PREFACE

Technical Notes

INTRODUCTION

Legal Precursors to the Company Law

Political History of the Company Law

PART I: A SELF-ENFORCING MODEL OF COMPANY LAW FOR EMERGING MARKETS

CHAPTER 1: OVERVIEW OF THE SELF-ENFORCING MODEL

CHAPTER 2: THE NATIONAL CONTEXTS THAT SHAPE COMPANY LAW

A. Company Law in Developed Economies

B. The Goals of Company Law in Emerging Economies

C. Legal and Market Controls in Emerging Economies

D. Cultural Norms for Manager and Large Shareholder Behavior

CHAPTER 3: ALTERNATIVE APPROACHES TO COMPANY LAW

A. The Prohibitive Model

B. The Self-Enforcing Model

1. Structural Constraints

2. Simple, Bright-Line Rules and Strong Remedies

C. The Limits to the Self-Enforcement Approach

D. Can Law Function Without Official Enforcement?

CHAPTER 4: GOVERNANCE STRUCTURE AND VOTING RULES

A. Allocation of Decisionmaking Power

B. Allocation of Voting Power: One Common Share, One Vote

C. Voting for Directors: Cumulative Voting

D. Voting Procedures: Universal Ballot

E. Ensuring Honest Voting

F. Providing Information to Shareholders

G. Fiduciary Obligations of Directors and Officers

CHAPTER 5: STRUCTURAL CONSTRAINTS ON PARTICULAR COMPANY ACTIONS

A. Reorganizations and Major Transactions

1. Shareholder Approval

2. Redemption Rights

3. Determining Market Value

B. Conflict-of-Interest Transactions

C. Control Transactions

D. Issuance and Repurchase of Shares

1. Share Issuances

2. Preemptive and Participation Rights

3. Repurchase of Shares

E. Protecting Creditors and Preferred Shareholders

F. The State as Part-Owner

CHAPTER 6: REMEDIES

CONCLUSION: SELF-ENFORCING LAW IN EMERGING ECONOMIES

APPENDIX TO PART I: SURVEY OF COMPANY LAW IN EMERGING MARKETS

PART II: CHAPTER-BY-CHAPTER ANALYSIS OF THE LAW

Concept of a Joint Stock Company under the Civil Code

General Scope of the Company Law

CHAPTER 1: GENERAL PROVISIONS OF THE LAW

Scope of the Company Law (Article 1)

Meaning of the Terms "Laws," "Legal Acts," and "Other Legal Acts"

Legal Status of a Joint Stock Company (Article 2)

Liability of a Company, Its Investors and Controlling Persons (Article 3)

Company's Name and Location (Article 4)

Branches and Representations (Article 5)

Subsidiary and Dependent Companies, Liability of Principal Economic Society (Article 6)

When is a Company a "Subsidiary"?

When is a Principal Economic Society (Partnership) Liable for a Subsidiary's Obligations?

Dependent Companies

Open and Closed Companies (Article 7)

Differences Between Open and Closed Companies

Regulation of Open Companies

Regulation of Closed Companies

CHAPTER 2: CREATION, REORGANIZATION, AND LIQUIDATION OF A COMPANY

Creation of a Company (Article 8)

Foundation of a Company (Article 9)

Companies with a Single Founder or Shareholder

Companies with Multiple Founders: Contract on the Company's Creation and Founding Meeting

Issuance of Shares; Manner and Timing of Payment

Founders of a Company (Article 10)

Charter of a Company (Article 11)

Other Items that Must be Included in a Company's Charter

Limits on Ownership of Shares and Voting Rights

Changes and Additions to a Company's Charter (Article 12)

State Registration of a Company (Article 13)

Consequences of Defective Registration

State Registration of Changes and Additions to a Company's Charter and a New Version of a Company's Charter (Article 14)

Reorganization of a Company (Article 15)

Voting and Redemption Rights During a Reorganization

Protection of Creditors During a Reorganization

Merger of Companies (Article 16)

Accession of a Company (Article 17)

Division of a Company (Article 18)

Separation of a Company (Article 19)

Transformation of a Company (Article 20)

Voluntary Liquidation of a Company (Article 21)

Procedure for Paying Creditors During Liquidation (Article 22)

Distribution of Liquidating Company's Property Among Shareholders (Article 23)

Completion of a Company's Liquidation (Article 24)

CHAPTER 3: CHARTER CAPITAL; SHARES AND OTHER SECURITIES

The Concept of Charter Capital

The Weakness of Charter Capital as a Regulatory Tool

Charter Capital and Categories (Types) of Shares (Article 25)

Registered or Bearer Shares

Minimum Charter Capital (Article 26)

Issued and Announced Shares (Article 27)

Increase in a Company's Charter Capital (Article 28)

Issuance of Shares to Cover Losses

Decrease in a Company's Charter Capital (Article 29)

Consequences of a Decrease in Charter Capital (Article 30)

Rights of Common Shareholders (Article 31)

Rights of Preferred Shareholders (Article 32)

Voting Rights and the One Common Share, One Vote Principle

Voting Rights on Particular Company Actions

Voting Rights if Dividends Are Not Fully Paid

Dividend, Liquidation and Conversion Rights

Issuance of Bonds and Other Securities (Article 33)

Limits on the Amount of a Company's Bonds

Payment for a Company's Shares and Other Securities (Article 34)

Reserve and Other Funds; Minimum Net Assets (Article 35)

CHAPTER 4: ISSUANCE OF SHARES AND OTHER SECURITIES

Protection Against Below-Market Issuances

Regulation of Convertible Securities and Options

Issuance Price for a Company's Shares (Article 36)

Procedure for Converting a Company's Securities into Shares (Article 37)

