Russian President Vladimir Putin adopted Decree No. 16 on January 17, allowing Russian companies to change their corporate decision-making so that minority shareholders from the so-called “unfriendly states” (or those controlled by persons from such states) and directors nominated by them lose their voting rights at the shareholder meetings in the boards of directors (supervisory boards) and management boards of affected Russian companies.
Decree No. 16 applies if a Russian company, such as a stock company or a limited liability company, meets the following criteria:
Under Decree No. 16, the shareholders of an affected Russian company who are not considered unfriendly persons can, by a majority of votes held by them, adopt a decision declaring that the votes of unfriendly persons will not be counted for quorum and the unfriendly persons will not have voting rights (the Decree No. 16 decision). If the Decree No. 16 decision is taken, it will apply to decision-making at the governing bodies of an affected Russian company, including at any shareholder meeting where the unfriendly shareholders will not be able to vote, and in the board of directors and the management board where directors nominated (appointed from the candidates nominated) by the unfriendly shareholders will not be able to vote.
Once the Decree No. 16 decision is adopted, all further decisions of the affected governing bodies will be taken in a similar manner: by a majority of votes of all members of a body (shareholders, directors) other than the unfriendly persons (the Decree No. 16 decision-making). Decree No. 16 explicitly states that this rule applies regardless of whether the charter of an affected Russian company or a corporate (shareholder) agreement concerning this company contains other rules and regardless of the governing law applicable to such corporate agreement.
The Decree No. 16 decision will apply until Decree No. 16 ceases to apply, or the Decree No. 16 decision is repealed.
Decree No. 16 establishes that the change of corporate decision-making is possible until December 31, 2023. We cannot exclude that this term will be extended.
Decree No. 16 represents a change in the statutory rules on corporate decision-making. In general, as a matter of Russian corporate law, such change could be adopted only by a law rather than a presidential decree. However, Decree No. 16 is adopted under the auspices of the Russian countersanction laws that allow the president to introduce any countersanction measure he deems necessary. Decree No. 16 represents yet another countersanction measure introduced by the president using his broad powers under the Russian countersanction laws.
Decree No. 16 does not list the affected Russian companies. Some commentators think that given the criteria outlined in Decree. No 16, there could be only about a dozen of such companies. In any event, given that it is up to certain shareholders of an affected Russian company to decide whether to adopt a Decree No. 16 decision, it remains to be seen how many companies will in fact be subjected to the Decree No. 16 decision-making.
Our lawyers have long been trusted advisers to clients navigating the complex and quickly changing global framework of international sanctions. Because companies must closely monitor evolving government guidance to understand what changes need to be made to their global operations to maintain business continuity, we offer this centralized portal to share our insights and analyses. To receive the latest updates, subscribe to our Ukraine Conflict: How to Maintain Global Business Continuity mailing list.
If you have any questions or would like more information on the issues discussed in this LawFlash, please contact any of the following: