Сompanies Under Sanctions May Get the Opportunity Not To Elect a Board Of Directors and Other Corporate Exemptions

On June 10, 2022 the Government of the Russian Federation submitted to the State Duma a Federal Law “On amendments to certain legislative acts of the Russian Federation and on establishing the specifics of regulating corporate relations in 2022” (the “Draft Law”). The Draft Law provides for temporary features of the regulation of corporate relations:

1. Extending the period during which the PJSC is obliged to sell its own previously acquired shares¹

   Now, a public joint stock company (“PJSC”) has the right to purchase its own shares (except for a reduction in their total number) until August 31, 2022, subject to certain conditions. At the same time, PJSC is obliged to sell these shares within a year from the date of acquisition². The Draft Law proposes to extend this period up to two years³. Also, if PJSC does not sell such shares within the specified period, the company must decide to reduce its authorized capital.

2. Increasing the procedural timeline for holding the General Meeting of Shareholders in 2022

   	Now	Under the Draft Law
   Holding of the Annual General Meeting of Shareholders	not earlier than 2 months and not later than 6 months after the end of the reporting year4	not earlier than 2 months and not later than 9 months5
   Drawing up a protocol on the results of voting	no later than 3 working days after the closing of the general meeting of shareholders6	no later than 6 working days7
   Notification of shareholders and persons entitled to participate in the General meeting in the form of a report on the results of voting	no later than 4 days after the closing date of the meeting8	no later than 8 days9
   Preparation of the minutes of the meeting of the Board of Directors (Supervisory Board)	no later than 3 days after its implementation	no later than 6 days10

3. Features of the formation of the Board of Directors

   The Draft Law establishes the possibility for business entities under sanctions not to form a board of directors if its formation is provided for by legislation or the charter up to December 31, 2023¹¹. This decision must be made by the general meeting of shareholders (participants). In this case, the functions of the board of directors (with restrictions) are transferred to the collegial executive body, and in its absence – to the sole executive body. Additionally, the Draft Law proposes to extend the powers of the board of directors of a joint-stock company until a new composition is elected, even if the number of members becomes less than the number allowed by the legislation or the charter of the joint-stock company (but not less than 3 members)¹².

   As stated in the explanatory note, the purpose of the Draft Law is “to reduce the negative consequences of unfriendly actions of foreign states and international organizations”.

   Now, the Draft Law was adopted in the first reading by the State Duma

¹ paragraph 2 of article 5 of the Draft Law
² Federal Law No. 46-FZ of March 08, 2022
³ paragraph 2 of article 5 of the Draft Law
⁴ paragraph 3 of article 47 of the Federal Law “On Joint-Stock Companies”
⁵ subparagraph 1 of paragraph 3 of article 5 of the Draft Law
⁶ paragraph 1 of article 62 of the Federal Law “On Joint-Stock Companies”
⁷ subparagraph 2 of paragraph 3 of article 5 of the Draft Law
⁸ subparagraph 1 of paragraph 4 of article 62 of the Federal Law “On Joint-Stock Companies”
⁹ subparagraph 2 paragraph 3 of article 5 of the Draft Law
¹⁰ subparagraph 3 paragraph 3 of article 5 of the Draft Law
¹¹ paragraph 5 of article 5 of the Draft Law
¹² paragraph 2 of article 5 of the Draft Law