On 1 September 2024, important changes in the procedure for changing the head of a company came into force in Russia.
Federal Law No. 287-FZ of 8 August 2024 amended the Law on State Registration of Legal Entities and Individual Entrepreneurs (No. 129-FZ), the Law on LLCs (No. 14-FZ) and the Law on Notaries (No. 4462-I).
Clause 1 of Article 40 of the Law on LLCs was supplemented with a new paragraph: The fact of making a decision on the election (appointment) of the sole executive body of the company must be notarized.
The point is that by certifying the minutes of the meeting of the company’s participants (shareholders), the notary fully guarantees the legality and reliability of the appointment of the new director.
After the minutes have been certified, the application in form P13014 is submitted to the registration authorities by the same notary who certified the minutes, within the framework of one notarial act. Thus, the Applicant for state registration in connection with the election (appointment) of the director is now not the new director, but the same notary who certified the minutes of the general meeting.
The new rule will also affect the procedures for the liquidation and reorganization of LLCs, since they are related to the appointment of certain managers. For example, since the liquidator (chairman of the liquidation commission) is the sole executive body during the liquidation of the LLC, the mandatory requirement for notarization will also apply to decisions on the commencement of liquidation and the appointment of a liquidator (chairman of the liquidation commission) instead of the director.
Previously, the procedure for changing the general director implied that after a decision was made at a general meeting of the company’s participants or the board of directors, the new manager independently submitted documents to the registration authority to make changes to the Unified State Register of Legal Entities. However, the lack of mandatory notarization at this stage created potential opportunities for abuse and document forgery.
The changes are intended to reduce the risk of forgery of minutes and decisions on the appointment of managers, which are often used for corporate raiding. The new rule is aimed at making the process of changing the director more transparent and reliable.
The President of the Federal Notary Chamber (FNC) Konstantin Korsik specified that over the past 10 years, the competence of a notary in the corporate sphere has doubled and continues to expand, which allows for strengthening the security and legal purity of legal relations in this segment.
“A notary who certifies the decision of a legal entity’s management bodies is guaranteed to check all important details: the status and competence of the company’s management body, the powers of the organizer and participants of the meeting. The notary must also make sure that the meeting is attended by persons who have the right to vote in relation to the decision being made, there is a quorum, the votes are counted correctly, etc. In fact, the notary ensures the legality of the decision made and the accuracy of the information in the Unified State Register of Legal Entities, protects the property rights and assets of the owners,” said the head of the FNC.
There are some nuances of the innovation.
1) What are the requirements if the sole executive body is appointed by the board of directors of the company (if it is elected)?
In cases where the election (appointment) of the sole executive body is attributed to the powers of the general meeting of participants, the requirement of the new legislation is unambiguous: the appointment of a director by a general meeting requires mandatory notarization (as well as some other issues, such as increasing the authorized capital)
However, in many companies, the election of a director may be attributed to the powers of the board of directors (if elected). The question arises: is it necessary in such a case to notarize decisions on the election (appointment) of a director made by the board of directors? From the new legislation, we can conclude that decisions on the election (appointment) of a director made by the board of directors, from 1 September 2024, also require notarization.
2) Can a foreign notary certify a decision if the participants are abroad?
The requirements specified in the law for notarization of the minutes of appointment imply certification exclusively in the presence of a Russian notary and according to the rules of the Russian notary office, i.e., certification of the authenticity of signatures by a foreign notary is excluded. Foreign participants cannot hold a general meeting to appoint the general director abroad. However, foreign participants can issue a notarized and apostilled power of attorney to their representatives to participate in the general meeting in front of a Russian notary.
If the director is elected by the board of directors according to the Charter, then such a requirement will seriously complicate the adoption of relevant decisions, especially in the situation with foreign members of the board of directors, as is often the case in Russian companies with foreign participation. The legislation does not stipulate that a member of the board of directors can issue a power of attorney to participate in a meeting of the board of directors to another member of the board of directors or a third party.
Thus, the appointment of a director by the board of directors also requires only the presence of a Russian notary and notarization. If foreign members of the board of directors do not have the opportunity to appear before a Russian notary, then the solution is to transfer the authority to appoint the director to the general meeting (in which one can participate by proxy).
In general, changes in the legislation are caused by the need to strengthen the protection of businesses from corporate raids and other illegal actions related to the illegal change of management.
The inclusion in the law of mandatory notarization of decisions on the change of the general director of an LLC, as well as the timely submission of an application to the registration authority to make changes to the Unified State Register of Legal Entities will reduce risks and provide businesses with guarantees of protection of their rights and property.