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Information Disclosure
Shares of the Company
Voting Right. Voting Right Restrictions
Affiliated Person
Minority Shareholder
Controlling Share
Blocking Share
Board of Directors
Executive Bodies
Disclosure of Information Regarding Interested-Party Transactions
Company Assets/Equity Appraisal
Bankruptcy risks
Transfer Prices
Provision of free access for anybody to the information related to the company’s activity and corporate events.
For example, publication of information on the company's web site, publication in a newspaper indicated in the company's Charter, or other newspaper available to most shareholders, hire of a company providing information disclosure services (www.skrin.ru)
The list of information subject to mandatory public disclosure by a joint stock company, as well as subject to disclosure upon shareholders' request, is set forth in the Federal Law # 39-FZ ‘On the Securities Market’ of 22.04.96, as well as in the Federal Law Law #208-FZ" p On Joint Stock Companies? of 26.12.95.<>
(1) The Federal Law ‘On Joint Stock Companies’ sets forth the list of documents the company has to present to shareholders upon their request, namely:
- the agreement on the company’s foundation;
- the charter of the company, duly registered changes and amendments to the charter, decision of Incorporation,certificate of state registration of the company;
- documents confirming the rights of the company to the property on its balance sheet;
- the company's internal documents;
- regulations on the company’s branches or representative offices;
- annual reports;
- documents of business accounting;
- documents of accounting reports;
- prospectuses of share issuance, quarterly reports of the issuer and other documents containing information to be published or disclosed by other means in accordance with the Federal Law ‘On Joint Stock Companies’ or other federal laws;
- minutes of general shareholders’ meetings (decisions of a shareholders owning all the company’s voting shares), of meetings of the board of directors (supervisory board) of the company, of the inspection commission (inspector) and of the company’s collective executive body (the management, directorate);
- voting ballots, as well as powers of attorney (copies of powers of attorney) to participate in the general shareholders’ meeting;
- independent auditors’ reports;
- lists of the company’s affiliated persons;
- lists of those possessing the right to participate in the general shareholders’ meeting, to collect dividends, also other lists filled by the company so that its shareholders could exercise their rights in accordance with the Federal Law ‘On Joint Stock Companies’;
- conclusions of the company’s inspection commission (inspector), of the company’s auditor, of state and municipal bodies of financial supervision;
- notifications of concluded shareholders’ agreements received by the company as well as lists of persons that concluded these agreements;
- judicial acts on litigations concerning the creation of the company, its management or participation therein;
- other documents envisaged by the Federal Law ‘On Joint Stock Companies’, the company’s charter, its internal documents, decisions of general shareholders’ meetings, of the board of directors (supervisory board) and the company’s management bodies, as well as documents envisaged by judicial acts of the Russian Federation.
It is only a shareholder (shareholders) possessing in the aggregate at least 25% of the company’s voting shares that shall have the right of access to documents of business accounting and minutes of meetings of the company’s collective executive body.
(2) The Law ‘On Securities Market’ defines that an issuer of publicly placed securities has to disclose information about these securities and its financial and economic activity in two forms:
1) through a quarterly report on the company’s securities;
2) through material fact reports.
(3)Quarterly Reports
The format of quarterly reports is defined in the ‘Regulation ‘On Disclosure of Information by Issuers of Emissive Securities’.
The quarterly report comprises 8 sections:
- Section 1. Concise information of persons that are part of the issuer’s management bodies, information of bank accounts, of the external auditor, the valuator and the financial consultant of the issuer as well as of other persons that signed the quarterly report;
- Section 2. Basic information regarding the financial and economic performance of the issuer;
- Section 3. Detailed information of the issuer;
- Section 4. Information of the issuer’s financial and economic activity;
- Section 5. Detailed information of persons that are part of the issuer’s management bodies and bodies supervising its financial and economic activity and concise information of the issuer’s officers (employees);
- Section 6. Information of the issuer’s participants (shareholders) and of interested-party transactions concluded by the issuer;
- Section 7. The issuer’s accounting reports and other financial information;
- Section 8. Additional information of the issuer and of emissive securities placed by the issuer.
