On some consequences of changes in corporate legislation in 2024. What does a business need to know?

In addition to the article in the Advocate Newspaper “Business Recommendations for 2025", we publish the full version of changes in corporate legislation, as well as vectors of possible consequences for business in Russia.

‍

It is more difficult to obtain information about companies under sanctions.

‍

From August 8, 2024 to January 1, 2026, an increased threshold (5% instead of 1%) of voting shares is applied to obtain the following information and documents about the company under sanctions (Federal Law No. 300-FZ of August 8, 2024):

‍

• information about an interested party transaction that was made without consent,
• minutes of meetings of the board of directors,
• documents of a non-public joint-stock company,
• a list of shareholders who have the right to participate in the general meeting.

This change may protect Russian companies from sanctions pressure, but further reduce interest from foreign investors. Reducing the transparency of Russian business Companies, especially foreign companies or those involving foreign investors, will face restrictions in accessing information about companies under sanctions. This can make it difficult to properly assess risks, as investors and partners will have less data to analyze. The complication of Due Diligence procedures Minority shareholders with small shares will not be able to quickly access the necessary corporate documents. This can make it difficult to make investment and partnership decisions, increasing risks for the parties, especially in international transactions. Increased risks for international investorsForeign companies and investors who own shares below a higher threshold may be vulnerable. It will be more difficult for them to control their investments in Russian companies if they find themselves under sanctions or under the influence of unfriendly jurisdictions. Concentration of controlRestricting access to information with smaller shares can increase the influence of large shareholders and reduce the opportunities of minority participants in corporate governance. These measures may lead to a more cautious approach to investments, especially by foreign companies, as well as an increase in the risks of legal uncertainty for businesses.‍On the other hand, the changes will protect Russian companies and large shareholders from unfriendly information campaigns and increased sanctions pressure.

Information about the seizure of a share imposed by a court or bailiff in the Unified State Register of Legal Entities

(Federal Law No. 287-FZ of August 8, 2024)

Simplifying Due Diligence procedures

Information about the seizure of a share will become public, which will make it easier to verify the reliability of counterparties when concluding transactions. This will increase the confidence of investors and partners in the legitimacy of transactions with shares in the LLC's share capital.

‍

Potential buyers of shares will be able to learn in advance about the seizures that have been imposed, which will avoid buying problem assets and protect against unforeseen legal proceedings.

‍

Strengthening control over the observance of creditors' rights

Information about seizures of shares can help creditors protect their interests, as they will be able to quickly learn about the seizure of debtors' property and take appropriate measures to collect debts.

‍

Administrative implications for companies

Companies whose shares have been seized may face restrictions in managing their capital and difficulties in attracting new investors, which may have a negative impact on their financial condition and business development.

‍

Thus, the new changes are aimed at increasing legal certainty and transparency of transactions with shares in LLCs, which will ultimately improve the investment climate and reduce risks for market participants

‍

Declaring the general meeting invalid due to “technical problems”

‍

Recall that an online shareholders' meeting will be considered invalid if significant technical problems prevent it from being held (Article 37.1, paragraph 10, of the LLC Act, as amended by Law No. 287-FZ).

‍

This vague wording can indeed allow unscrupulous shareholders to “oppose other shareholders in exercising their rights, citing sudden technical problems.”

‍

On the other hand, this change may encourage businesses to increase their technical support requirements. Companies that hold meetings remotely will have to ensure the reliable and uninterrupted operation of equipment. Any significant disruptions may result in the meeting being declared invalid, which poses risks for management and decision-making.

‍

Because the phrase “significant technical issues” is vague, companies may find it difficult to interpret which failures would be considered sufficient to cancel a meeting. This may cause additional legal disputes.

‍

Thus, businesses will need to pay more attention to both the legal preparation of meetings and technical support for events in order to minimize the risks of disruption of meetings and the associated consequences.

‍

Recent changes in corporate legislation are making Russian business more transparent where necessary, and reducing it in the near future where this transparency can harm it. Some terminological uncertainty is also being introduced, which, of course, will lead to abuses and, in turn, to big lawsuits.