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Complex Transactions Back in Civil Code

23.04.2013 00:03 / RBC - daily

The State Duma has passed the second portion of Civil Code amendments in the second reading. New rules, in force starting this September, will return to the Russian jurisdiction the structuring of complex transactions with open-ended POAs, which will complicate the procedure of contesting trades.

For instance, the Duma has upheld the existing regulation of potestative transactions (the proposed banning of which sparked protests in the business circles earlier). Senior Counsel at Yegorov, Puginsky, Afanasiev and Partners Maxim Rasputin says potestative conditions are frequent in complex financial transactions, M&A and JVs. The ban would have thwarted the possibility of structuring any of these deals according to Russian law. The approved Civil Code amendments make potestative conditions permissible at the discretion of the court.

For trades requiring approval (by the Board of Directors or the anti-monopoly committee), a two-step procedure is in place. The deal is contestable if approval has not been obtained within a reasonable period.

The approved document contains a separate chapter on general meetings. New norms, however, will not cover corporate GSM. They will regulate other types of meetings such as property owners or lenders. Head of the State Duma Civil, Criminal, Arbitration and Procedural Law Committee Pavel Krashennikov said that the new chapter lays down the basic rules. For instance, mandatory points of meeting minutes or required number of votes for passing a decision. The crucial point is the rules for contesting meeting decisions, including clearly listed cases of automatically void meeting decisions, regardless of whether they have been contested in court.

Another important amendment is POA issuance. The maximum term requirement (three years) has been lifted. Also, staring in September, POAs may be issued collectively or to several representatives at a time.

Some experts debate the necessity of irrevocable POAs. If powers of attorney can not be revoked at short notice, this may be used as an advantage in case of dispute. To mitigate the risks, such POAs should be issued only through a notary, say experts.

Dmitry Ivanov, Maxim Odintsov

Corporate and contract lawProject Group №2