To improve Russia’s position in the Doing Business ranking, officials have prepared amendments to the law “On Joint Stock Companies” (Vedomosti has read a copy). On Tuesday, they were approved by the government commission on legislative activities, said its participant and official. The project is aimed at increasing positions in the ranking (see inset), a representative of the Ministry of Economic Development confirmed.

In 2016, in terms of protection of the rights of minority shareholders, Russia took 66th place in the ranking out of 189, having risen by 44 positions over the year, and 40th in the overall ranking. In May decrees, President Vladimir Putin instructed to increase the country’s position to 20th place by 2018. Now the World Bank has begun another round of assessment.

Most of the proposed amendments have already been discussed many times, including during the development of a roadmap to improve corporate governance, says Denis Spirin, director of corporate governance at Prosperity Capital. But they were included in different bills and moved slowly, but now the norms on which there is no disagreement have been collected into a separate bill in order to be adopted more quickly, he explains.

Mechel was not enough
The amendments introduce into the legislation the concept of a committee under the board of directors, previously prescribed only in the corporate governance code, and require notification of a shareholders’ meeting 21 days in advance, and not 20....
Read in full

Mechel was not enough

The amendments introduce into the legislation the concept of a committee under the board of directors, previously prescribed only in the corporate governance code, and require notification of shareholders’ meetings 21 days in advance, not 20. They solve a “technical” problem, which, according to Stepanov, has made life difficult for many large companies: recognize the interested party transaction as approved with the support of half of the shareholders participating in the meeting. Such a provision already exists in the law on joint-stock companies, but it can also be read as a requirement to obtain the votes of half of all disinterested minority shareholders, and not just meeting participants, says Spirin. It is not always easy to collect the required number of votes, explains an official from the Ministry of Economic Development: in March 2016, Mechel shareholders were unable to approve an increase in collateral, without which it is impossible to restructure the debt, due to a lack of votes at the meeting. Mechel faced such a problem, its representative confirmed.

The bill makes it possible to change the company's charter - to transfer the power to appoint a general director from the meeting of shareholders to the board of directors without the right of shareholders to present them for redemption. Now the courts, as a rule, believe that such a step limits the rights of shareholders, and they can demand a buyout, notes Dmitry Stepanov, partner at Egorov, Puginsky, Afanasiev and Partners.

The bill also clarifies that dividends on preferred shares are considered definite if they are not lower than the amount established in the charter; if the amount is not specified, dividends are paid as on ordinary shares. The largest dispute related to preferred shares is the trial between the UCP group of companies and Transneft, Stepanov recalls: the fund bought more than 70% of its preferred shares, focusing on the history of dividend payments, but then the company began to pay less for preferred shares than for ordinary shares . Transneft referred to the state decision on the amount of dividends.

Smaller cases, according to Stepanov, are reviewed annually; many companies do not pay dividends on preferred shares at all, citing a lack of net profit. And the main problem - the lack of guarantees of payments to the owners of such shares - the proposed amendments do not solve, he says, these guarantees need to be spelled out. “The simplest mechanism is the general requirement that dividends on preferred shares should not be less than dividends on ordinary shares,” Stepanov suggests, and a company can also be legally obligated to pay dividends on preferred shares if it has received a net profit. “Now you [the owners of preferred shares] do not have the rights to corporate governance, to participate in voting, to request documents, to receive money, like owners of ordinary shares, and you cannot even sell this illiquid product. Who needs prefs who either vote or don’t vote?” – Stepanov asks.

Mechel was not enough The amendments introduce into the legislation the concept of a committee under the board of directors, previously prescribed only in the corporate governance code, and require notification of a shareholders’ meeting 21 days in advance, and not 20.... Read in full

Mechel was not enough
The amendments introduce into the legislation the concept of a committee under the board of directors, previously prescribed only in the corporate governance code, and require notification of a shareholders’ meeting 21 days in advance, and not 20....
Read in full

Shareholders will not be able to get rid of shares in response to restrictions on their rights