Transparency and Opacity of Russian Business Amidst Technical Glitches.
About some consequences of changes in corporate legislation in 2024. What businesses need to know.
In addition to the article in the Advokatskaya Gazeta titled "Recommendations for Business in 2025," we are publishing the full version of changes in corporate legislation, as well as potential implications for businesses in Russia.
Increased difficulty in obtaining information about sanctioned companies.
From August 8, 2024, until January 1, 2026, an increased threshold (5% instead of 1%) of voting share ownership applies for obtaining the following information and documents about a sanctioned company (Federal Law No. 300-FZ of August 8, 2024):
- information about an interested party transaction conducted without consent,
- minutes of board of directors meetings,
- documents of a non-public joint-stock company,
- list of shareholders entitled to participate in the general meeting.
This change may protect Russian companies from sanctions pressure, but it will further reduce interest from foreign investors. Reduced transparency of Russian business. Companies, especially foreign ones or those with foreign investor participation, will face restrictions in accessing information about sanctioned companies. This could complicate proper risk assessment, as investors and partners will have less data for analysis.
Complication of Due Diligence procedures
Minority shareholders with small stakes will not be able to promptly access necessary corporate documents. This could complicate investment and partnership decisions, increasing risks for parties, especially in international transactions.
Increased risks for international investors
Foreign companies and investors holding stakes below the increased threshold may find themselves in a vulnerable position. It will be more difficult for them to control their investments in Russian companies if those companies become sanctioned or fall under the influence of unfriendly jurisdictions.
Concentration of control
Limiting access to information for smaller shareholdings may strengthen the influence of major shareholders and reduce the opportunities for minority participants in corporate governance.
These measures could lead to a more cautious approach to investments, especially from foreign companies, and increase the risks of legal uncertainty for businesses.On the other hand, these changes will protect Russian companies and major shareholders from unfriendly information campaigns and increased sanctions pressure.
Information on the seizure of a share imposed by a court or bailiff in the USRLE
(Federal Law dated 08.08.2024 No. 287-FZ)
Streamlining Due Diligence Procedures
Information on share seizures will become public, simplifying due diligence on counterparties during transactions. This will boost investor and partner confidence in the legitimacy of operations involving shares in the authorized capital of LLCs.
Potential share buyers will be able to learn about imposed seizures in advance, helping them avoid purchasing problematic assets and protecting them from unforeseen litigation.
Strengthening Control Over Creditors' Rights
Information on share seizures can help creditors protect their interests, as they will be able to promptly learn about seizures imposed on debtors' property and take appropriate measures to recover debts.
Administrative Consequences for Companies
Companies with seized shares may face restrictions in managing their capital and difficulties in attracting new investors, which could negatively impact their financial condition and business development.
Thus, these new changes aim to enhance legal certainty and transparency in LLC share transactions, ultimately improving the investment climate and reducing risks for market participants.
Declaring a General Meeting Invalid Due to "Technical Glitches"
It should be noted that an online shareholders' meeting will be deemed invalid if significant technical glitches prevented it from being held (Clause 10, Article 37.1 of the Law on LLCs, as amended by Law No. 287-FZ).
This vague wording could indeed allow unscrupulous shareholders to "obstruct other shareholders in exercising their rights by citing sudden technical glitches."
On the other hand, this change may prompt businesses to raise their technical requirements. Companies holding remote meetings will need to ensure reliable and uninterrupted operation of their technical equipment. Any significant failures could lead to the meeting being declared invalid, creating risks for management and decision-making.
As the phrase "significant technical glitches" is vague, companies may face difficulties interpreting which specific failures will be considered sufficient to cancel a meeting. This could lead to additional legal disputes.
Therefore, businesses will need to pay more attention to both the legal preparation of meetings and the technical support for events to minimize the risks of disruptions and their associated consequences.
Recent changes in corporate legislation make Russian business more transparent where needed, but reduce transparency where it might be detrimental in the short term. Additionally, some terminological uncertainty is introduced, which will undoubtedly lead to abuses and, in turn, to significant lawsuits.