31.12.2009

New provisions on business entities’ charter capital and issue of bonds

New Federal Law No. 352 which came into force from December 31, 2009 establishes a number of new rules concerning limited liability companies, additional liability companies and joint stock companies established in Russia (business entities).

Restrictions for business entities when a charter capital is formed have been revised.

In whole, a legislator followed the way of liberalization and provided expressly for a possibility to set off monetary claims of a participant or a third party to a limited liability company by their making additional contributions as well as a possibility to set off claims when paying for additional shares placed by a joint stock company by way of private offering.

And only in respect of credit organizations there has been established an express prohibition to set off claims to a credit organization when its charter capital is increased. Let us remind that at present such a rule is not established for insurance organizations, only obligatory composition and structure of assets received in order to cover insurance reserves as well as a prohibition to include into the charter capital borrowed assets and property under pledge have been provided for.

Requirements to joint stock companies in case of the charter capital incompliance with the cost of net assets have been specified, methods of protecting creditors’ rights when the charter capital of a joint stock company is decreased have been revised.

In particular, a six-month term within which a company is obliged to make a decision on decrease of the charter capital or liquidation has been established. It is additionally established that if the cost of net assets of a joint stock company is more than 25% lower than its charter capital upon expiry of three, six, nine or twelve months of a financial year following the second financial year or each subsequent financial year upon expiry of which the cost of company’s net assets is lower than its charter capital, the company shall place twice, once a month, in mass media in which information on state registration of legal entities is published a notification of company’s net assets cost decrease.

The Company’s creditor if his claims arise before a notification of company’s net assets cost decrease is published, no later than within 30 days as of the date of the latest publication of such a notification shall have the right to demand the company’s early fulfillment of a relevant obligation and, in case that its early fulfillment fails, termination of an obligation and compensation for related losses.

The period of limitation for reference with such a claim to the court is six months as of the date when a notification of company’s net assets cost decrease is published last.

An obligation of a joint stock company to notify the company’s creditors of its charter capital decrease within 30 days has been abolished. Instead there has been established an obligation to notify within three business days of such a decision to a body carrying out state registration of legal entities and twice, once a month, to place in mass media in which information on state registration of legal entities is published a notification of its charter capital decrease.

In this case creditors’ position has been improved: before 30 day period stipulated for presentation of a written claim for early termination or fulfillment of company’s relevant obligations and its compensation for losses started from the date when a relevant notification is sent or within 30 days as of the date when a notification on the decision made is published; now the term starts only from the date when such a notification is published last and it concerns only non-judicial claims.

The period of limitation for applying to the court with this claim is also established within six months as of the date when a notification of the company’s charter capital decrease is published last.

There has been additionally provided an exhaustive list of cases in which the court shall have the right to dismiss the indicated claim of a creditor:

(1) In case that the company proves that as a result of its charter capital decrease creditors’ rights are not violated;

(2) In case that the company proves that resources provided for proper fulfillment of a relevant obligation are sufficient.

Restrictions related to issue of bonds by business entities have been revised.

In particular, Federal Law No. 39-FZ as of April 22, 1996 “On securities market” has been provided with amendments determining categories of persons having right to act as guarantors ensuring fulfillment of bond obligations as well as material conditions of such a contract of guarantee.

Peculiarities of bonds issue by a business entity have been stipulated as follows:

- issue of bonds by a business entity is allowed after its charter capital has been fully paid;

- par value of all bonds of a business entity shall not exceed the amount of its charter capital and(or) the amount of security provided by third parties to a business entity for these purposes. In case that third parties provide no security, issue of bonds shall be allowed no earlier than on the third year of a business entity’s operations and provided that annual accounting reports for two complete financial years are properly approved.

There has been presented a list of cases when the above-indicated restrictions do not apply (mortgage-backed bonds, debenture bonds, equity securities of which have been included into the quotation list (have passed a listing procedure) at a stock exchange, etc.).

This Federal Law came into force as of December 31, 2009.