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Newsletter. Law Update. March - April 2014

19.05.2014, Dmitri A. Lubomudrov
Newsletter

Law Update
March – April 2014

Law Update

Legal Entities

Federal Law on the Amendment of Article 90, Part One, of the RF Civil Code and Article 16 of the Federal Law on Limited Liability Companies, dated May 5, 2014, No. 129-FZ

The changes concern the procedure and deadlines for payment of the charter capital of the LLC. The founder(s) must pay its (their) share in the charter capital within the term set forth in the agreement for setting up the LLC, but in any case within four months from the date of the state registration of the legal entity. Previously, the term was 12 months. The requirement of the minimal 50% advance payment of the charter capital by the date of the state registration has lost its force.

Federal Law on the Amendment of the Federal Law on the State Registration of Legal Entities and Individual Entrepreneurs, dated May 5, 2014, No. 107-FZ

Now, the application for state registration of the legal entity (individual entrepreneur), registration of amended constitutive documents, and information on the legal entity must be filed and documents from the registrar must be received on the basis of a notarized power of attorney (or its notarized copy) enclosed with the set of documents being filed. The signature under the application must be certified by a notary public, except where the applicant files the documents personally on production of his(her) passport or the documents are signed by a qualified electronic signature.

Federal Law on the Amendment of Certain Legislative Acts of the Russian Federation to the Extent of Reduction of the Term for Registration of Legal Entities and Individual Entrepreneurs with State Non-Budget Funds and Recognition as Lapsed of Certain Provisions of the Federal Law on Insurance Premiums to the RF Pension Fund, RF Social Insurance Fund and RF Obligatory Medical Insurance Fund, dated April 2, 2014, No. 59-FZ, was promulgated on April 2, 2014

The term for registration with and striking off the records of state non-budget funds of legal entities and individual entrepreneurs has been reduced from 5 to 3 business days.

It is no longer required to receive paper documents confirming registration of the insurer and the insurance rate of the obligatory social insurance. Now, the said documents signed with a qualified electronic signature are sent to the insurer in an electronic form through Internet. However, on request of the insurer the documents may be sent as hard copies within three business days as well. Correspondingly, the Consolidated State Register of Legal Entities and the Consolidated State Register of Individual Entrepreneurs contain (if indicated in the application) the insurer’s electronic mail address. Thus, the term for the exchange of information between the registrar and the non-budget fund is reduced from 5 to 3 business days. The changes come into force 180 days after the date of promulgation, i.e. April 2, 2014.

Insurers are no longer obligated to notify non-budget funds (controlling bodies) about the opening and closing of bank accounts. The said provision came into force on May 1, 2014.

Purchases

The provisions of Federal Law on the Amendment of Article 2 of the Federal Law on Purchases of Goods, Work, Services by Certain Types of Legal Entities, dated March 12, 2014, No. 26-FZ, came into force on March 22, 2014.

The changes concern the procedure for approval of the purchase regulations of a customer. Under the general rule, such regulations are approved by the board of directors of a joint stock company, and if the board functions are performed by the general meeting of shareholders, the approving body is the management board. If the company has no elected management board, approval is within the competence of the general meeting of shareholders. In a limited liability company the purchase regulations are approved by the general meeting of participants. However, if the company’s charter grants such powers to the board of directors or the management board, the decision is made by the corresponding management body.

Counteraction to Money Laundering

Governmental Decree on the Approval of the Regulations on the Provision of Data to the Federal Financial Monitoring Service by Organizations Conducting Operations with Money or Other Property and Individual Entrepreneurs, and Inquiries of the Federal Financial Monitoring Service to Organizations Conducting Operations with Money or Other Property and Individual Entrepreneurs, dated March 19, 2014, No. 209

As a measure to counteract money laundering and financing of terrorism, the RF Government has approved a new procedure for provision of data to the Federal Financial Monitoring Service (the “Rosfinmonitoring”). Such data include information about clients, their operations and beneficial owners, in particular, about suspicious operations, operations subject to control, about suspension of operations and freezing of money, as well as about the facts of hindering the struggle against money laundering on the part of a foreign state in which the branches, representative offices or subsidiaries of suspicious companies operate. Credit organizations must provide, inter alia, copies of civil-law contracts, transaction passports, cards with the autograph signatures and seal imprint of the client, information about the movement of money in the client’s accounts (deposits), as well as the corresponding excerpts, copies of the client’s file, copies of the passports of persons entitled to conduct financial operations with the accounts, etc. Rosfinmonitoring may at its own initiative inquire for information about the beneficiaries in a specific operation. The list of persons providing such information to Rosfinmonitoring is broadened to include mutual insurance societies; non-state pension funds, cellular communication operators; individual entrepreneurs – real estate brokers, insurance brokers and entrepreneurs engaged in purchase and sale of precious metals and stones, jewelry. All data – inquiries and responses – are submitted in an electronic form under an electronic digital signature or on a data medium. Depending on the category of information, such data are sent to Rosfinmonitoring promptly, within three or five business days.

Court Practice. Freedom of Agreement

Ruling of the Supreme Arbitration Court Plenum on the Freedom of Agreement and Its Limits, dated March 14, 2014, No. 16, was published on April 3, 2014

The Supreme Arbitration Court Plenum (the “SAC Plenum”) elucidates the criteria and limits of the imperative and discretionary nature of law rules, the issues of regulation of the parties’ relationship where they enter into an undefined contract or a contract containing approximate terms and conditions, as well as gives recommendations concerning resolution of disputes arising out of contracts.