The quarterly report is drawn up in accordance with the results of each complete quarter and is to be submitted to the FCSM not later than 30 days after the end of the quarter.
(4) Material Facts
The content of information of material facts is defined by the Regulation ‘On Disclosure of Information by Issuers of Emissive Securities’.
Material fact reports as a form of information disclosure shall be made in the form of displaying a material fact report:
- on the newswire - not later than within 1 day after the material fact occurs
- at the Internet web page - not later than within 2 days.
The text of a material fact report shall be displayed on the Internet web page for at least 6 months since the expiry of the time period established by the Regulation ‘On Disclosure of Information by Issuers of Emissive Securities’ for its web publishing, and should it be come to be published in the Internet after the expiry of the said time period – since the date of its web publishing.
A copy of a material fact report shall be provided to the issuer’s shareholders and other interested persons upon their request and not later than within 7 days following the request, for a fee not exceeding the costs related to producing such a copy.
(5) Completeness of Information Disclosure - disclosure of all information required by correspondent legislative acts.
In practice issuers disclose less information than required. This may be related to both a mistake of a company's officer who did not fill in all necessary fields and an unwillingness of the management to disclose some data.
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(6) Disclosure of Information Regarding Share Capital Structure
Under the Regulation ‘On Disclosure of Information by Issuers of Emissive Securities’ the company is to disclose information regarding the structure of its shareholders as to the following:
- in quarterly reports the company shall disclose information of the issuer’s participants, among these of participants owning over 5% of the issuer’s charter capital as well as of participants owning not less than 20% of the charter capital of the latter;
- in material fact reports issuers shall disclose information about acquisition by a certain person of an interest in their charter capitals exceeding 5% and/or of 5% of the issuers’ shares, as well as about changes of size of such interest (parcel of shares) if it comes to be superior or inferior to 5, 10, 15, 20, 25, 30, 50 or 75 per cent of distributed ordinary shares.
Normally, part of shareholders of a company transfer their shares to a depository for nominal holding. At that the shareholders’ register records information about nominal holders, and not about these shareholders. According to existing rules, nominal holders will supply information about their clients to the Registrar only for the purposes of drawing up the list of shareholders entitled to participate in a general shareholders’ meeting.
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(7) Information on Affiliated Persons
Joint-stock companies are required to disclose information of affiliated persons in the form of a list of affiliated persons. The list of affiliated persons of a joint-stock company shall contain information that is known or should be known by this joint-stock company.
The text of the list of affiliated persons shall be accessible at the Internet web page for at least 3 years since the expiry of the time period established by the Regulation ‘On Disclosure of Information by Issuers of Emissive Securities’ for its web publishing, and should it be come to be published in the Internet after the expiry of the said time period – since the date of its web publishing.
The procedure for maintaining record of affiliated persons is defined by the Regulation ‘On Disclosure of Information by Issuers of Emissive Securities’ and the Federal Law ‘On Joint Stock Companies’.
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2. Shares of the Company
- Shares can be common and preferred.
The total nominal value of preferred shares cannot exceed 25% of the Charter capital of the company.
(1) Common Share - gives the owner a right to participate in GMs and vote all on issues within its competence, a right for dividends, and, in case of liquidation of the company - a right to claim a share of its assets.
(2) Preference Share - give their owners the right to top priority receipt of dividends at a fixed rate independently of the level of profit earned by a joint-stock company in this period. The owner of preference shares also has a preferential right to get a share of assets of a company under liquidation.
(3) Authorised Shares – the nominal value, category (class) of the shares provided in the company’s Charter that the company has the right to issue in addition to the already distributed shares and the rights granted by the shares.
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3. Voting Right. Voting Right Restrictions.
- As a general rule, the formula is "one share - one vote".
(1) Voting by Proxy and Absentee Ballots
The right to participate in the GM can be executed by the shareholder either personally, or through an authorised representative.
In a joint-stock company with the number of shareholders owning voting shares exceeding one thousand, the company is required to send out to its shareholders absentee voting ballots, so that a shareholder may participate in the meeting by physical attendance or by mailing the ballot to the company, without physically attending the meeting.
