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17.11.2015 Read more

Shareholders Agreement in Russia

Shareholders agreement is an instrument for running shared businesses, which is well known in many jurisdictions. Two major approaches are generally applied to such transactions. The Anglo-Saxon law provides for more freedom of implementation for the parties to such agreements. The continental law principals that are applied in Germany, France and other large European countries provides for a detailed development of prohibitive norms which limit freedoms of the parties to such agreements. While some traditions have been already established all over the world, in Russia the institution of shareholders agreements has only recently been introduced, as late as June 2009. The Federal Law “On joint stock companies” was amended by introducing article No 32.1, and the Federal Law “On limited liability companies” was supplemented by item 3 article 8.

In line with the Russian legislation the shareholders agreement is deemed to be an agreement on executing the rights certified in a form of shares, and (or) special rules for execution of rights of shareholders.

Shareholders agreements help business partners to resolve many questions, primarily as follows: management procedures, procedures for acquisition of gain and withdrawal from a company or changes in shareholding structure. In case a new business is being established and the agreement shall be entered into in a form of joint venture agreement, the parties thereto shall specify and certify their intents related to business development, as well as guarantees for some consistency in shareholders’ legal relations, i.e. one may bind over the parties through such shareholders agreement to vote in some certain way at shareholders meetings, to dispose of shares at a pre-defined price or not to dispose of shares under some pre-defined circumstances.

However, there are some difficulties related to application of such legal institution, which have hampered attempts to introduce it in Russia for such a long time. Yet, some secret agreements have been already applied in our country; nonetheless their application has been effective only unless one of the parties resorted to courts. In courts it was frequently discovered that some clauses of such agreements, i.e. which induce a party to vote in a certain way, or the whole agreement did not comply with the Russian law (i.e. the notorious case of Megafon).

As a result the parties to shareholders agreement started to subject them to foreign jurisdictions; but the Russian courts in return nullified transactions which had been entered into under such agreements. The businesses started to register holding companies, which owned the shares of Russian companies, in the off-shore territories, thus in such case they were allowed to enter into shareholders agreements.

This resulted in massive loss of large investment projects and flow of funds which were transferred to foreign countries, therefore the government started to introduce the institution of shareholders agreements within the national legislation.

The newly established institution of shareholder agreements and parties’ agreements is a step forward to meet business initiatives in Russia. Ligerion Company being both an expert and an investor in investments projects in Russia monitors further development and application practice of shareholder agreements drawing on experiences for the Russian transactions.
Shareholders Agreement in Russia

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