Legal Update – 2013. What foreign business should be prepared for.

The Committee on Legal Matters of the Russian-German Chamber of Commerce organized the seminar “Legal Update – 2013. Topical changes in Russian law” for entrepreneurs and financial directors. Members of the Committee, experienced lawyers of leading international law firms, told those present about the most significant changes in the following spheres:

• Currency regulation and control;
• Personal data protection in Russia;
• Labour and migration law;
• Legal regulation of shareholder agreements;
• State purchases;
• Liability of general directors of LLCs;
• Antitrust regulation.

The experts pointed out the significant toughening of the currency control regime, novelties to the regulation of telecommuting (the law on making the respective amendments to the Labor Code of the Russian Federation see here), the unresolved problems of across-the-border transfer of personal data, possibilities of amendments to the legislation in the sphere of state purchases.

Special attention was paid to the forthcoming adoption of the draft resolution by the HCA of Russia “On certain matters of compensation of losses by members of bodies of the legal entity” regarding the liability of legal entities. Advocate Thomas Brand, Managing Partner of “Binetzky Brand & Partners”, pointed out that the question, what exactly is understood as “honest and reasonable” execution of their duties by general directors, remains even after reading the draft. The so-called “unclear legal conceptions” have received different, and at times conflicting, interpretations by the Russian courts. Meanwhile, according to the advocate, dishonest actions by the top management are commonly practiced in Russia. Examples of that include execution of agreements with deliberate overpricing, or of transaction bringing no profit or result. The company has difficulties in proving to the court that the director did not act in the company’s interests, because the transactions are formally legal. Thomas Brand concluded by saying that the presumption of dishonesty, which in essence is implemented by said explanations “is a harsh measure, but corresponds to the today’s reality”. Execution of a judgment, when it is discovered that the director owns nothing and it is thus practically impossible to exact any money from him, is another acute problem.

In her turn, Erika Kindsvater, Lawyer of the Law Firm "YUST", told those present about the implementation of shareholder agreement institution (the changes, suggested by the draft law, to chapter 4 of part I of the Civil Code). The subject is of a special importance for the participants of joint ventures. The expert described the legal situation in the legislation and the current court practice and spoke on concrete changes stipulated by the draft law. Special attention was paid to the problems, which would be resolved by the changes, and to the questions, which would remain. In particular, the participants learned about the risks inherent in the novelties of the shareholder agreement forms, status of parties to it, the obligation to inform the company of the fact of execution of a shareholder agreement and compensation of damages if its provisions are not observed. In her speech, Erika Kindsvater described in detail the legal consequences of invalidity of decisions by bodies of a commercial company and transactions executed in violation of shareholder agreements, as well as the obligations of the members to vote in certain ways, with which they are charged by third parties. Those present at the event were especially interested in her report on the correlation between the shareholder agreement, the company’s charter and the antitrust legislation.

Radmila Nikitina, acting Head of Antitrust Law Group, delivered a report on the novelties of the third antitrust package regarding the regulation of distribution agreements and their significance for foreign companies entering the Russian market. The report was dedicated to the changes of antitrust legislation, enacted a year ago, and the forming of the law application practice in the sphere of regulation of distribution agreements. The author paid special attention to the risks faced by foreign companies that enter the Russian market, which are inherent in the organization of distribution networks. The approaches of the Russian antitrust law to the regulation of the distribution agreements were analyzed in comparison with the European law.

Other publications on the subject:

Amendments to the Civil Code: will the corporate agreement “Russian style” survive? //RAPSI
Results: The ways to delimitate competencies //Vedomosti, 28.11.2012
The reform of the Civil Code of Russia imbued the good-faith principle with a new life // Economy and Life, №11 / 2013
The role of law and justice in today’s Russia. The results of the survey by the Center of Political Technologies were published. //Zakon, №12, 2012.