Slides 2009

SHASHKOVA A.V.

ACCA Training Programme

PAPER F4

CORPORATE AND BUSINESS LAW,

RUSSIA

Slides

Moscow 2009

ACCA F4 – Corporate and Business Law

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Shashkova A.V. ACCA Training Programme. Paper F4. – Corporate and Business Law, Russia. Slides

Анна Владиславовна Шашкова, кандидат юридических наук, доцент С отличием окончила международно-правовой факультет МГИМО-Университета МИД России в 1998 году. Награждена премией Иберо-Американского Центра МГИМО, ректорским грантом МГИМО (У) МИД России за создание курса на иностранном языке.

Занимается юридической практикой более 12 лет. С 1999 года – член Московской областной коллегии адвокатов.

Преподает в МГИМО (У) МИД России курсы по различным правовым дисциплинам. С 2003 года является лектором по курсу корпоративного и предпринимательского права (ACCA (F4)), курса общего менеджмента (ACCA (F1)).

Является автором 7 книг по вопросам корпоративного и предпринимательского права РФ и соавтором 2 книг. В 2004 году опубликовала книгу Russian Business Law (Предпринимательское право РФ) на английском языке, книга переиздана в 2007 году. Имеет большое число публикаций в различных печатных изданиях: «Юрист», «Президентский контроль», «Российская юстиция» и др.

Anna Shashkova, Ph. D. in Law

Graduated with distinction from Moscow State University for International Relations (MGIMO). Awarded with the premium of Ibero-American center of MGIMO, awarded with MGIMO rector’s grant on the law course in a foreign language.

Has been practicing law for more than 12 years. Since 1999 admitted to the Moscow Region Bar Association.

At present is a senior lecturer, docent of MGIMO. Since the year 2003 gives lectures (in English) on Russian Corporate and Business Law (ACCA (F4)), Accountant in Business (АССА (F1)).

Is an author of 7 books on Russian Business Law, co-author of 2 books on Russian Corporate & Business Law. In 2004 published a book Russian Business Law (in English), second edition in 2007. Has numerous publications in Russian periodicals, such as "Urist", "Presidentsky Control", "Rossiyskaya Ustitsya", etc.

© Шашкова А.В., 2009

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CONTENTS

ESSENTIAL ELEMENT OF THE LEGAL SYSTEM

7

LAW OF OBLIGATION

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EMPLOYMENT LAW

47

THE FORMATION AND CONSTITUTION OF BUSINESS ORGANIZATONS

56

CAPITAL AND FINACING OF COMPANIES

73

COMPANY MANAGEMENT AND AMINISTRATION

87

LEGAL IMPLICATIONS RELATING TO COMPANIES IN DIFFICULTY OR IN CRISIS

103

GOVERNANCE AND ETHICAL ISSUES RELATING TO BUSINESS

115

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ACCA PAPER F4RUSSIAN BUSINESS LAW

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Lecturer’s IntroductionAnna Shashkova� Education – High Legal� Docent MGIMO� Ph.D in Law� Lawyer (Moscow Region Bar Association)

specialized in:� Arbitrazh Disputes

� ACCA instructor since 2003� E-mail: [email protected]

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Our Plan� Essential Elements of the Legal System� The Law of Obligations� Employment Law� Company Law

� The Formation and Constitution of Business Organizations

� Capital and Financing of a Company� Company Management and Administration� Legal Implications Relating to Companies in Difficulty or

in Crisis� Governance and Ethical Issues Relating to Business

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Exam Paper F4� 3 hour written paper� 15 minutes reading and planning time� 100% questions obligatory� Pass - 50%� Knowledge-based questions (1-7)� 7 questions – 10 marks each

� Problem-based questions (8-10)� 3 questions – 10 marks each

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Exam Technique� Time management: 18 minutes on each question� Read the question at least twice� Blue or black ink� Use heading and subheadings� Structure the answer� Use a short sentence� Define each question number and each part (a), (b), (c),

etc.� Neat crossing out� Do not write “everything I know”, etc.

