Competence of the General Meeting of Shareholders in Relation to M&A Deals under Russian Law
Investment Law Attorney, CA-Project Consulting, St. Petersburg, Russia
Russia has made progress in reforming its laws on investments, and its Mergers & Acquisitions market grew to USD 5-billion in 2007. Legal regulation of M&A needs to be further adapted to economic reality. Current regulation concerning the competence of the general meeting of shareholders impedes the Russian M&A market. Anastasia Rusinova analyses competences of the general meeting of shareholders in relation to M&A deals under Russian law.
Ms. Rusinova writes: It is well known that shareholders as the owners of a JSC entirely control the company’s activities directly through voting, or indirectly through members of the company’s bodies elected by the shareholders. The direct participation of shareholders in a company’s management allows them better control over the company’s activities and secures their interests. However, precisely the direct participation of shareholders in the company’s management is limited under Russian legislation.
First, the competence of a general meeting of shareholders is exhaustively defined in the Federal Law of 26 December 1995 No.208-FZ On Joint-Stock Companies (JSC Law). According to Article 48(3) of the JSC Law, the general meeting has no right to examine or to settle questions that are not stipulated in the JSC Law. Thus, shareholders have no right to broaden the authority of the general meeting, even by amending the company’s charter. However, they also have no right to limit their competence if the JSC Law does not directly prescribe it.
Most of the company’s matters that fall within the competence of shareholders can be decided upon by a 50 per cent plus-one-share majority. The JSC Law stipulates several cases when a decision must be made through a qualified majority of votes (for example, changes and additions to the company’s charter requires three-fourths of the whole number of votes). The shareholders have no right to provide for qualified majority voting for the cases which are not stipulated by the JSC Law, or to provide for simple majority voting where the Law prescribes qualified majority voting. For example, the shareholders cannot alter the company’s charter to provide for the unanimous voting.