(2) Voting Share - a common or preference share giving its owner the right to vote on the issues put to vote at the GM.
(3) At the company’s general shareholders’ meeting Shareholders - owners of preference shares of a specific class acquire the right to vote on issues concerning the introduction of changes and amendments to the Charter of the company which limit the rights of shareholders – owners of preference shares of the same class, including the cases of defining and increasing the amounts of the company’s dividends and (or) defining and increasing the liquidation value paid for preference shares of previous issues as well as granting the priority of dividends’ payment and (or) liquidating value of the shares to shareholders – owners of preference shares of another class.
Shareholders – owners of preference shares participate in the general shareholders’ meeting and have the right to vote on the issues concerning the company’s restructuring and its liquidation
Shareholders - owners of preference shares of specific types, the size of dividends on which is determined in the Charter, are entitled to participate in the GM and have the voting right as to all issues within the GM competence starting from the next GM after the GM where the decision about payment of dividends on such preference shares was not made, or the decision was made about incomplete payment of dividends. After the first full payment of dividends on such shares occurs, the right of the above shareholders to participate in GMs discontinues.
(4) Special Right ("Golden" Share) – can be introduced with respect to companies which were formed in the process of privatization. If the decision is yaken to exercise the special right granted to the State to participate in governing the open joint stock company undergoing privatization, representatives of the State are entitled to participate in GMs and have the right of veto on the decisions of the GM regarding:
- changes and amendments to the company’s Charter or approval of new edition of the company's Charter;
- reorganization of the company;
- liquidation of the company, appointment of the Liquidation Commission and approval of intermediary and final liquidation balance sheets;
- changes in the company's Charter capital;
- conclusions of large and interested-party transactions, as specified in Chapters X and XI of the Federal Law ‘On Joint Stock Companies’ .
(5) Restrictions of the Number of Votes per one Shareholder - the company's Charter may establish restrictions on the number of shares owned by one shareholder, their total nominal value and the maximum number of votes given to one shareholder.
(6) Established Minimum for the Quorum of a GM - the GM is legitimate (has the quorum), if shareholders holding in aggregate more than one half of distributed voting shares of the company participated in the meeting.
(7) Number of Votes for Approval of Decisions by the GM - the decisions of the GM on issues put to vote are approved by the majority of shareholders –owners of the company’s voting shares participating in the meeting, unless the Federal Law ‘On Joint Stock Companies’ provides overwise.
(8) Qualified Majority for Approval of Especially Important Decisions - the decisions on a number of issues, such as changes and amendments to the Charter, reorganization, liquidation of the company, large transactions and several others, is made by the GM by the majority of 3/4 of votes of shareholders - owners of voting shares participating in the GM.
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4. Affiliated Person - a legal entity and/or an individual recognized as an affiliated person in accordance with the Federal Law ¹ 948-1 ’On Competition and Restriction of Monopolistic Activities on Commodity Markets’ of March 22,1991.
Affiliated persons are individuals or legal entities able to influence activities of legal entities; affiliated persons of a legal entity are:
- member of its board of directors (supervisory board) or of another collective management body, member of its collective executive body and also the person exercising the authority of its individual executive body;
- persons belonging to the same group of persons where the said legal entity belongs;
- persons that have the right to command over 20 per cent of the total of votes corresponding to voting shares or to investments, shares of the above legal entity that form the share capital or partners’ equity;
- a legal person in which the said legal entity has the right to command over 20 per cent of the total of votes corresponding to voting shares or to investments, shares of the said legal entity that form the share capital or partners’ equity.
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5. Minority Shareholder
- Minority shareholder – shareholder not affiliated to ‘insider’ shareholders and not financially connected with the company whose shares do not influence the decisions made by the GM and as a consequence, whose interests may be ignored by the Management of the controlling shareholder.
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6. Controlling Share
- - 50% + 1 voting share.
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7. Blocking Share
- - 25% + 1 voting share.
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8. Board of Directors.
- Establishment of the Board of Directors (Supervisory Board) is mandatory for companies with the total number of shareholders - owners of voting share exceeding 50.
