Further restrictions on shareholders' rights

Rights restrictions of “unfriendly“ shareholders participating in big russian market players

The recently released Decree of the President of the Russian Federation dd. January, 17 2023 establishes temporary procedures of corporate decision-making for Russian legal entities (i.e. the meetings of shareholders, boards of directors or other collegial executive bodies).

The new procedure is applicable to the entities meeting the following requirements simultaneously:

  • The entity belongs to energy\machinery engineering\trade industries,
  • Its revenue in the year prior to the intended decision’s adoption is more than 100 billion rubles (approx. 1 319 600 00 EUR),
  • Sanctions against the beneficiary owner\controlling person of the entity were imposed by ‘unfriendly’ states[1] or unions,
  • Not more than 50% of the share capital belongs to the shareholders from the ‘unfriendly’ states.

As from January, 17 2023, it is allowed for such entities to make decisions on the agenda without taking into account the votes belonging to persons from ‘unfriendly’ states (except for those who have their registration in Russia) and/or candidates nominated by such persons to the governing bodies. The votes of the mentioned persons and candidates also should not be taken into account when determining the quorum.

However, the new temporary procedure does not come into force automatically, it can only be adopted by a majority vote of the company’s shareholders being from ‘not-unfriendly states’)

The Decree specifies what persons\entities are not to be considered as ‘unfriendly’:

  • Citizens of the Russian Federation and persons\entities controlled by them,
  • Persons coming from ‘not-unfriendly’ states exercising control over persons\entities from ‘unfriendly’ states on condition that such control was established before March, 01 2022,
  • Persons, being under control of persons\entities from ‘not-unfriendly’ states (or under control of ‘not-unfriendly’ states themselves) on condition that such control was established before March, 01 2022.

[1] USA, Canada, Austria, Bahamas, Belgium, Bulgaria, Croatia, Cyprus, the Czech Republic, Denmark, Finland, France, Germany, Greece, Hungary, Ireland, Italy, Latvia, Lithuania, Luxembourg, Malta, the Netherlands, Poland, Portugal, Romania, Slovakia, Slovenia, Spain, Sweden, Estonia, the Great Britain (including Jersey, Anguilla, British Virgin Islands, Gibraltar), Ukraine, Montenegro, Switzerland, Albania, Andorra, Iceland, Liechtenstein, Monaco, Norway, San Marino, North Macedonia, Japan, South Korea, Australia, Micronesia, New Zealand, Singapore, Taiwan, Isle of Man, Guernsey Island, the Bermuda, the British Antarctic Territory, the British Indian Ocean Territory, the Cayman Islands, the Falkland Islands, Montserrat, the Pitcairn Islands, Saint Helena, the Ascension and Tristan da Cunha Islands, the South Georgia and South Sandwich Islands, Akrotiri and Dhekelia, Turks and Caicos.

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