limited Liability Companies.

[9] Articles 52(5) and 66.3(3)(5) of the Russian Civil Code, Article 32(1) of Federal Law No. 14-FZ dated February 8, 1998 On Limited Liability Companies.

[10] para. 1 of Article 103.10 of The Fundamentals of the Notarial Legislation of the Russian Federation.

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Generally, the M&A market of Saint Petersburg and Leningrad Region has been following all-Russian trends. Regional businesses are looking for access to international markets, adapting to local demand, and are expanding to other Russian regions.

Businesses are also developing and redistributing the assets inherited from the foreign companies that have left and are still leaving the Russian market, but this is rather a fading trend. Modern challenges have also had their impact on the M&A market—e.g., digitalization, which manifests itself, in particular, in the interest in IT companies that has sparked in recent years.

Among the notable transactions in the M&A market in Saint Petersburg and Leningrad Region, experts name the purchase of the assets of the Finnish Metsä Group by Vologodskiye Lesopromyshlenniki Group. As Delovoy Peterburg reported in May, the transaction encompassed the lease base of Metsä Forest Podporozhye LLC with logging operations and a sawmill, Metsä Svir LLC, and Metsä Forest Podporozhye LLC. The new owner’s plan is to restart the Metsä regional plant. According to experts, the transaction value, with account taken of the discount, could be up to €10 million.

Traditionally, a significant number of Finnish, German, and Swedish investors were present in the forestry industry of Russia’s North-West.

“The sale of Russian assets by these investors reached its peak in 2023,” said Julia Talagaeva. “But even now, the remaining foreign holdings may decide to leave due to increased pressure on them from the European Union and the United States, and the risk of introducing external administration on their Russian assets.”

The activity of foreign sellers is affected by the tightened conditions for obtaining authorizations from the Russian Government Commission for transactions. In October, the minimum discount for the sale of a company was once again upped from 50% to 60% of the market value, and a voluntary contribution payable for the sale of a company was increased to 35% of its market value, as compared to 15% earlier.

“In view of this, foreign sellers, in addition to the financial terms of transactions, are paying more and more attention to a potential buyer’s ability to obtain authorization from the Russian Government Commission (the buyer is more likely to obtain such authorization, if the buyer operates in in the same or related industry) and the buyer’s waiver of the seller’s guarantees in relation to the company after the closing of the transaction,” said Julia Talagaeva.

For more information, click here (in Russian).

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As expected, the Russian Government Commission has tightened the conditions for issuing authorizations for transactions with respect to shares/interests in companies.

Now, the discount must be at least 60% of the market value of an asset. Previously, it was at least 50%.

A voluntary contribution has been increased to 35% of the appraised market value of shares/interests and will have to be paid as follows:

• 25% within one (1) month from the transaction date;
• 5% within one (1) year from the transaction date; and
• 5% within two (2) years from the transaction date.

Previously, a voluntary contribution was 15% of the appraised market value of shares/interests.

Furthermore, selling or buying any assets valued at more than RUB 50 billion will require approval from the Russian President.

As you may remember, some transactions, such as the sale of interests in limited liability companies or shares in joint-stock companies where one of the parties is a person, whether an individual or a legal entity, from the approved list of ‘unfriendly’ countries, will require an authorization from the Russian Government Commission on Control over Foreign Investments in the Russian Federation that is issued subject to a number of conditions.

We would be pleased to advise you on how to obtain authorizations from the Russian Government Commission in more detail.

If you would like to discuss this matter further or have any questions, please write to Anton Kabakov or Alexandra Yudina.

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There has been an intense discussion lately about increasing the amount of a voluntary contribution payable upon the sale of shares/interests in companies up to 40% of their market value.

As you may remember, where shares/interests in companies are sold involving entities/individuals from so-called ‘unfriendly’ countries, a voluntary contribution must be paid to the Russian budget, the amount of which is now at least 15% of the market value of the relevant assets as specified in a report on an independent appraisal of those assets. In other words, an authorization for the sale/purchase by such entities/individuals of shares/interests in companies is granted subject to payment to the Russian budget of 15% of the market value of the company, the shares/interests in which are being sold.

There have been more and more proposals put forward to increase the amount of a voluntary contribution to 40% of the appraised market value of shares/interests. We do not know whether this proposal will be realised in practice, but it is likely that the amount of a voluntary contribution may indeed be increased in the near future.

For this reason, we recommend that you should not delay submitting documents to the Russian Government Commission so that you may be able to obtain an authorization for the transaction before the amount of the voluntary contribution is increased.

We would be pleased to advise you on how to obtain authorizations from the Russian Government Commission in more detail.

If you would like to discuss this matter further or have any questions, please write to Anton Kabakov or Alexandra Yudina.

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The pravo.ru portal has conducted a study on corporate law, evaluating the projects run by Russian law firms in terms of the value and number of projects.

For this study, regional law firms submitted 273 projects worth a total of over RUB 1 trillion. Four companies from Saint Petersburg have made it to the top five. These are Kachkin & Partners, Nordic Star Law Offices, Forte Tax & Law, and Legal to Business.

According to the study, since January 2022, Forte Tax & Law has provided support for 31 corporate law projects worth about RUB 40 billion, with the average project value being RUB 1,290 billion. Transactions account for 84% of the number of our projects.

To read the study, click here.

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Article by Anton Kabakov for RBC Pro

The RBC Pro portal has published an article by Anton Kabakov, Partner at Forte Tax & Law, overviewing the latest practice of obtaining authorizations from the Russian Government Commission for the purchase and sale of foreign companies in Russia.

Since the fall of 2022, Russia has been imposing serious restrictions on transactions with respect to shares (interests) in Russian companies where one of the parties is a foreign person from a so-called ‘unfriendly’ country.As you may know, such transactions require authorization from the Russian Government Commission on Control over Foreign Investments.However, it is not common knowledge that authorization from the Russian Government Commission or the Central Bank of Russia may be required even when the object of a transaction is a foreign company.

To read the article on the RBC Pro portal (a subscription fee applies), click here (in Russian).

If you have any questions about obtaining authorizations from the Russian Government Commission, please send an email to Anton Kabakov.

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