Joint-stock company in Russia

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общество с ограниченной ответственностьющество с ограниченной ответственностью

When setting up a business entity in Russia, you will need to do some analysis to determine which business system will be the most advantageous for your company. A joint-stock company (JSC) may supply you with the ownership and revenue opportunities you need for a successful business venture in Russia. Under the Russian Civil Code, a JSC provides rights with limited liability. Shareholders of a JSC are not generally liable for its debts and their risk is limited to their acquisition. Shareholders may sign shareholders’ agreements that control how their rights are exercised.

Russian law describes public and non-public joint-stock companies. Public companies are entitled to have their stock publicly traded, but they must comply with rather strict legislative requirements concerning the structure of their governing bodies, connections between shareholders, and obligatory reporting, among other things. Non-public JSCs, on the other hand, cannot arrange for public trade of their stock but may enjoy more flexible regulation concerning their corporate structure and operations.

Formation of a Joint Stock Company in Russia

Company formation in Russia can either create a new business entity or reorganize an existing legal entity. A JSC is considered to be created as of the date of its state registration. The JSC charter must satisfy several requirements. In addition to the name and business address, the charter must specify whether the JSC is public or non-public. It must also specify:

  • The amount of the initial capital
  • The number, nominal value, and classes of shares
  • The composition and powers of the governing bodies of the JSC
  • The procedures for shareholders’ meetings
  • Whether a government entity has any special voting right
  • Other provisions required by law

Both public and non-public JSCs must maintain a shareholders’ register in which the holdings of the shareholders are noted. This function must be performed by a licensed registrar.

Key Requirements of a JSC

As with any form of business entity, joint-stock companies are subject to certain requirements regarding initial capital and the organization of the management structure. Some of these requirements include:

  • Initial capital. A joint-stock company’s capital is divided into a set number of shares. The initial fund’s needs are modest. The charter capital of a public JSC must be at least 1,000 times the statutory monthly minimum wage. As of today, this works out to RUB 100,000 (USD 1500). A non-public joint-stock company must have a minimum charter capital of 100 times the minimum monthly wage, or RUB 10,000 (USD 150). The first 50% of the JSC charter capital must be paid in within three months of its registration, and the remainder by the end of the first year. Russian law stipulates that only joint-stock companies may issue stock, which is deemed as securities and subject to registration.
  • Governance. A joint-stock company’s higher administration body is the general meeting of shareholders, which must convene at least once a year. A public joint-stock company must have a board of directors consisting of at least five members. The company’s executive body may be collegiate (board, directorate) and/or “one-person” (director, general director). It is also possible to have several “one-person” executive bodies in a joint-stock company that may represent the company jointly or separately. A joint-stock company’s executive body carries out the day-to-day management of operations and reports to the board of directors and the general meeting of shareholders.
  • Auditor. In addition to the previous governing bodies, a JSC must have an auditor. The auditing function can be performed by an Internal Auditing Commission or an Internal Auditor. The auditor must be elected by the shareholders.

Registration and Liquidation of a JSC

The general enrollment requirement is the same as for a limited liability company. An additional requirement, however, is the registration of the issuance of the JSC shares with the Central Bank of Russia.

A joint-stock company may be liquidated voluntarily or by court order on the grounds established by the Civil Code. The liquidation of a company shall result in its termination, with no transfer of rights and obligations to other persons by succession.

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Joint-stock company in Russia
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Joint-stock company in Russia
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When setting up a business entity in Russia, you will need to do some analysis to determine which business system will be the most advantageous for your company. A joint-stock company (JSC) may supply you with the ownership and revenue opportunities you need for a successful business venture in Russia. Under the Russian Civil Code, a JSC provides rights with limited liability. Shareholders of a JSC are not generally liable for its debts and their risk is limited to their acquisition. Shareholders may sign shareholders’ agreements that control how their rights are exercised.
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