Russian business law: the essentials

A corporation consists of members. Members of any corporation form the highest body of the management of the corporation, and due to this, have certain rights and duties in relation to the legal entity.

Basic rights of members are (Article 65.2 of the CC of the RF):

i) the right to manage a corporation;

ii) the right to receive information on the corporation’s activities. The principal duties of members are:

i) participation in the formation of the corporation’s property,

ii) participation in the adoption of decisions required for the company to continue its existence.

The following rights are also attributed to profit corporations’ members:

i) the right to receive income from the activities of the corporation,

ii) the right to receive a part of the property that is remaining after the liquidation of organization.

Other rights and duties of corporations’ participants are established in special laws (Federal Law on Limited Liability Companies, FL on Joint Stock Companies, FL on Non-Profit Organizations, and others).

The participants of a corporation are named members, shareholders or just participants depending on a specific type.

Unitary legal entities have no members.

3.4. Establishment of Legal Entities

The legal entity is considered established from the moment the record is entered into the Unified State Register of Legal Entities (USRLE).

The procedure for the establishment of any legal entity consists of the following steps:

i) drawing up necessary documents,

ii) submission of documents to the registering body,

iii) receipt of documents confirming registration of the legal entity.

Below we will consider each of these three stages in more detail.

3.5. Preparation of Necessary Documents

The list of documents which should be submitted to the registering body is established in Article 12 of Federal Law on Registration. These documents are:

i) a statement on state registration,

ii) a decision on the establishment of a legal entity,

iii) constituent documents,

iv) an extract from the register of foreign legal entities of the respective country of origin (or any other proof of equal legal force) of the legal status of the foreign legal entity being a founder,

v) a document confirming the payment of the state fee.

In addition, the following shall be submitted at the establishment of a non-profit organization in the appropriate body:

i) information on founders in duplicate,

ii) a statement for the inclusion of a non-profit organization in the register of non-profit organizations which are carrying out the functions of a foreign agent, as for non-profit organizations which are carrying out functions of a foreign agent.

3.5.1. Application of State Registration

The application form for the state registration of a legal entity is approved by Order No. MMB-7–6/25, at the Federal Tariff Service (FTS) of Russia, dated January 25, 2012 (appendix No. 1 to this order, form No. P11001). The application form shall be filled out strictly in accordance with the registration requirements, which are approved by the specified order of the FTS of Russia (Appendix No. 20, sections I and II).

3.5.2. Decision on the Establishment of a Legal Entity

The decision on the establishment of a legal entity is made, as a rule, by a protocol which is formed in the results of the meeting of founders. The protocol is composed in a written form, made in a single document and is signed by all of the participants of the meeting.

Provisions of Chapter 9.1 of the CC of the RF shall be complied while holding a shareholder meeting. This chapter is devoted to the decision-making at the meetings, as well as the invalidity of such decisions. This chapter refers to the meetings, including the meetings of the legal entity’s founders.

If the legal entity has only one founder, the decision on the establishment of a legal entity is made by him/her individually, and is not formalized in the form of a protocol. Such a document will be called, for example, “The Decision on the Formation of the Joint Stock Company ‘Alfa’.”

At the establishment of a non-profit organization, the decision on the establishment is provided in duplicate.

3.5.3. Constituent Documents

One of the constituent document of any legal entity is its charter. An exception is the fellowships constituent document, which is the foundation agreement. Rules of the CC of the RF on charters (clause 1 of Art. 52 of the Civil Code of the RF) are applicable to the foundation agreement of the association/fellowship.

The charter of the legal entity must necessarily contain the following information:

i) The Name

Legal entities have full and/or reduced names. The name must contain an indication on the organizational-legal form of the legal entity. Some federal laws establish additional requirements for the name of the legal entity. For instance, the Federal Law on Education establishes that the educational organization must have an indication on type of the educational organization in its name (Clause 5 of Article 23).

ii) The Organizational-Legal Form

iii) The Location

The location is a locality where the legal entity was registered (Clause 2 of Article 54 of the CC of the RF). There is no need to indicate the full address of the legal entity in the charter.

iv) The order of management of the legal entity’s activities

Under the management order in the CC of the RF, there is a list of the managing bodies of the legal entity, with an indication of their powers.

Additionally, in the charters of non-profit organizations, and in cases provided by law, as well as in the charters of profit organizations, the subject and the purposes of legal entities’ activities have to be defined (Clause 4 of Article 52 of the CC of the RF). The subject means the list of the variety of the activities of the organization. The legislation sets other requirements on the content of the charter, depending on its organizational-legal form, and the variety of conducted activities.

The charter of legal entity may contain any provisions which do not contradict to the legislation of Russia.

The CC of the RF allows the possible use of sample charters. However, currently the state authorities have not approved of any sample form of a charter.

Constituent documents are provided to the registering body in duplicate (in triplicate in case of establishing a non-profit organization).