Comments of Mikhail Ilyin, lawyer, on «Directors to Tax Inspectorates, Minority Shareholders to Be Excommunicated» article

28 October 2010

To fight against raid seizures, deputies of the State Duma of the Russian Federation suggests obliging executives of companies (including major corporations) to personally submit documents to registering authorities and limiting rights of minority shareholders: they will not be able to review company statements.

According to current laws, all documents submitted for registration shall be certified by the notary that shall check powers of company official signing applications.

However, Oleg Mikheev, deputy of Just Russia group, developer of the draft law submitted at the end of October to the State Duma of the Russian Federation for consideration, thinks that currents measures are insufficient. In his opinion, one of principal methods of company takeover consists in registration in the Uniform State Register of Legal Entities of fictitious data on appointment to the executive position of a “nominee” that then settles transactions to alienate assets to the benefit of the raiding party.

Queue up...

To prevent such offences, deputy Mikheev suggests that possibility to send documents for registration by mail should be eliminated and the applicant should be bound by the law to personally submit them to taxation authority. Furthermore, having received relevant application, the registering authority shall notify the entity of planned changes.

It is not specified in the draft law and explanatory note to it what additional check officers of tax inspectorate will be able to perform in case of corporal appearance of director. It also fails to determine exceptions for heads of major companies (for example, RZhD, Gazprom, Sberbank, etc.) business subdivisions of which are located in different regions of the country and it is often necessary to submit documents to the registering authority of the relevant constituent entity of the Russian Federation.

In fact deputy Mikheev is intended to legalize a procedure invented by Moscow taxation authorities almost five years ago: in 2006 to control fly-by-night companies, Moscow Interdistrict Inspectorate No. 46 registering legal entities in Moscow, started to deliver documents only to executives or founders of entities in person. It provoked numerous objections on the part of business community including major corporations (for example, executives of Slavneft company had to repeatedly visit taxation offices joining the queue at 5.00 a.m.). Only seven months later the court to which one of entities that was affected by arbitrary behavior of the taxation authority applied declared that these actions were unlawful.

Experts are critical about submitted draft law. For example, in the opinion of Natalia Sibgatulina, lawyer, head of ACB law firm, submission of applications by company executives in person makes no sense in terms of anti-raiding measures: “It is probable that the presenter of legislative initiative simply does not know the procedure for registration of legal entities that was approved earlier and is currently applicable. On the whole, I think that all these “anti-raiding” projects are developed only to give appearance of authorities’ work. As all changes in registration of legal entities that have already been put in force since 2002 systematically made it possible to perform official and legal raids. What control can be discussed now? It is necessary to simply eliminate this multibranch system for delivery of information and incompetence of registering authorities.”

Mikhail Ilyin from S&K Vertical law firm agrees with her: “In case of fraudulent activities a person with forged document can personally submit information to the inspectorate. The main problem now is absence of the right of taxation officers to refuse to register if they have doubts about submitted documents or information does not represent the facts. It is necessary to allow registering authorities to perform legal analysis of submitted documents similarly to powers of Rosreestr upon registration of rights to immovable property.”

A Big Secret from a Small Party

As another “anti-raiding” measure, deputy Mikheev suggests limiting rights of shareholders share of which does not exceed 7%: within six months after purchase of securities they will not be able to review documents of the company. “Practice of corporate conflicts suggests that cases of purchase of an insignificant block of shares only to acquire access to internal information of a joint-stock company followed by its use for corporate blackmailing or raid seizure are currently widespread,” the author of the draft law notes in the explanatory note.

“I also think that setting a temporary ban for minority shareholders on receipt of company documents lacks grounds,” Mikhail Ilyin says. “According to the current laws, only persons holding at least 25% of shares of the joint-stock company have access to accounting documents. And documents which minority shareholders are currently entitled to obtain can serve as a corporate blackmail tool only in case the company violates the law,” the lawyer is sure.

Amendments made by deputy Mikheev are currently viewed by the speaker of the federal parliament. No official comments on them have been made yet.

Pavel Netupsky

Daily Journal

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