Corporate Law amendments during pandemic
On April 1, 2020, the Russian Parliament has adopted law amending the existing legislative acts in the corporate relations sphere. It was triggered by widespread dissemination of coronavirus infection in Russia and the suspension of a significant number of companies’ activities.
The law is expected to be approved by the Federation Council and signed by the President in the nearest future.
Below are the most important amendments that will directly affect business industry in 2020.
Firstly, it should be mentioned that the amendments will affect the time frame of holding annual general meetings of joint-stock companies (JSC) and limited liability companies (LLC). According to the law, the annual general meeting of shareholders must be held no earlier than 2 months and no later than 9 months after the end of the reporting period (the annual meeting for 2019 must be held no later than September 30, 2020). The same terms are set for the annual general meeting of LLC participants. Thus, due to the current situation, the period of holding annual general meetings of business entities’ participants is extended till December 31, 2020.
Secondly, the amendments will also affect the value of the company’s net assets. According to the law, reducing the value of net assets below amount of the authorized capital by the end of 2020 will not create obligation to reduce the authorized capital or liquidate the company. This innovation applies to both joint-stock companies and limited liability companies.
Also, one of the amendments concerns extension of the period during which the joint-stock companies whose articles of association and corporate name indicate their public status, but the company itself does not actually meet the criteria of a public JSC, can finally determine its status. This period has been extended till January 1, 2021 after which the company must either apply to the Bank of Russia for registration of the share issue prospectus or make appropriate changes to their articles of association.
The amendments will also concern the annual consolidated financial report, which filing will be available no later than 180 days after the end of the reporting period for which the report was made. At the same time, interim consolidated report must be submitted within 150 days. If the filing deadline falls on a weekend, non-working day, or holiday, the report shall be submitted on the first business day.
Thus, the provisions of the law clearly show the liberalization of legislation in the field of corporate relations, caused by the new realities dictated by COVID-19 pandemic. The necessary incentives are being introduced to maintain a stable level of economic development and support for-profit businesses, without which it would be impossible to carry out normal economic activities.