Joint stock companies in Russia will be divided into public and non-public entities

The Federal law №99-FL, making amendments to the Civil Code of the Russian Federation, comes into force as per the September 1, 2014. According to the proposed amendments, closed and open joint stock companies along with superadded liability companies will cease to exist within the Russian Federation. All joint stock companies (JSC) will be divided into public and non-public companies instead of preexisting legal forms.

Public companies are proposed to be qualified as JSC, securities of which were ever placed by public offering or traded publicly on the terms specified by the securities laws.

Alexander Konovalov, the Head of the Ministry of Justice of the Russian Federation, stated that more than 85 % of the legal entities are registered at the moment as limited liability companies. At the same time, such legal forms as general partnership and superadded liability companies appeared to be the most unclaimed.

According to representatives of the Ministry, closed joint stock companies fail to justify their existence, as far as their status is actually duplicated by limited liability companies. Thus, it is submitted to constitute the division on public (open) and non-public (closed) joint stock companies instead of existing forms of open and closed joint stock companies. In addition, Mr. Konovalov placed emphasis on the fact that there is no need to re-register earlier established legal entities and to re-record real estate titles.

Division of JSC on public and non-public entities won’t influence the number of companies obligated to disclose the full set of existing facts. In this respect, several thousands of JSC that were released from disclosing information by the form of existing facts prior to introduction of amendments are now to disclose condensed amount of information (annual statements, annual accounting reports, lists of affiliated persons), due to the fact that in the past these companies carried out public placement of securities.

According to specialists, the proposed bill is focused on arrangement of the conditions for establishing of corporate management models. Besides, the submitted amendments are to contribute simplification and regulation of control over JSC.