The key points of the laws are as follows:
- From the list of mandatory information to be contained in the JSC Articles of Association, are excluded those that repeat the provisions of the legislation;
- The issue of approving internal corporate documents and regulations can be transferred from the exclusive competence of the general meeting to the competence of other management bodies of the company;
- The size of the JSC reserve fund will by default amount to 5% of the authorized capital, unless otherwise provided in the Articles of Association of JSC;
- The Articles of Association of JSC can provide for a different term for holding the annual general meeting of shareholders (AGM) within March to June of each year;
- The Articles of Association of JSC can provide for an increased quorum for holding a meeting of the board of directors and the executive board;
- The minimum number of members of the board of directors in a non-public JSC is reduced to three, while the Articles of Association can provide for an increased number of members of the board of directors for both non-public and public JSCs;
- Until December 31, 2022, it is allowed to vote on all issues on the agenda of the general meeting of shareholders and members of the LLC in absentia.
The Federal law dated February 25, 2022 No. 20-FZ “On the introduction of amendments to part one of the Civil Code of the Russian Federation” (in terms of the elimination of excessive requirements for the content of the Articles of Association of JSC) (hereafter – “the Law 1”) and the Federal law dated February 25, 2022 No. 25-FZ “On the introduction of amendments to the Federal Law “On Joint Stock Companies” and on the suspension of certain provisions of the other legislative acts of the Russian Federation” (hereafter – “the Law 2”), hereinafter collectively referred to as the “Laws”, were published on the official web portal of legislative acts.
1. Elimination of excessive requirements for the content of the Articles of Association of JSC
The Laws exclude the following information from the list of mandatory information to be contained in the Articles of Association of JSC:
- information on the rights of shareholders - owners of ordinary registered shares;
- information on the competence of the management bodies of the company and the procedure for making decisions by them, including on issues, decisions on which are taken unanimously or by a qualified majority of votes (if the competence and procedure for making decisions do not differ from the regulation established by the law).
2. Other management bodies, in addition to the general meeting of members, will be able to approve the internal corporate documents and regulations of the corporation
The Law 1 establishes that internal corporate documents and regulations governing corporate relations and the procedure for the formation and competence of the bodies of a legal entity can be approved not only by the founders and members at the general meetings, but also by other management bodies in cases provided for by the law. At the same time, such cases are need to be separately regulated in the legislation on business entities, since at present special laws contain provisions on the exclusive competence of the general meeting on the issue of approving internal corporate documents regulating the functioning of management bodies.
3. Other changes in the regulation of the content of the Articles of Association of JSC
The Law 2 introduces a number of amendments to the Federal Law “On Joint Stock Companies”, which provide for the expansion of discretion in the regulation of JSC.
Firstly, in the Articles of Association of JSC it will be possible not to establish the amount of the reserve fund, in this case it will be considered to be equal to 5% by default. If the shareholders of the JSC wish to increase the specified amount, they will be able to fix the corresponding increased amount of the reserve fund in the Articles. Previously, the amount of the reserve fund had to be mandatorily indicated in the Articles of Association of JSC and constitute at least 5%.
Secondly, it will be possible to fix other requirements for the period of holding AGMs in the Articles of Association of JSC within the period established by the law, i.e. not earlier than two months and not later than six months after the end of the reporting year (from March to June inclusive). Previously, it was impossible to change the term of the AGM (for example, to shorten it for the period from March to May) in the Articles.
Thirdly, the Articles of Association of JSC can increase the quorum for holding a meeting of the board of directors and the executive board. At present, according to the Federal Law “On Joint Stock Companies”, meetings of these collegiate bodies are quorate if at least half of the elected members take part in it.
4. Number of members of the board of directors of JSC is changing
The Law 2 establishes that the number of members of the board of directors of a non-public JSC will be reduced to three members, unless a larger number is provided for by the Articles of Association. In addition, the Law 2 adds that the legislative requirement for at least seven members of the board of directors for JSCs with more than 1,000 shareholders and at least nine members of the board of directors for JSCs with more than 10,000 shareholders may be increased in the Articles of Association of JSC.
For the practical implementation of this provision, it will be necessary to amend the Articles of Association of existing JSCs, since, as mentioned above, the provisions of the Articles in the most cases repeat the provisions of the Federal Law “On Joint Stock Companies”. At the same time, amendments to the Articles entail the right of shareholders to repurchase shares in accordance with art. 75 of the Federal Law “On Joint Stock Companies”. This, in turn, may cause financial costs for JSCs. However, the proposed regulation is discretionary, so it is not necessary to change the number of members of the boards of directors of existing JSCs and, accordingly, to change the Articles.
5. Possibility to make decisions on all issues on the agenda of the general meeting by absentee voting has been extended for 2022
The Law 2 also suspends for 2022 the effect of para. 2 of art. 50 of the Federal Law “On Joint Stock Companies” and para. 1 of art. 38 of the Federal Law “On Limited Liability Companies”, which prohibit making corporate decisions on a number of issues by absentee voting (previously the suspension was in effect in 2020 and 2021). Accordingly, in 2022, by the decision of the board of directors in JSC or by the decision of the executive body in LLC, corporate decisions on any issues on the agenda of the general meeting can be taken by absentee voting, and the AGM in 2022 can be held “in absentia”.
Thus, the Laws are aimed at eliminating unnecessary requirements for JSCs and assume more discretion in their regulation. In addition, the possibility of holding general meetings “in absentia” in 2022, including the AGM, allows for a more flexible approach to their organization during the ongoing period of unfavorable epidemiological situation.
Authors:
Ksenia Stepanischeva – Counsel
Kristina Seveeva – Associate