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Legislation� Issued before 30th September 2008� Civil Code Part One� LLC Law� J-SC Law

� Employment Code� Bankruptcy Law� Constitution� Securities Market Law

� Civil Code Part Two� Civil Procedural Code� Arbitrazh Procedural Code

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RUSSIAN BUSINESS LAWESSENTIAL ELEMENTS OF THE LEGAL SYSTEM

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Classification of Laws� Public Law� Private Law

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Foundations of Private Law� Equality of Participants to Proprietary

Relations� Inviolability of Property� Contractual Freedom� Inadmissible Arbitrary Interference into

Private Affairs� Necessity to Freely Exercise Civil Rights and

Guarantee their Protection in Court

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Classification of Laws� Substantive Law � Procedural Law

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Sources of Russian Law� Statute Law� Acts of the Executive Bodies � International Law� Rulings of the Constitutional Court of the RF� Customs of Business Turnover� Judicial Precedent - ?

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Structure of Statutory Law� The Constitution of the Russian Federation� Constitutions and Charters of the Subjects of the

Russian Federation� Federal Constitutional Laws of the Russian

Federation� Federal Laws of the Russian Federation� Law of the Subjects of the Russian Federation� Law of the Former USSR and RSFSR

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Constitution� Highest Juridical Power� Superiority� Direct Action on the Russian Territory

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Characteristics of Laws� Source of Adoption� Specific Order of Adoption� Legal Supremacy

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FCL Differ from FL� Legal Force� Competence� Procedure for Adoption� Powers of the President on Application of its

Suspensive Veto

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Jurisdiction Divided� Jurisdiction of the RF� Joint Jurisdiction of the RF and the Subjects

of the RF � Jurisdiction of the Subjects of the RF

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Advantages and Disadvantages ofStatute Law

� Advantages� Written Form and Easily Available� Parliament Can Adopt a Law on Any Subject

� Disadvantages� Can Become Bulky � Bad Drafting Creates Ambiguities� Costly to Modify� Difficult to Change as a New Draft Law Is Required� Legislation May be Rushed through

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Legislative Initiative� The State Duma� Deputies of the State Duma� The Federation Council� Members of the Federation Council� The President of the Russian Federation� The Government of the Russian Federation� Legislative Bodies of the Subjects of the Russian

Federation� The Superior Legal Bodies

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Federation Council Required to Rule� Federal Budget� Federal Taxes and Levies� Financial, Monetary, Credit and Customs

Regulations and Money Emission� Ratification and Denunciation of International

Treaties of the RF� Status and Protection of the State Border of the RF� War and Peace

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Official Publication� “Rossiyskaya Gazeta” - !� “Parlamentskaya Gazeta”� “Sobranie Zakonodatelstva”

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Validity of Normative Act in Time� Does not Repeal Other Statutes� Is Not Retroactive

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General Principles of Law Implementation

� Accomplishment� Execution� Observance� Enforcement

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Requirements to Law Enforcement Acts

� Strict Compliance with Legal Provisions� Issued within Limits of Powers � Must Be Substantiated � Must Have All Characteristics of an Official

Document

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A Gap in a Law� Analogy of Law � Analogy of Legislation

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Hierarchy of Normative Acts� Decrees and Orders of the President of the RF� Rulings and Orders of the Government of the RF � Normative Acts of the Federal Executive Bodies� Acts of the Bodies of Power of the Subjects of the

RF� Normative Legal Acts of Local Self-Government

Bodies

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Conflict of LawsEliminated

� Interpretation� Adoption of New Act� Abolishing Previous Act� Amending Acts Already Adopted� Consideration in Court� Administrative Consideration� Harmonization of Norms� Application of Constitutional Justice

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Law Implementation� Horizontal conflict of laws - a specific legal

act shall be applied � Vertical conflict of laws - the higher one shall

be applied � Discrepancies between regulatory legal acts

issued by one body - the most recent normative legal act shall be applied

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International Law� Universally Recognized Principles and Norms� International Treaties of the RF

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Types of International Treaties� Interstate Treaties� Inter-Governmental Treaties� Treaties between Ministries, Agencies,

Federal Services and State Departments

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Sources of Russian Law� Statute Law� Acts of the Executive Bodies � International Law� Rulings of the Constitutional Court of the RF� Customs of Business Turnover� Judicial Precedent - ?

