Our progress / Hot Topics

Corporate and contract law


Back to Media

Offshores Left to Medvedev

25.01.2012 10:00 / Vedomosti

Officials and experts have resolved their disputes on most Civil Code reforms. Possible raising of the charter capital minimum and disclosure of beneficiaries has been left for the President to decide.

The Civil Code reform workgroup, headed by Minister of Justice Alexander Konovalov, convened for the last time yesterday, say two participants. The draft of the amendments will be forwarded to President Dmitry Medvedev on 1 February.

Only three moot points remain, say our sources: the charter capital minimum, disclosure of offshore beneficiaries and extended freedom of contract. The latter will be futher discussed by the workgroup, who have requested overtime. The stands on charter capital differed radically. The President’s Codification Council lawyers proposed to raise it 50 times for open joint stock companies to RUB 500k, 500 times for non-public (formerly closed joint stock) companies to RUB 5mn, 1000 times for public companies to RUB 100mn. The idea failed to get approval from the Ministry for Economic Development and the MIFC Taskforce.

The MIFC Taskforce proposed complete elimination of charter capital, replacing it with a series of solvency and asset value tests, according to the Konovalov workgroup. Thus the Board of Directors will be personally liable for the tests, according to the proposals.

Sources at the Ministry for Economic Development and the MIFC Taskforce have stated earlier that they are ready to support the offshore beneficiary disclosure to the Federal Tax Service, however, they were against sanctions for non-compliance. Codification Council member Sergey Sarbash says that the project envisions 2 types of sanctions. If an offshore fails to disclose its owners, solidary liability will be carried by the persons authorized to act on the company’s behalf or vested with the power to represent it. The offshore company itself can be deemed a mala fide purchaser and will have to return all the proceeds. The sides failed to reach a compromise yesterday, say our sources.

The sanctions will affect the investment climate and are difficult to impose, says Alexander Zakharov, Partner at Paragon Advice Group: many juridictions forbid beneficiary disclosure, making only nominee information available to the taxman. These details are also impossible to verify, believes Zakharov: “Unlike the USA, Russia is not in a position to boss around other countries with its laws”.

Dmitry Kazmin

Corporate and contract lawProject Group №2