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Closed Joint Stock Companies To Be Abolished?


In the near future, Russia may only have two company forms—joint stock companies (AO) and limited liability companies (OOO.) This reform, part of larger plans to reform the Civil Code, was developed by the Presidential Council on Legislative Development. It is now waiting for President Medvedev’s signature.

The document proposes to eliminate obscure forms of companies (such as the “Additional Liability Company”) and the popular Closed Joint Stock Company (ZAO.) It does not specify how the ZAOs are to be liquidated. During an interview in June, Anton Ivanov, Chairman of the Supreme Arbitration Court, said: “ZAOs must be either abolished or converted to AOs or OOOs.”
The authors of the concept have suggested increasing the minimum registered capital for OOOs to as much as one million rubles and for AOs up to two million rubles. The entire registered capital of the company at its creation must be deposited in cash. Only then can non-monetary contributions be deposited. Thus, entering equity bills, bonds, and claims as registered capital would be banned under the author’s conception. However the Duma is already in the process of drafting amendments to the Civil Code that will would allow registered capital to include secured debt and company debt.

The concept is based on European law. “European laws and Russian laws should be drawn closer together, as required by a recent Presidential decree, which states that the convergence between the two is necessary.”—stated Aleksandr Makovsky, Vice Chairman of the Board.

Ivan Oskolkov, an official with the Ministry of Economic Department, agrees that the two major forms of companies — OOOs and AOs—should be maintained. However, he is against increasing the minimum size of registered capital: “Control needs to be strengthened not during a company’s initial creation, but during its liquidation.”

Simply raising the minimum registered capital is a requirement relatively easy to circumvent, for example, by making a subsequent purchase using fixed assets. Europe has the reverse tendency - of abolishing requirements for minimum capital.
In 2001, France allowed SARL, an analog to Russia's OOO, to register with the capital of one Euro. Last year, Germany's GmbH followed suit. In Europe, more attention is paid to the maximum disclosure of public information.

Alinga Consulting Group

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