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Acts of Courts� Rulings of the High Arbitrazh Court of the

Russian Federation and the Supreme Court of the Russian Federation

� Information Letters � Arbitrazh or Court Practice Reviews

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Trukhina filed a suit to All-Russia Blind Society on reimbursement of damages in May 1990. She suffered under the fault of the employer injury of both hands in 1956, 1962, 1975 and 1983 and lost 20% of her earning capacity. However, the Administration refused to pay her compensation for the lost part of her earnings.The Court of Permskaya Oblast held the decision in 1995 to recover in favour of the plaintiff a commutation payment from May 1987 till February 1995 in the amount of 1 375 422,00 roubles, and monthly payments for the life term from 1 March 1995 in the amount of 13 762,00 roubles.The defendant in the cassation appeal asked to abolish the decision of the Court of Permskaya Oblast on the grounds that the court held to recover the injury for three years before filing a suit to the court under Article 208 of the Civil Code of the Russian Federation and not under Article 43 of the Rules on Reimbursement of the Injury to the Employee, dated 24 December 1982, which provides that the injured in case of omission of a three year term to apply to the court is entitled to the reimbursement of the injury from the date the injured applied to the Administration or to the court.

Questions:• Which act shall be applied in case the provisions of the Civil Code

contradict the provisions of other legal act of the civil legislation of the Russian Federation, which entered into force before entering into force of the Civil Code of the Russian Federation?

(4 marks)• Your decision as a judge.

(6 marks)(10 marks)

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In relation to the Russian legal system:• Explain the purposes and scope of the

Constitution of the Russian Federation. (3 marks)

• Explain the consequences of a conflict between the provisions of the Constitution and the provisions of international laws.

(3 marks)• Explain the role of codes within the

overall framework of Russian law. (4 marks)

(10 marks)

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Court System� Constitutional Courts� Courts of General Jurisdiction� Arbitrazh Courts

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Superior Courts� The Constitutional Court of the Russian

Federation� The Supreme Court of the Russian Federation� The High Arbitrazh Court of the Russian

Federation

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System of Courts of General Jurisdiction

CONSULTATIVE

� The Supreme Court of the Russian Federation--------------------------------------------------------APPELLATE

� The Supreme Courts of the Republics of the Russian Federation; the Area, Oblasts, Cities of Federal Importance (Moscow and St. Petersburg), Autonomy Oblast and Autonomies Circuits Courts

--------------------------------------------------------ORIGINAL

� The Municipal Courts� The Justice of the Peace

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System of Arbitrazh CourtsCONSULTATIVE

� The High Arbitrazh Court of the Russian Federation--------------------------------------------------------APPELLATE

� The Federal Arbitrazh Circuit Courts� The Arbitrazh Appellate Courts--------------------------------------------------------ORIGINAL

� The Arbitrazh Courts of the Subjects of the Russian Federation

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May File Claims to Constitutional Court

� President of the RF� State Duma� Federation Council� One-Fifth of Members of Federation Council or Deputies of

State Duma� Government of the RF� Supreme Court of the RF� High Arbitrazh Court of the RF� Bodies of Legislative and Executive Power of Subjects of the

RF� Individuals� Groups of Individuals - Legal Entities

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To Apply to Constitutional Court Following Shall Be Observed

� It Must Be a Law � Constitutional Rights and Freedoms Are

Infringed� Law Is to Be Enforced

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Jurisdiction of Courts� In Personam Jurisdiction� Alternative Jurisdiction � In Rem Jurisdiction� Agreed Jurisdiction

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Cases Considered in Courts of General Jurisdiction

� Cases and Claims if One Party Is Individual� Cases and Claims Arising from International

Transportation Agreements� Cases and Claims Arising from Administrative Legal

Relations� Cases and Claims of Special Jurisdiction Directly

Provided for in Civil Procedural Code� Cases a Party to which Are Foreign Citizens � Other Cases and Claims

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Criteria to Apply to Arbitrazh Court� Appropriate Type of Legal Relations� Appropriate Subjects of the Case

