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Institutional Problems to or after applying to the court of law or the arbitration court and can be initiated, in particular, per the judge or the arbiters suggestion. To run the procedure the sides agree upon and pick one or several mediators. Should the sides turn to an organization that carries out operations on securing the conduct of the mediation procedure, such organization can recommend mediator/mediators or appoint them. The procedure per se is set by the agreement on conduct of the mediation procedure. The mediation agreement is made in writing and should contain information on the parties thereto, the subject of the dispute, the mediation procedure implemented, the mediator, as well as the obligations mutually agreed upon, and timelines for their implementation. The meditative agreement the parties arrive at the end of the mediation process should be executed voluntarily and in good faith. In addition, it can be approved as an amicable settlement by the court of law or the arbitration court, should the mediation takes place after the case was brought to the court. As to mediators, they can be both professionals, that is, having a profile higher education and taking a special training course in mediation, and amateurs. Some experts believe that, for instances, lawyers and notaries can handle mediation quite efficiently, for ex officio they often resort to amicable settlement and conciliation methods in their work.

Another large block of modifications was formed by change in the procedure for conclusion of large transactions and non-arms length transactions, which was caused by the necessity to prevent siphoning off assets mostly of corporate debtors and corporate bankrupts. In July 20091, it was established that a large transaction or a non-arms length one might be recognized as an invalid one only providing its negative consequences for the company or a shareholder, which should be proved in the court of law. The novelty clearly is a pro-majority one, and it will considerably diminish the number of transactions in question which the court of law renders ineffective.

Plus, the amended legislation specified the list of entities that have interest in effect of transactions and have a possibility to influence their completion; as well, the Board of Directors hence has enjoyed the possibility (along with the general meeting) to approve future transactions.

Lastly, a number of transactions are no longer subject to a special procedure for their conclusion (interest). This novelty concerns:

a) transactions whose conclusion is binding for the company, per the law;

b) transactions in which all the participants are interested, which are entered into by an LLC,;

c) transactions effected by companies consisting of the sole participant who concurrently exercises the functions of the one-man executive body;

d) relations arising in the course of the assignment to the company of a stake or its share in the companys authorized capital2.

Earlier on, in July 20063, out of the procedure for approval of large transactions and nonarms length transactions were taken transactions conditioned by the decision on reorganization; as well, the procedure was specified for finding by the Board of Directors of the market Federal Act of 19.07.2009 205-FZ.

Pp.c and d were adopted in December 2008 with Federal Act of 30.12. 2008 312-FZ On introducing amendments to Section One of the Civil Code of Russian Federation and individual legislative acts of Russian Federation.

Federal Act of 27.07.2006 146-FZ On introducing amendments to the Federal Act On joint-stock companies.

RUSSIAN ECONOMY IN trends and outlooks value of the alienated or purchased assets with regard to such transactions. The modifications concerned joint-stock companies operations. In July 2009, they were also implemented with regard to LLCs in respect to taking away non-arms length transactions1.

It is also worth noting a temporary cancelation of, or limitations put on, the effect of a number of legal provisions, mostly through 1 January 2011 (in the frame of an urgent response to liquidity shortages). In the focus of such a crisis narrowing of the legal environment in the joint-stock area were banks, which faced the following meaningful changes:

1) requirements to the procedure for completion of non-arms length transactions did not encompass the subordinated unsecured loans extended by VEB2 and the ones CBR disbursed to Sberbank, which combined stood at Rb. 500 bln., with the term to maturity being 31 December 2019 and the interest rate being 6.5% annualized3;

2) in compliance with the CBR decision, the requirement to diminish the companys authorized capital until 1 January 2011 did not encompass banks4;

3) Requirements to the procedure for exercise of the mandatory offer for sale of equity or other issuable securities by the entity that has purchased 30%-plus of the companys equity (art. 84.2 of Federal Act of 26.12.1995 208-FZ On joint-stock companies5) had not concerned until 1 January 2011:

- Credit organizations, should they acquire property rights for joint-stock companies equity that form collateral;

- Third parties that purchased from credit organizations property rights for joint-stock companies equity that formed collateral, including auctioned off ones;- Since 20 July 2009, the Federal Act On joint-stock companies has been in effect as it pertains to banks in respect to issuance and circulation of issued by banks securities to the extent that it does not contravene Federal Act of 18.07.2009 181-FZ On using public treasuries to raise the banks capitalization.

Federal Act of 19.07.2009 205-FZ.

- to open-end joint-stock company Bank VTB in an amount not in excess of Rb. 200 bln. with the term to maturity being 31 December 2019 and the interest rate being 6.5% annualized (as amended in Federal Act of 27/07.2010 206-FZ);

- to open-end joint-stock company Rosselkhozbank in an amount not in excess of Rb. 25bln. with the term to maturity being 31 December 2019 and the interest rate being 6.5% annualized (as amended in Federal Act of 27/07.2010 206-FZ);

From the date of enactment of Federal Act of 13.10.08 173-FZ and through 31 December 2009 have the right to extend unsecured subordinated credits (loans) to credit organizations, should they comply with the following conditions (as amended in Federal Act of 27.07.2010 206-FZ):

a) In the event the credit organization has the long-term credit scoring not less than the set minimal level as of the date of applying for the credit (loan);

b) The credit organization received after 1 October 2008 subordinated credits (loans) and (or) amounts to pay the contribution to the said credit organizations authorized capital.

P. 2 art. 6 of Federal Act of 27.10.2008 173-FZ On additional measures on support of the financial system of Russian Federation.

P. 8 art. 7 of Federal Act of 27.10.2008 173-FZ On additional measures on support of the financial system of Russian Federation.

