Federal Law No. 14-FZ “On limited liability companies“ of February 8, 1998

Starting from January 1, 2017, amendments to Federal Law No. 14-FZ “On limited liability companies“ of February 8, 1998 (hereinafter – the Law) concerning approval of major transactions and related party transactions enter into force. The main improvements are:

Related party transactions

(Article 45 of the Law)

Major transactions

(Article 46 of the Law)

  1. Criteria for the recognition of persons as related to the company’s transaction has been changed:

    – «affiliated persons» has been substituted with «controlling person» and «controlled persons»;

    - The threshold of direct or indirect participation in the company (control over the company) for the recognition of persons as related has been increased from 20 per cent to 50 per cent plus one vote.

  2. The procedure of obligatory preliminary (or subsequent) approval of related party transactions has been substituted with a notification procedure. Now, as a general rule, the company shall notify unrelated persons about the completion of related party transaction not less than 15 days prior it’s execution. Whereas the sole executive body, member of the company's council of directors or company’s participant who possesses 1 or more per cent of shares of the nominal capital has a right to require preliminary approval of the transaction at the general meeting (council of directors) of the company.

  3. The sole executive body is obliged to approve and submit for approval a reporting on related party transactions concluded in the reporting year to the annual general meeting of members. 

  4. The list of transactions to which the provisions of Article 45 of the Law does not apply has been extended.

  5. It is possible to avoid completely the application of the provisions of Article 45 of the Law in relation to the Company or establish an exclusive procedure for approval of related party transactions with inclusion of the relevant provision into the company's charter.

 

 

  1. The definition of major transaction has been extended. Now, in addition to transactions involving the acquisition and disposal of property, rent and license agreements shall also be recognized as major transactions if the balance value of such transactions amounts to at least 25 per cent of the book value of the Company’s assets.

  2. The rules for calculating property value for the purposes of recognizing transactions as major has been changed. Now the following issues shall be associated with the balance sheet asset:

    in case of the disposal of property – the greatest one of the two values: balance sheet value or value of disposal;

    -     In case of the acquisition of property –  the acquisition price of the property;

    -     in rental agreements – the balance value of the object of the transaction;

    -     in case of acquisition of shares of a publicly traded company – the price of all shares which may be finally acquired.

  3. Some other issues which may contain the resolution on authorization of the major transaction have been specified. Such issues may include the duration of the resolution, alternative options for terms of transactions or authorization of some similar transactions.

  4. The list of transactions to which the provisions of Article 46 of the Law does not apply has been extended.  

  5. The possibility to avoid an obligatory authorization of major transactions of the company with inclusion of the relevant provision into the company's charter is not allowed.