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Cases Considered in ArbitrazhCourts

� Economic Disputes� Cases on Establishing Facts of Legal Importance � Cases on Disputing Decisions of Tribunals of

Arbitrators� Cases on Recognizing and Executing Decisions of

Foreign Courts � Special Jurisdiction

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Special Jurisdiction of ArbitrazhCourts

� Insolvency� Disputes Related to the Establishment,

Reorganization or Liquidation of Commercial LE� Disputes Related to the Denial of State Registration � Disputes between a Shareholder and a Joint-Stock

Company� Protection of Business Reputation

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Refusal to Consider the Claim� Claim Is Being Considered by Another Court� Plaintiff Not Observed Pre-Trial Order � When Determining Facts, Issue on Law Arises� Claim to Be Considered within Bankruptcy Case� Case to Be Submitted to Tribunal of Arbitrators� Claim Not Signed

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Limited liability company F, having its permanent office in Moscow, has got some problems with itsdebtors.They are as follows:

– Mr Pupkin, having his permanent residence in Samara owes 20 000 roubles as reimbursementfor the damage caused to a car, belonging to F, in an accident that took place in December 2005, notfar from Samara;

– LLC G having its permanent office in Vladivostok owes 100 000 roubles for the goods suppliedto its subsidiary (filial) in St Petersburg in June 2006;

– A company limited by shares, J, has not transfered a building situated in the Moscow region(Moskovskaya oblast) under a contract of purchase and sale of the building concluded in May 2006;

– A Cypriot company, K, didn’t pay for the consulting services rendered to it in March 2006.F has decided to sue all of the above mentioned companies and individuals.

Required:Consider the situation and answer the following questions:(a) What court (please indicate the type of court and geographic position of the court) must theaction against Mr Pupkin be submitted to and why?

(2 marks)(b) What court (please indicate the type of court and geographic position of the court) must theaction against G be submitted to and why?

(2 marks)(c) What court (please indicate the type of court and geographic position of the court) must theaction against J be submitted to and why?

(2 marks)(d) What court (please indicate the type of court and geographic position of the court) must theaction against K be submitted to and why?

(2 marks)(e) Is it possible to sue K in a Russian court and if so, under what circumstances?

(2 marks)(10 marks)

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Groups of Rights� Civil rights� Political rights� Economic, social and cultural rights

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Remedies for Violation of Rights� Private remedies under domestic law� Public remedies under domestic law� Remedies under international law

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Duties� Duties to the community� Duties to other individuals

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Subjects of Law � Individuals� Legal Entities� The State� Municipal Bodies

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Scope of the Individual’s Passive Legal Capacity� Possess Property under Ownership� Inherit and Bequeath� Engage in Business � Set up Legal Entities � Effect any Deals and Take Part in Obligations � Select Place of Residence� Enjoy Rights of Authors� Enjoy Other Property and Personal Non-Property

Rights

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Active Legal Capacity� Full

� After 18 Years of Age� Marriage before 18 Years of Age� Emancipation

� Partial� From 14 to 18 Years of Age� From 6 to 14 Years of Age

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Passive Legal Capacity Active Legal Capacity

� Capability to Possess Civil Rights and to Perform Duties

� Starts from Birth

� Extent Equal for All� Limitations:

� On Courts Decision

� Termination:� Death� Recognition Dead

� Capability to Acquire and Exercise by Actions Civil Rights, to Create Civil Duties and to Discharge Them

� Starts from� 18 Years of Age� Marriage� Emancipation

� Extent Equal for All� Limitations:

� On Courts Decision� Voluntary

� Termination:� Death� Recognition as Dead� Recognition as Mentally

Insane or Weak-Minded

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Minors from 14 to 18 Years of Age Independently� Dispose of Earnings� Exercise Author's Rights � Make Deposits into Credit Institutions � Effect Petty Everyday Deals

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Young Minors from 6 to 14 Independently Effect� Petty Everyday Deals� Transactions, Aimed to Gratuitous Profit� Transactions for Disposal of Means, Provided

by Legal Representative

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Legally Incapable Restrictedly Capable

