Corporate agreement: shareholders’ agreements under Russian law reloaded

Shareholders’ agreements are a tool for the contractual regulation of relations between shareholders/participants of companies and are widely used in jurisdictions of the Anglo-Saxon legal system (in particular, the UK and the US), but also recognized and regulated by the laws of countries that have continental legal systems (including Russia, Germany and Italy).
The core value of this tool is that it allows for:

-redistributing the rights of shareholders in the domain of corporate governance, regardless of the number of votes that a particular shareholder is granted under the law based on the number of shares owned by said shareholder;

-increasing the liquidity of shares of non-public companies by granting to shareholders additional rights to dispose of their shares under certain circumstances and by establishing corresponding obligations of other shareholders for the acquisition of such shares;

-providing for the undertakings of shareholders related to the promotion of business development, competitiveness and the economic security of a company that cannot be established by the articles of association and internal documents of the company;

-stipulating mechanisms for settling disputes among shareholders out of court or through arbitration.

The concept of a shareholders’ agreement (as applicable to joint stock companies) andan agreement on the exercise of participants' rights (with respect to limited liability companies) was first enshrined in Russian law in mid-2009:

a. Article 8 of the Federal Law dated 8 February 1998 No. 14-FZ,²On Limited Liability Companies² (hereinafter – the ²LLC Law") was supplemented with a provision on the right of a company's founders (participants) to enter into an agreement on the exercise of participants' rights[1];
b. the Federal Law dated 36 December 1995 No. 208-FZ,²On Joint Stock Companies² (hereinafter – the ²JSC Law") was supplemented by Article 32.1[2], which provides for the right of shareholders to enter into a shareholders' agreement pertaining to exercising of the rights granted by shares.

Prior to these legislative amendments, although it had generally been possible to enter into agreements between shareholders/participants governed by Russian law on the basis of the principle of freedom of contract established by Article 421 of the Civil Code of the Russian Federation (hereinafter - the 'Civil Code'), Russian investors and their foreign counterparts chose (and still often choose) the law of England and Wales or the law of the country of incorporation of a foreign invest to regulate their relations within joint ventures.[3]



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This article is based on the provisions of laws and courts’ decisions as of December 2014 and does not constitute legal advice. It is prepared for the general information of our clients and other interested persons and it may include links to websites other than the GRATA website. This information should not be acted upon in any specific situation without appropriate legal advice.

 For further information please contact:

 Yana Dianova, Director of the Corporate and Commercial Law Department, GRATA Law Firm, (Moscow)

Tel: +7 (495) 660 11 84

E.: Ydianova@gratanet.com

Yana Dianova

Director of Corporate and Commercial Law Department, GRATA International (Moscow)