As amended in Federal Act of 03.11.2010 292-FZ On introducing amendments to art. 84.2 of the Federal Act on joint-stock companies.

Federal Act of 30.12.2008 306-FZ On introducing amendments to some legislative acts due to improvement of the procedure for the levy of execution on pledged property.

Section 6.

Institutional Problems To what degree the above measures were justifiable one can judge only in the context of the anti-crisis strategy as a whole. That said, the peril of an uncontrolled and opaque redistribution of the largest assets under the said legal framework appears significant.

Yet another direction of development of legislation is formed by systemic novelties that considerably changed the standing of minority shareholders and creditors to corporations.

This refers to the introduction of mechanisms whose ultimate objective is to lower the level of corporate raiding and limiting possibilities to challenge transactions and decisions made by a companys management bodies.

The milestone development back in June 2009 became enactment of the bill (Federal Act of 03.06.2009 115-FZ) that changed the then existing balance of forces within the shareholders - Board of Directors - company head triangle. The critical peculiarity and, at the same time, the most profound challenge facing the Russian corporate governance model is the Board having no independence and exercising the will of the controlling shareholder. Meanwhile, other shareholders have no real instruments at hand to influence the companys management.

The new Act solidified the shareholders interests by granting them the right to initiate and terminate the company head (one-man executive bodys) powers before an extraordinary shareholder meeting. Such a meeting can be convened by initiative of a shareholder who holds more than 10% of voting shares. The extraordinary meeting at the same time considers the issue of an early termination of the Board members and election of its new composition (sp 6, 7, art. 69 of FA On joint-stock companies). Besides, shareholders owning more than 2% of voting shares were granted the right to nominate the candidacy of the company head at the extraordinary shareholder meeting (p. 2 art. 53 of FA On joint-stock companies).

Plus, the corporate law saw the introduction therein of the institution of shareholder agreement that constitutes an agreement between shareholders, which can obligate the parties to vote in a certain way at the general meeting, buy and sell equity at a certain price or not to sell them until certain circumstances arise, etc. Such an agreement forms the mechanism of coordination of shareholders will and, in this sense, theoretically, can help regulate corporate conflicts.

Given Russias peculiarities (a high concentration of equity, a special position held by the government as a shareholder and by companies it controls, a low level of legal culture and corporate governance), though, the mechanism in question can be equally employed for a latent increase in the level of control over corporations operations by the government, statecontrolled banks, public corporations and other large proprietors.

Changes in regulation of the corporate dividend policy adopted in December 2010 (FA of 28.12.2010 409-FZ1) to some extent consolidated the shareholders influence. The changes provide for introduction of a threeyear timeline for realization of the right to appeal to the court of law with the request to pay announced dividends. The companys Charter can extend the timeline up to 5 years.

In addition, it was legislatively set that the company has no right to grant a preference in respect to payment of dividends to individual owners of shares of the same category (type).

The payment of announced dividends by shares of each category (type) shall be effected concurrently to all the owners of shares of a given category).

Federal Act of 28.12.2010 409-FZ On introducing amendments to individual legislative acts of Russian Federation with regard to payment of dividends.

RUSSIAN ECONOMY IN trends and outlooks As noted above, novelties of the period in question affected rights of creditors to reorganized legal entities. (FA of 30.12.08 315-FZ1). The creditors rights were de-facto narrowed: while earlier they had a possibility to choose between demanding from the reorganized entity for termination or an early fulfillment of its obligations, presently the termination of obligations and reimbursement of thus arising losses can be possible only in the event of the impossibility to early fulfill the obligations.

That said, even such castrated rights of creditors of reorganized companies are not applicable to creditors to public corporations Rosavtodor2, Rosnanotekhnologii3, Rosatom, as well as FPUEs and FPEs whose property complexes are assigned as the RFs contribution to Rosatom4 and FSUEs whose assets form the contribution to Rosnanotechnologii and Rosatom.

Now creditors are entitled for demanding from the reorganized company for an early fulfillment of obligations or termination of obligations with the recovery of losses through court action only, providing the reorganized legal entity, its participants or third parties failure to ensure a sufficient collaterization.

This implies a string of technical novelties which should protect creditors rights in the event of reorganization, including:

a) Making an entry on reorganization of the company in the register of legal entities;

b) The legal entitys obligation to notify tax authorities of reorganization within three days from the moment of taking the decision thereof;

c) The companys obligation to publish the statement on reorganization;

d) Additional requirements to the statement of reorganization, including procedures for, and conditions of, laying by creditors of reorganized companies their claims, information of entities that are going to provide collaterization to the creditors, among others (p. 61 Art.

15 of FA On joint-stock companies).

The requirements may not be applicable to the aforementioned public corporations, except for Rosnanontecknologii.

As to credit organizations, in addition to notifying their creditors of reorganization by posting the respective information on their homepages in the Internet, publication in media or notifying each creditor in writing, they are obligated to disclose information on substantial facts of their financial and economic operations during the whole period of reorganization, including facts and transactions that resulted in an increase or diminishment of the value of their assets by more than 10%; acquisition by an entity of a 5% -more stake in the credit organization, etc. Art. 2, 3 of Federal Act of 30.12.2008 315-FZ On introducing amendments to the Federal Act On banks and banking and some other legislative acts of Russian Federation.

P. 2 Art. 41 of Federal Act of 17.07. 2009 145-FZ On public company Rossiyskiye avtomobilnye dorogi and on introducing amendments to individual legislative acts of Russian Federation.

P. 1 Art. 5 of Federal Act of 27.07. 2010 211-FZ On reorganization of the Russian corporation of nanotechnologies.

P. 10 aArt. 37 and p.2 Art. 41 of Federal Act of 1.12. 2007 317-FZ On public corporation on nuclear power Rosatom.

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