� Can Neither Realize Meaning of His Actions Nor Control Them

� Guardianship Is Established� Deals Effected by Guardian

� Court Shall Recognize as Legally Capable. Guardianship Is Terminated

� As a Result of Abuse of Alcohol or Drug Addiction Has Placed His Family into Precarious Financial Position

� Trusteeship Is Established� Has Right to Independently

Effect Petty Everyday Deals. Shall Receive Earnings and Dispose Thereof Only upon Consent of Trustee. Independently Bear Property Responsibility

� Court Shall Cancel Restriction of Active Capacity. Trusteeship Is Terminated

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Mrs. Klushkina was invited to teach in a University situated in one ofthe European countries. She is a citizen of the Russian Federation andhas some property in Moscow that she would like to dispose of.

Required:• Is it possible to sell her apartment to her nephew Peter (15 years old)

and what is necessary to make this deed valid? (2 marks)

• Is it possible to transfer her bicycle to her niece Elena (5 years old) and what is necessary to make this gift valid?

(2 marks)• Is it possible to empower her sister to manage her property and how?

(2 marks)• Is it possible to empower her sister or any other person to draft a

testament in her name? (2 marks)

• Is it possible to sell any of her property mentioned above to a foreignindividual? Are there any restrictions imposed on transfer of theabove mentioned types of property to a foreign legal entity?

(2 marks)(10 marks)

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• Rosa and Dimitri are the parents of two children.• Their daughter Anna is 17 years old and has asked her

parents for permission to marry her boyfriend Alexei. Anna’snext birthday is in 11 months’ time.

• Their son Peter is 21 years old. He has had numerous personalproblems, including convictions for theft. His variousaddictions have also led him to steal from his family, causingconsiderable financial difficulties for them.

• Required:• Discuss the legal implications of Rosa and Dimitri’s decision

to allow Anna to marry in relation to Anna’s legalcapacity.

(4 marks)• Explain the extent to which the provisions of the Civil

Code can be invoked by Rosa and Dimitri in order toprotect themselves if Peter’s personal problems continueto affect their situation.

(6 marks)(10 marks)

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RUSSIAN BUSINESS LAW

LAW OF OBLIGATIONS

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Contract

� Agreement� Concluded by Two or Several Persons� Under Which Civil Rights and Obligations

Arise, Modify or Cease to Exist

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Preliminary Agreements

� Essential Terms� Form

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Types of Transactions

� Unilateral, Bilateral and Multilateral� Real and Consensual� Onerous and Gratuitous� Under Condition and Abstract Transactions� Contract of Adhesion

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Deals under Condition

� Under the Suspensive Condition� Under the Subsequent Condition

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Form of Contracts

� Oral� Written Form

� Simple� Qualified

� Notarization� State Registration

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Obligatory Written Form

� Contracts between Legal Entities� Contracts between Individuals to Sum Ten

Times Exceeding MMAWS� Foreign Economic Transactions

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Obligatory Notarial Form

� In Cases, Stipulated by Law� In Cases, Stipulated by Parties' Agreement

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Offer

� Precise and Unambiguous� Addressed to One or More Certain Persons� Contain Essential Conditions of Agreement� Express Intention to Conclude Contract with

Party to Whom Offer Is Made

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Public Offer and Invitation to Treat

� Invitation to TreatAdvertisements

� Public OfferItems on DisplayRewardsAuctionsTendersGaming and Betting

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Termination of Offer

� Rejection� Lapse of Time� Death (Liquidation)� Revocation

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Maria offered Elena a farm for 1000000 Maria offered Elena a farm for 1000000 RoublesRoubles. In response, Elena said she . In response, Elena said she would offer 950000 would offer 950000 RoublesRoubles..

ElenaElena’’s offer of 950000 s offer of 950000 RoublesRoubles amountedamountedto a counter offer, which had the effect of to a counter offer, which had the effect of rejecting Mariarejecting Maria’’s original offer resulting in s original offer resulting in its termination. its termination.