A law rule is imperative if it either “expressly prohibits the parties from setting forth in their agreement a provision that differs from that contained in the law rule” or indicates that they may deviate from it within limited boundaries or does not prohibit it expressly but the imperativeness of the law rule follows from the goals and nature of the legal regulation of such kind of agreements (relationships) and is necessitated by the need to safeguard “specifically important interests protected by the law”, public interests, prevention of “a gross violation of the balance of the parties’ interests”. However, the prohibition following from the imperative law rule must be construed narrowly. At the same time, the SAC Plenum gives no exhaustive criteria for determination of such boundaries, merely stating that inadmissible are only those conditions which infringe upon the lawful interests of the weaker party, and giving some examples. If the law rule does not contain an express prohibition to deviate by way of the parties’ agreement and no other criteria of its imperativeness exist, such law rule is regarded as being of the discretionary nature. However, in every specific case and with regard for all circumstances, it is for the court to establish with good reason the essence of the law rule and the limits of its imperative or discretionary nature.

Besides, the SAC Plenum indicates how a contract should be construed if its terms are not clear and it is impossible to establish the true will of the parties with regard for all circumstances. It is presumed, insofar as the contrary is not proved, that construction must be in favor of the counterparty of the party that drafted the contract. If the draft contract contains clearly burdensome conditions for the other party which was actually deprived of the chance to negotiate its terms, the court may apply the law rule regulating an adhesion contract, namely amend or terminate the contract on request of the counter party.

The SAC Plenum also touched upon the issue of undefined contracts, stressing that in the absence of the signs of a mixed contract they are not subject to application of the rules on definite types of contracts. Such rules may be applied to undefined contracts by analogy exclusively in the event of similarity of relationships and the absence of a direct regulation by the parties’ agreement.

Court Practice. Void and Invalid Contracts

Informative Letter of the Supreme Arbitration Court Presidium The Overview of Court Practice in the Consideration of Disputes Connected with Holding a Contract Void, dated February 2014, No. 165, was published on March 12, 2014

The Supreme Arbitration Court Presidium (the “SAC Presidium”) elucidates disputable issues concerning recognition of contracts as void and invalid.

According to the SAC Presidium, a contract whose material terms were not agreed upon by the parties is actually absent and does not give rise to circumstances it was aimed at either at present or in the future. Therefore the rules setting forth the grounds for invalidation of a contract may not be applied to such contract.

A contract which the parties made in a proper form and agreed upon all its material terms but failed to have it properly registered nevertheless gives rise to legal circumstances in the parties’ relationship and may be contested in accordance with the rules on transactions invalidity. However, the whole complex of legal consequences such contract is aimed at would only emerge after its formal state registration. If the contract did not undergo state registration but is performed by the parties, it may not be deemed void. However, it may not be referred to in the relations with third parties. For example, the landlord has no right to claim that the contract be retained after a change of the property’s owner.

According to the SAC Presidium, “if there is a dispute over the voidance of the contract, the court should assess the circumstances of the case in their interconnection in favor of retention of the obligations rather than their annulment, and also proceeding from the presumption of reasonableness and good faith of the parties”. For example, a contract whose material terms the parties agreed upon incompletely but nevertheless performed it may not be regarded as void, because the fact that the parties performed the contract evidences that they “thought it unnecessary to agree upon such term” and entered into the contract. However, if the concerted will of both parties to perform the contract (e.g., to perform work under the contract) is not proved and the contract was not actually performed, then it cannot be stated that the contract was entered into or that there is a ground for claiming unjust enrichment.

The SAC Presidium reminds that the terms “which one of the parties claims should be agreed upon” may also be material terms of the contract. If such terms were not agreed upon by the parties, the contract is void. Whether a certain term is material or not may be determined on the basis of an indication that one of the parties should perform a certain action at a certain time. For example, in a contract for performance of work the period for carrying out the work by the contractor may be determined on the basis of the indication that certain action should be performed by the customer or third parties. However, the actions of third parties must be performed within the period of time set forth in the contract for them or within a reasonable period of time. In that case the contract would be regarded as non-void, and if the customer fails to perform its obligations in due time, the contractor would have the right to refuse counter-performance and claim damages.

The SAC Presidium draws attention to the fact that the terms of a framework agreement are a part of the contract entered into by the parties, unless the parties set forth otherwise and unless it does not contradict the parties’ intent fixed in the framework agreement. It is also noted that the dispute resolution clause of a contract is an independent agreement and, consequently, is valid regardless of whether the contract itself was found void.

Civil Law Reform

Federal Law on the Amendment of Parts One, Two and Four of the RF Civil Code and Certain Legislative Acts of the Russian Federation, dated March 12, 2014, No. 35-FZ, and Federal Law on the Amendment of Chapter 4 of Part One of the RF Civil Code and Recognition as Lapsed of Certain Provisions of the Legislative Acts of the Russian Federation, dated May 5, 2014, No. 99-FZ, which will come into force on October 1 and September 1, 2014 respectively

Considerable changes were introduced in Part Four of the RF Civil Code (the “CC”) which regulates the sphere of intellectual property. Among other things, the issues of registration of intellectual property rights, disposal and use of exclusive rights and their protection have been reconsidered and set forth in more detail. The pledge of exclusive rights has been regulated scrupulously. Changes also concern copyright, related rights and patents.

Chapter 4 (on legal entities) of Part One of the CC has been changed drastically. In particular, legal forms of legal entities have been revised: there have appeared corporation, public and non-public companies, real estate owners’ partnership, and others. Closed joint stock companies and superadded liability companies have become things of the past. A corporate agreement has been introduced. Special attention is paid to affiliates as the ground for emergence of legal consequences. The provisions on reorganization, liquidation, liability of legal entities, protection of creditors rights have been revised.

The changes in the CC described above will be discussed in more detail in our Newsletters.