Extension of the term of office of the general director: you have time until 1 September
Background
Important information for all limited liability companies (OOO). From 1 September 2024, the appointment of the general director (the sole managing body) will only be possible through a notary. This affects all OOOs.
What has changed?
It has long been the rule that all resolutions of the general meeting of shareholders of an OOO must be notarised. However, it has been possible to circumvent this requirement: through a notary to make changes to the articles of association, or through a notarised resolution (but only the first time) to dispense with this formality.
Lawyers will note at this point that, in any event, an increase in authorised capital or the conclusion of a convertible loan agreement is only possible via a notary.
As of 1 September 2024, the appointment (election) of the sole executive body (general director) can only be made in “notarial form” (by notarial certification of the fact of the resolution (and the composition of the participants present at the resolution)), regardless of the provisions of your company's articles of association or a prior resolution of the general meeting of shareholders to dispense with the notarial form.
As a result, it will be much more difficult and expensive to adopt such a resolution after 1 September, especially if the participants of the company are not located in Russia. Moreover, it will be even more difficult for companies with a board of directors, as the members of the board of directors cannot even issue a power of attorney.
But an appointment is not an extension, is it?
In fact, an extension is not really an appointment. Moreover, the changes that will come into force in September are clearly aimed at combating raids, which implies a change of general director, not an extension of his powers.
However, the term “extension” of the general director's powers does not appear in the Act, and there is a serious risk that further law enforcement practice will develop in such a way as to impose higher requirements for the extension of powers. This is of course not certain, there is no judicial clarification yet, so there is a risk.
What is your advice?
The extension of the powers of attorney is not registered anywhere; moreover, court practice assumes that the powers of attorney of the general director are valid until revoked, regardless of whether there is a resolution of the general meeting on the extension. However, counterparties, banks and other persons may request confirmation of the validity of the proxies. From 1 September, they will be able to request a notarised power of attorney.
- We recommend that you make a decision on the extension (confirmation) of powers for a new term of office before 1 September, even if the old term has not yet expired. Also, do not forget to check the terms of the director's employment contract (according to the Labour Code of the Russian Federation, the maximum term of a fixed-term contract is 5 years).
- As lawyers, we cannot recommend making decisions retroactively after 1 September to avoid the need for notarisation.
More information to the norms and an analysis of the situation for OOO with a board of directors can be found at this link.