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Silence Not Acceptance But

� Performance ConstitutesAcceptance

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Acceptance

� Acceptance Must Correspond with Terms of Offer

� Counter Offer Does Not Constitute Acceptance

� Acceptance May Be in Form of Express Words or Implied from Conduct

� Must Be Communicated to Offerer� Through Postal Service - When Received

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Exceptions to Privity

� Trust� Agency� Commission� Mandate� Lease� Insurance� Sale of Goods

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Essential Terms

� Subject-Matter of Contract� Terms Directly Defined for Given Kind of

Contracts by Law� All Terms on Which Agreement of Parties Is

Reached

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Dispositive (Risiduary) Norms Not Applied

� Parties Exclude Application� Parties Introduce Provision, Distinct from That

Norm

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Essential Features of Contract

� Capacity of Parties� Subject-Matter of Contract Must Be Legal� Contract Must Have an Element of Bargain � Specific Form � Offer Must Contain Unambiguous Terms

and Conditions

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Due Execution of Obligations

� Term of Execution� Place of Execution� Proper Person� Subject-Matter of the Obligation� Way of Execution

� Discharge of the Obligation by Placing the Debt on a Deposit

� The Recourse Discharge of Obligations

� Currency of the Obligation

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Place of Execution

� To Transfer Land Plot - at Place of Location of Property

� To Transfer Property with Its Shipment - at Place of Transferring Property to First Shipper

� Other Obligations to Transfer Property - at Place of Manufacture or Bailment

� Pecuniary Obligation - at Place of Residence of Creditor

� Other Obligations - at Place of Residence of Debtor

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Proper Person

� Debtor� Third Party on Which Discharge Imposed by

Debtor� Third Party in Threat of Losing Right to

Property of Debtor

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Placing the Debt on Deposit

� Absence of Creditor� Creditor's Legal Incapacity � Absence of Certainty Who Is Creditor � Creditor's Avoidance of Accepting Discharge

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Joint and Several Promise

� Promisor, who has discharged the joint and several promise, shall have the right of the recourse claim to the rest of the debtors

� Amount which has not been paid by one of the joint and several promisors to the debtor bear in equal shares this promisor and the rest of the promisors

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Transfer of Rights

� Legal Succession� Court Decision� Pledge Obligations� Subrogation in Insurance Obligations

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• ZAO Picture is a specialist company that deals in works of art. It acquired three paintings signed by a famous artist and decided to make these available for sale.

• The company sent letters to Nikolai, Peter and Svetlana stating the following:‘ZAO Picture is prepared to offer you an exclusive bargain. You have the opportunity to purchase a signed painting (full description given) by the famous artist Chaikin for 500.000 roubles. In order to secure your purchase please reply, enclosing full payment, by 13.00 hours on 1 February 2008’.

• Nikolai replied to the letter and sent full payment for the painting, but his reply did not reach ZAO Picture until 3 February 2008. Peter’s response was to send a remittance of 450.000 roubles, with a letter stating that he was prepared to purchase the painting but as a valued customer expected a discount of 10%. Svetlana did not reply, but the general director of ZAO Picture was certain that as an enthusiastic art collector she would wish to accept the offer and sent her a painting with an invoice for 500.000 roubles.

• Required:• Explain whether the letters sent by ZAO Picture to the three clients were

offers which, if accepted, formed the basis of binding contracts. (4 marks)

• Explain whether contracts have been concluded with Nikolai, Peter and Svetlana.

(6 marks)(10 marks)

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Means for the Security of the Fulfillment of the Obligations

� Mortgage or Pledge� Surety� Bank Guarantee� Forfeit� Earnest Money� Retaining

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Pledge May Arise

� By Agreement� By Law

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Parties to Pledge

� Pledgee - Creditor � Pledger - Debtor

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Subject-Matter of Pledge May Not Be

� Property Excluded from Business Turnover � Claims Linked to Pledger's Personality � Other Rights Whose Alienation Is Prohibited

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Mortgage Contract Set Out

� Rights and Obligations of Parties� Nature of Security� Covenants of Debtor� Actions of Creditor in Default

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Mortgage Contract Must Contain

� Identification of Property Mortgaged� Evaluation of Property Mortgaged� Full Description of Terms and Conditions of