Issuance Price for Convertible Securities (Article 38)

Manner of Issuance of Shares and Convertible Securities (Article 39)

Preemptive Rights During Issuance of Shares and Convertible Securities (Article 40)

Procedure for Exercising Preemptive Rights (Article 41)

CHAPTER 5: DIVIDENDS

Avoiding the Limitation of Dividends to the Current Year's Net Profits

The Meaning of the Concept of a "Dividend"

Procedure for Paying Dividends (Article 42)

Solvency-Based Limits on Dividend Payments (Article 43)

Need for "Fraudulent Conveyance" Rules

CHAPTER 6: SHAREHOLDER REGISTER

Shareholder Register (Article 44)

Entering Notations in a Company's Shareholder Register (Article 45)

Extract from a Company's Shareholder Register (Article 46)

CHAPTER 7: THE SHAREHOLDER MEETING

Shareholder Meeting (Article 47)

Competence of a Shareholder Meeting (Article 48)

Limits on the Competence of a Shareholder Meeting

Decisions by a Shareholder Meeting (Article 49)

Remedies for Violation of Shareholder Rights

Shareholder Decisions Adopted Through External Voting (Article 50)

Right to Participate in a Shareholder Meeting (Article 51)

Information about the Holding of a Shareholder Meeting (Article 52)

Proposals for the Agenda of a Shareholder Meeting (Article 53)

Preparation for Holding a Shareholder Meeting (Article 54)

Extraordinary Shareholder Meeting (Article 55)

Tabulation Commission (Article 56)

Shareholder Participation in Shareholder Meeting (Article 57)

Quorum of a Shareholder Meeting (Article 58)

Voting at a Shareholder Meeting: One Share, One Vote (Article 59)

Voting Ballot (Article 60)

Secret Voting

Counting Votes During Voting Effectuated with Voting Ballots (Article 61)

Record of Voting Results (Article 62)

Record of a Shareholder Meeting (Article 63)

CHAPTER 8: BOARD OF DIRECTORS AND EXECUTIVE ORGAN

Board of Directors of a Company (Article 64)

Competence of the Board of Directors (Article 65)

Division of Authority Between Board of Directors and Executive Organ

Issues Within the Exclusive Competence of the Board of Directors

Election of the Board of Directors and Cumulative Voting (Article 66)

Cumulative Voting

Chairman of the Board of Directors (Article 67)

Meetings of the Board of Directors (Article 68)

Remedies for Improper Decisions by the Board of Directors or the Executive Organ

Executive Organ of a Company (Article 69)

Collegial Executive Organ (Article 70)

Liability of Members of the Board of Directors, the Person Exercising the Powers of the Individual Executive Organ, the Members of the Collegial Executive Organ, the Managing Organization or Manager (Article 71)

The Duties of Loyalty and Care

Persons Liable; Amount of Liability; Shareholder Right to Sue

CHAPTER 9: ACQUISITION AND REDEMPTION OF SHARES

Acquisition and Redemption of Bonds and Other Securities (Other than Shares)

Company's Repurchase of Its Shares (Article 72)

Solvency-Based Limits on a Company's Acquisition of Shares (Article 73)

Consolidation and Splitting of a Company's Shares (Article 74)

Company's Redemption of Shares on Demand by Shareholders (Article 75)

Procedure for Exercising Redemption Rights (Article 76)

Determining the Market Value of Property (Article 77)

CHAPTER 10: MAJOR TRANSACTIONS AND CONTROL TRANSACTIONS

Large Acquisition or Alienation of Property

Large Issuance of Shares

Definition of a Major Transaction (Article 78)

Definition of Large Acquisition or Alienation of Property

Definition of Large Issuance of Shares

Approval Requirements for Major Transactions (Article 79)

Approval of Large Acquisition or Alienation of Property

Approval of Large Issuance of Shares

Protection of Third Parties and Creditors During a Completion of a Major Transaction

Control Transactions (Article 80)

CHAPTER 11: TRANSACTIONS INVOLVING A CONFLICT OF INTEREST

Interest in a Company's Completion of a Transaction (Article 81)

Information About an Interest in a Company's Completion of a Transaction (Article 82)

Procedure for Concluding an Interested Transaction (Article 83)

Consequences of Noncompliance with Conflict-of-Interest Rules (Article 84)

CHAPTER 12: CONTROL OVER A COMPANY'S FINANCIAL-ECONOMIC ACTIVITY

Inspection Commission (Inspector) (Article 85)

Auditor (Article 86)

Conclusions of the Inspection Commission or Auditor (Article 87)

CHAPTER 13: FINANCIAL ACCOUNTS AND INFORMATION DISCLOSURE

Bookkeeping Accounts and Financial Reporting (Article 88)

Safekeeping of a Company's Documents (Article 89)

Disclosure of Information by a Company (Article 90)

Disclosure of Information to Shareholders (Article 91)

Mandatory Publication of Information by a Company (Article 92)

Information About a Company's Affiliated Persons (Article 93)

CHAPTER 14: FINAL PROVISIONS

APPENDIX I: MODEL COMPANY LAW

APPENDIX II: MODEL CHARTER

APPENDIX III: LAW ON JOINT STOCK COMPANIES

Translators' Endnotes

APPENDIX IV: CIVIL CODE OF THE RF (EXCERPTS)

APPENDIX V: SUPREME COURT/SUPREME ARBITRAGE COURT RESOLUTION NO. 4/8

SUBJECT INDEX

INDEX: REFERENCES TO THE CIVIL CODE

INDEX: REFERENCES TO THE RUSSIAN COMPANY LAW

INDEX: REFERENCES TO THE MODEL COMPANY LAW