(1) Board of Directors Election/Termination
The members of the Board of Directors are elected at the annual GM untill the next annual general shareholders’ meeting. Members of the Board of Directors of a company with the total number of shareholders - owners of voting shares exceeding one thousand are elected by cumulative vote.
GM is entitled to prematurely terminate the authority of any member (all members) of the Board of Directors. In case of the election of the Board of Directors by cumulative vote the decision of the GM regarding the premature termination of authorities should be made with regards to all members of the Board of Directors.
(2) Independent Directors in the Board of Directors. The Law does not contain direct requirements for mandatory participation in the Board of Directors of so-called independent directors. In accordance with the Federal Law ‘On Joint-Stock Companies’, an independent director is a member of the Board of Directors who is not and was not during a year preceding the adoption of a resolution:
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a person carrying out the functions of the single-member executive body, including the functions of its manager, a member of the collective executive body, a person holding a position in the governing bodies of the managing company;
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a person whose spouse, parents, children, brothers and sisters, adoptive parents and adopted children are holding positions in above-mentioned company’s management bodies, of the managing company, or being the Manager of the company;
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the company’s affiliate, excluding the member of the Board of Directors (the company’s Supervisory Board).
For the purposes of the methodology an independent director shall mean a person satisfying certain conditions (as well as his spouse, parents, children, brothers and sisters). An independent director:
- shall not represent a shareholder – owner of more than 2% of voting shares of the company;
- shall not have any contractual relations with the company other than participation in the work of the Board of Directors and/or holding the share not more than 0.5% of voting shares;
- shall no be employed by the company or its affiliated persons during the 5 years prior to election as a member of the Board of Directors and during the appointment;
- shall not provide legal, consulting and/or other services to the company;
- shall not be a representative of the State authorities.
(3) The Law defines that members of the collective executive body of the company may not form more than one quarter of the Board of Directors.
(4) Special Requirements Applicable to Persons Being Elected to the Board of Directors of the company may be set forth in the company's Charter or a by an international document approved by the GM.
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9. Executive Bodies
- The company's executive bodies (General Director/President and Management Board) supervise the company’s activity and ensure execution of decisions of the GM and the Board of Directors (Supervisory Board) of the company.
Formation of executive body and premature termination of their powers is made by the decision of the GM unless the Charter of the company refers this issue to the competence of the Board of Directors (Supervisory Board) of the company.
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10. Disclosure of Information Regarding Interested-Party Transactions.
- According to the Federal Law ‘Joint-Stock Companies’, members of the Board of Directors, executive bodies and shareholders owning more than 20% of voting shares, if they are recognized to be interested in carrying out a specific transaction, have to communicate to the Board of Directors, the Inspection Commission and the Auditor of the company the information regarding:
the companies in which they possess individually or jointly with their affiliated persons 20% or more of voting shares (interest);
the companies in management bodies of which they occupy positions;
known to them transactions or planned transactions, in which they may be recognized to be interested persons.
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11. Company Assets/Equity Appraisal.
- (1) Independent Appraiser - in cases set forth by the legislation the determination of market value of assets/equity subject of a transaction, the price of the redemption by the company of the shares in possession of its shareholders requires the hire of an independent appraiser - a company providing appraisal services and not affiliated with the company.
(2) Board of Director’s Authority
The Federal Law ‘Joint-Stock Companies’ sets forth the list of transactions requiring the Board of Directors to set up the market value of assets/equity subject of a transaction (e. g., large-scale and interested-party transactions, shares redemption from shareholders).
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12. Bankruptcy risks.
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According to the Federal Law ‘On Insolvency (Bankruptcy)’, a legal entity is recognized as unable to satisfy the claims of its creditors on money obligations and/ or fulfill its duty to make compulsory payments should it fail to meet the corresponding obligations and /or fulfill its duty within three months since the date of maturity.
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13. Transfer Prices.
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Transfer prices differ from market prices on identical goods. A transfer price is an internal, transfer price used within integrated companies. Transfer pricing manipulations in Russia are primarily undertaken in order to lower profit and turnover taxes, avoid foreign exchange controls, and withdraw substantial funds abroad through offshore subsidiaries.
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