ALRUD Law Firm
  July 20, 2009 - Russia

Amendments to the Federal Law "On Limited Liability Companies"

Dear Sirs, let us kindly remind you that on July 01, 2009 amendments to the Federal Law “On Limited Liability Companies” of February 08, 1998 ¹ 14-FZ (hereinafter – the “New Law”) came into force. Pursuant to it, the Articles of Association of limited liabilities companies (hereinafter – the “companies” or the “LLC”) established prior to July 01, 2009 should be brought to compliance with the New Law by January 01, 2010.

Until the Articles of association of the limited liability companies established prior to July 01, 2009 are brought in compliance with the New Law their provisions shall be effective as to the extent complying with the New Law.

Please be aware of the substantial amendments to the Law which cover the legal status of LLC and its participants, and the constituent documents of LLC:

            (i) Participants of LLC are entitled to enter into an Agreement on execution of rights of participants of LLC (the analogue of shareholders agreement in joint stock companies) enabling them to set out in the said agreement all issues of company management on a confidential basis    

            (ii) Transactions on disposal of participatory shares (a part thereof) in the authorized capital of LLC to another participant or third parties are subject to notary certification and are effective since the date of such notary certification. In connection with this amendment we recommend you to review and evaluate the enforceability of already executed agreements providing for participatory shares transfer after the 1st of July, 2009 (closing arrangements and etc.)  and to amend them (if necessary) in compliance with the provisions of the New Law  to enhance the enforceability            

            (iii) The Articles of Association of LLC no longer contains information on participants of LLC, amount and nominal value of participatory shares owned by LLC participants. This information shall be kept in the Unified state register of legal entities and entrepreneurs maintained by tax authorities and in the Register of LLC Participants to be maintained by the general director of LLC.

            (iv) Participants of the Company may be restricted in the right to withdraw from the Company by introducing the said limitation in the Articles of Association of LLC. Introduction of such limitation earlier was not permitted by the effective regulations (since it used to be an absolute right of a participant to withdraw from LLC) what constituted a key risk for using LLC as a legal form for joint venture.

New Law modifies the procedure for realization the pre-emptive right of participants on purchasing participatory share or part thereof when disposed by a participant to a third party (i.e.: new Law specifies the terms for realization of the pre-emptive right, the method for setting up a purchase price (a fixed amount or an amount calculated as per indicated formula), and allows to acquire a part of participatory share disposed by a participant of LLC).

Let us draw your attention that appropriate and timely introduction of the above described amendments into the Articles of Association of the LLC as well as execution by participants of LLC of the Agreements on execution of rights of participants will help to operate the LLC in more effective manner and to avoid any complications which may arise from interpretation and implication of the provisions of the Articles of Association being effective prior to July 01, 2009 (such as limitation of the right to withdraw from LLC, etc.).

We would recommend you to double-check the data on the LLC and its founders / participants contained in the Unified State Register of Legal Entities and Entrepreneurs in order to facilitate the procedure of state registration of the new revision of the Articles of Association of LLC and to avoid negative consequences such as refusal in state registration due to possible discrepancies contained therein.




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