Directors’ Duties in Russia

>> Board Requirements in Russia

Appointment of directors

A director is elected by the shareholders of the company.

Generally, any individual can be appointed to the position of the director. However, the tax authority of Russia maintains the Register of Persons who are disqualified from performing the duties of a director for up to 3 years. In case the General Shareholder Meeting elects such disqualified director, the company may be subject to administrative fine amounting to up to RUB100,000 (approx. EUR1300)

It is advisable for the company to request information from the tax authority register as to whether the nominee for the position of the director is disqualified from the position before holding the meeting.

The Russian law contains no restrictions on the age, nationality or gender of who may be appointed a director and, in general, no employment agreement with the member of  the board of directors is required.

Board meetings and composition requirements

The main source of powers for directors are set out in the Act on Limited Liability Companies (Section 18 to 20). In general, a joint directors representation applies, if not otherwise agreed in the Articles of Association (Articles). Please be aware that any “internal” restrictions of signatory and representation rights of directors resulting from the Articles or by shareholders resolution do not apply towards third parties (and any agreements which have been concluded with such third parties). If you, however, act against  an internal restriction, you will be liable towards the company.

Signatory rights/powers of directors

A member of the board of directors is not entitled to transfer his/her right to vote at the board meetings to another person, including another member of the board of directors. Directors must act within the powers imposed by Russian legislation and delegated to them by the Charter and other internal regulations of the Company.

Conflicts

The conflict of interests between the company and the director may occur when a director is interested in entering company into a “related party transaction”. Related parties include: his/ her spouse, parents, children, brothers, sisters, half-brothers, half-sisters, foster parents, adopted children, and/or other affiliates.

For this reason, the director shall keep the shareholders and the company informed of  the following:

  • Each legal entity of which the director or affiliate of the director hold not less than 20% of shares.
  • Each legal entity in which the director or affiliate of the director holds position(s).
  • Information on transactions of the company (current or potential) which the director might be deemed interested.

If a director has an interest in the company entering into a transaction, the transaction must be approved by the general shareholders meeting.

Where the related-party transaction is concluded by the company without approval by the general shareholder meeting, such transactions may be challenged in court and declared void.


Latest version updated 9th April 2018

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