Changes to the legislation on business entities from April 28, 2021
The Law No. 95-Z “On Amending the Laws on the Issues of Business Entities” (LLCs, SLCs, JSCs) (hereinafter – the “Entity” / “Entities”) was adopted in Belarus on January 5, 2021. In general, the key changes will:
- Allow to restructure bad debts,
- Abolish some restrictions regarding the quantity of stakeholders in ZAOs,
- Add the possibility to become a shareholder of the Entity with one shareholder to another similar Entity,
- Introduce new instruments (e.g., debt to equity swap, paying up contributions to the Entity’s property for its financial and economic support not leading to its share capital increase).
Before the changes enter into force since April 28, 2021, the Entities should conduct annual general shareholders’ meetings under the current rules.
If you plan to make changes to the charter, we recommend you to revise and align with the Law its following provisions:
- Election order to the board of directors (supervisory board),
- Calling and conducting general shareholders’ meetings, board of directors’ (supervisory board’s) sittings of the Entity and making decisions on them,
- Company restructuring,
- Sealing deals with affiliated persons and the list of such persons, etc.
Before aligning them with the Law, charters will be valid in the part that does not contradict it.
The key changes are the following:
- Remote participation in general shareholders’ meetings, board of directors’ sittings is allowed, if it is directly provided for in the Entity’s charter. In this connection, the decisions to use electronic and other communication means, information systems/networks or soft and hardware technologies at their conducting shall be adopted by all shareholders unanimously.
- Debt to equity swap will become possible allowing to restructure company’s bad debts or to raise funding at a company setup.
- Representatives of employees or labor union members will have the possibility to enter the board of directors (supervisory board). Whereas, the obligation of their presence there has to be stipulated in the charter. The charter should also provide for the requirements to candidates’ professional, qualification and other characteristics. Order of calling of board of directors’ (supervisory board’s) sittings and voting on them also has to be established.
- The Entity’s shareholders will be able to pay up contributions to its property under the agreement concluded between the shareholder and the Entity, which will not lead to the share capital increase.
- The list of the Entity’s documents will be extended. Notifications on concluded shareholders’ agreements (agreements on exercising shareholders’ rights of LLC), as well as the lists of the parties which concluded them will be included to it.
- Joint stock companies will have to determine the way of election to members of board of directors, if the number of stakeholders is less than 1000: simple or cumulative voting. (Earlier the wording of the law was ambiguous.)
- The Entity with one shareholder will be able to become a shareholder of another similar Entity.
- The restriction regarding the stakeholders quantity in ZAOs will be abolished (earlier max. quantity was 50), as well as pre-emptive right in ZAOs won’t be mandatory. Nevertheless, ZAOs will be empowered to establish a maximum quantity of stakeholders in the charter and provide for them pre-emptive right.
- Transfer of shares (stakes) in the share capital without compensation or their sale to employees or members of management bodies of the Entity will become possible.
- OAOs will have to publish annually the information about their development strategies, other planning documents including the main directions of their development; expected results of their activity, mechanisms for achievements of these results.
- The Entity restructuring order will be specified: new requirements to merger contracts, adhesion contracts, as well to the decisions of the Entity’s general shareholders’ meetings in case of restructuring in form of division, spin-off, transformation will be established; the issues of voting on general shareholders’ meetings in case of the Entity restructuring will be clarified, the requirements for deeds of assignment and dividing balance sheet will be extended, the requirements to notifications on the Entity restructuring will be established.