The Supreme Court recently clarified parties' right to terminate a contract unilaterally (ie, the 'right to unilateral refusal of performance' in Russian terminology) or amend a contractual obligation unilaterally. The court also clarified the requirements regarding the fulfilment of payment obligations, including with regard to bank transfers, currencies and interest in the event of a default, among other things.
Russian law continues to develop with respect to the disclosure of beneficial owners of Russian businesses. New provisions came into force at the end of 2016, which require all Russian legal entities to take reasonable and available steps to identify their beneficial owners and disclose them on request, among other things. For this purpose, the law expressly entitles a Russian legal entity to request information from its shareholders, as well as from other persons who in any way control the entity.
The statutory deadline for holding the annual general meeting of a Russian limited liability company (LLC) is April 30 2017. The meeting must approve the annual results of the LLC's activities – in particular, its annual financial statements as of December 31 2016 and its 2016 annual report. Violation of the deadline or any formal requirements may result in administrative fines. The deadline for holding the annual general meeting of a Russian joint stock company is June 30 2017.
In March 2015 and July 2016 amendments to the Civil Code were introduced regarding compensation for damages and contractual penalties. In March 2016 the Supreme Court provided its interpretation of the March 2015 amendments. Together, they should make damages claims easier to assert, clarify the limitations of liability, define the criteria for the reduction of penalties and establish contractual means of protecting creditors against loss and damages.
Amendments to the Federal Law on Joint Stock Companies recently came into effect, allowing shareholders to finance joint stock companies (JSCs) safely by means of so-called 'contributions to assets'. Voluntary contributions can be made via an agreement between the relevant shareholder and the JSC. Alternatively, a non-public JSC's articles of association can stipulate that the shareholders' meeting can impose an obligation on shareholders to make contributions.
The statutory deadline for holding the annual general meeting of a Russian limited liability company (LLC) will expire on April 30 2016. The annual meeting must approve the annual results of the LLC's activities – in particular, the annual financial statements and the annual report of the LLC as of December 31 2015. Violations of the deadline or the formal requirements may result in significant administrative fines.
The Federal Law on Limited Liability Companies was recently amended. Among other things, a share in a limited liability company can now be alienated in order to exercise the option to conclude a contract by way of separate notarisation of the irrevocable offer and subsequent notarisation of the acceptance. The timeframe in which share pledge agreements must be filed with the registering authority has also been shortened.
According to a draft bill introduced by the Federal Service for Fiscal Monitoring, legal entities will be obliged to maintain, document and disclose information on their beneficiaries and measures instigated by beneficiaries on the request of authorised bodies (as defined by the government). The bill obliges companies to record such information, store it for five years and update it annually.
The plenum of the Supreme Court recently issued a resolution on the application and interpretation of the general provisions of Part 1 of the Civil Code. The resolution addresses a number of issues regarding the use of customary practice, the registration of real estate objects and notes of objection, the validity of contracts, the resolution of meetings and representation and power of attorney.
A draft bill on the notary system and notarial services has been introduced in the State Duma. The draft bill is intended to replace the framework legislation on the notary system which is currently in force and proposes substantial amendments, including the introduction of a new system of liability for damages caused by the actions of notaries and other persons involved in notarial activities.
Draft legislation recently submitted to the State Duma includes proposed amendments to the Civil Code which seek to establish different kinds of liability for violations of monetary and non-monetary obligations, as well as a bill to reduce the timeframe for state registration of legal entities and individual entrepreneurs.
During the past couple of years significant steps have been taken to modernise Russian commercial legislation, in particular the Civil Code. As part of these efforts, Federal Law 42/2015 recently entered into force. The law amends the Civil Code provisions regarding obligations and contract law and aims to implement certain foreign legal concepts used in practice in Russia-related finance transactions.
The Supreme Court has held that an abuse of rights committed when entering into a transaction is a breach of the Civil Code, and that for this reason, the transaction should be declared invalid. Notably, the Supreme Court had previously pointed out that such an abuse of rights should not constitute grounds for declaring a transaction invalid.
The Supreme Arbitrazh Court has clarified that the effects of rescission of a contract, other than those provided by law, may be stipulated in an agreement between the parties with consideration of the restrictions imposed on the freedom of contract. The court pointed out that on rescission, the debtor's obligations will be terminated, with certain exceptions.
More amendments have been introduced to the Civil Code regarding legal entities. One novelty is that all legal entities will be classified as either corporations or unitary enterprises. Corporations include legal entities in which shareholders have corporate interests, while unitary enterprises include legal entities whose founders have ownership interests in such legal entities' property.
In 2015 a new procedure for the accreditation of branches and representative offices of foreign companies will enter into force. Accreditation will be carried out by an official body authorised by the government. The law introducing the procedure also stipulates new grounds for termination of accreditation of representative offices and branches in accordance with the decision of the accrediting body.
The Supreme Arbitrazh Court recently enacted new rules for the interpretation of freedom of contract by Russian arbitrazh courts. The new rules constitute an important step forward in the process of conforming the Russian legal system to Western standards. Among other things, the resolution provides that the courts should consider legislative intent in interpreting the law applicable to the contractual parties.
Further revisions to the Civil Code have introduced significant changes to the provisions governing transactions involving a foreign element. Among other amendments, company law now governs the liability of a legal entity's founders and members for its obligations, while the form of a transaction is now subject to the law governing the transaction itself (rather than the law of the jurisdiction in which it was executed).
The Plenum of the Supreme Arbitrazh Court has clarified certain matters associated with compensation for loss resulting from defaults by directors. The court listed circumstances that must be proven to find a director's actions unfair and also noted cases in which a director can be found to have acted unreasonably in undertaking a transaction.
A law containing several significant amendments to the Civil Code was recently signed into law by the president. Among other things, the new law regulates the delivery of 'legally significant notifications', imposes restrictions on the challenge of bad-faith transactions, introduces the concept of an irrevocable power of attorney and stipulates new requirements regarding the statute of limitations.