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State Duma of the Russian Federation is currently discussing draft amendments to the Russian Civil Code. Affiliation criteria list, earlier established by RSFSR law dated 22.03.1991 N 948-1 “On Competition and Restriction of Monopolistic Activity in Commodity Markets” is planned to be changed. Herewith the criteria will be specified by a separate federal law.
DATE: February 18, 2014 | AUTHOR: atlawyers
It is intended by Article 53.2 of the Russian Civil Code to include the Board of Directors and the Executive Board members’ relatives into the affiliates list, while now the scope of the rules on affiliation includes only the relatives of general directors. Approval by the general meeting of shareholders will be required for a company to make transactions with its subsidiaries.
This change has already been widely criticized in the business community. The highest public reaction was drawn by the norm, which establishes that the court can recognize members of a transaction as affiliates at its discretion, without regard to the criteria established by the law (paragraph 4, article 53.2 of the Russian Civil Code). Thus, affiliation criteria list is still opened. This can create favorable conditions for transaction challenging abuses. In order to do this it is only necessary to bring indirect affiliates into the shareholders’ or management group.
However, the Civil Code establishes only general provisions on affiliation; they will be specified by a separate law. As expected, relevant amendments will be made to Federal law “On joint-stock companies”.