Amendments have been made to the Law on Joint Stock Companies and the Law on Limited Liability Companies regarding the regulation of major transactions and interested party transactions.
The changes will come into force on January 1, 2017 and will apply to transactions concluded after entry into force.
Mandatory bringing of charters in accordance with the new regulations is not provided for by law. The provisions of the charters will be applied to the extent that they do not contradict the law.
Issues of limiting the competence (breadth of authority) of the executive body to carry out transactions, the need for approval of transactions (in the new edition, two terms are used: consent – before the transaction; approval – after the transaction) by the board of directors and / or the general meeting of shareholders (general meeting of participants) are some of the key issues of corporate governance.
Therefore, it is advisable to assess the compliance of the charter with both the new law and the real state of affairs in society, the current system of corporate governance and control. And decide on the need or lack of need to change the charter.
According to the new regulation, the company’s charter may provide for the need to obtain the consent of the board of directors or general meeting to carry out certain transactions (which are not major transactions or interested party transactions).
Previously, legislation indicated the possibility of extending the approval procedure for major transactions to other transactions. Now the provisions on the need for consent are specified separately from the regulation of large transactions. In this connection, there is a need for more detailed regulation of the procedure for approving transactions specified in the charter.
The changes practically do not affect companies in which the only participant (shareholder) is also the executive body (director).
Major deals
1. The definition of large transactions has been changed. A major transaction is a transaction that goes beyond