Obligation Secured by Mortgage

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Pledger or Pledgee Shall

� Insure Pledged Property� Take Measures to Guarantee Security of

Pledged Property� Immediately Notify Other Party about Threat

of Loss of Pledged Property

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Execution on Mortgaged Property Only under the Court Decision

� Consent of Other Person Required for Conclusion of Contract

� Subject-Matter – Property of Historical Value � Pledger Is Absent

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Termination of the Pledge

� Termination of Main Obligation� Upon Demand of Pledger Concerning Threat

of Loss of Pledged Property� Perish of Pledged Object� Sale of Pledged Property� Dissolution of Pledge Agreement� Levy on Pledged Property� Transfer of Debt

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Termination of Surety

� Termination of Main Obligation� Amendment of Obligation� Transfer of Debt � Creditor Refused to Accept Proper Discharge� Expiry of Term, Indicated in Contract of

Surety

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Bank Guarantee

� Principal� Guarantor� Beneficiary

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Refusal to Satisfy Beneficiary's Claim

� Claim Does Not Correspond to Terms of Guarantee

� Expiry of Term

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Termination of Bank Guarantee

� Payment to Beneficiary� Expiry of Term� Beneficiary's Renouncement of Rights and

Return of Guarantee to Guarantor� Beneficiary's Renouncement of Rights with

Application to Relieving Guarantor of Obligations

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Forfeit

� Legal Forfeit� Contract Forfeit

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Types of Forfeit

� Offset Forfeit � Penalty Forfeit � Alternative Forfeit � Exclusive Forfeit

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Functions of Earnest Money

� Payment� Security� Ascertaining� Compensation

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Groups of Securing Measures

� Measures of Responsibility� Means, Defining Property on Which Creditor

Will Put Recovery� Means, Empowering Creditor to Put Recovery

on Property of Third Parties� Retaining of Property of Debtor

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Interrelation of Main and Securing Obligation

� Securing Obligation Shall Follow Main Obligation

� Volume of Execution May Decrease Quantity of Securing Obligation

� Non-validity of Main Obligation Shall Invalidate Securing Obligation

� In Case of Termination of Main Obligation the Securing Obligation Shall Terminate

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Elena is a wealthy businesswoman. Her friend Sasha has approached herwith a view to securing her assistance to set up a new business. Elena isprepared to assist Sasha but does not want to take undue risks.Sasha has existing borrowings already secured by way of pledge over realestate that he owns.Sasha’s bank is prepared to make funds available subject to Elena actingas surety. Elena is unsure what this entails and seeks appropriate advice.

Required:• Explain what is the meaning of the term ‘surety’ and what is the

nature of the legal relationship between debtor, creditor and surety. (2 marks)

• Explain what are the rights and obligations of the surety if thearrangement goes ahead.

(4 marks)• State how may the surety arrangement be terminated.

(4 marks)(10 marks)

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Anna Shashkova

• Yuri purchased a property in 2004, raising 60% of the purchaseprice by way of a mortgage secured on the property. In 2006, Yuri’s business failed and he was no longer able to service therepayments due to the bank.

• The property was neglected and has fallen into disrepair. It is alsosituated in an undesirable location. Attempts by the lender to sellthe property at public auction failed. Faced with the possibility ofmaking a loss on the contract, the lender is considering twoalternative courses of action. Firstly, it will consider selling theproperty by private agreement to an individual who is willing to paya sum adequate to cover the outstanding debt and accumulatedcosts. Secondly, it is prepared to pay Yuri 80% of the guide priceoriginally set by the court, with the intention of carrying outrepairs and then selling it at a future date.

Required:• Explain the legal obligations of the lender in respect of the

disposal of the property. (5 marks)

• Evaluate the alternative courses of action proposed by thelender.

(5 marks)(10 marks)

Anna Shashkova

• ZAO Grow is a rapidly developing company thatmanufactures and retails sports and leisure goods. Inorder to achieve its performance targets for the nexttwo years, ZAO Grow has to raise new capital.

• Vladimir is the general director of ZAO Grow. He hasapproached Loan Bank for funding. The bank will onlyprovide loan facilities if ZAO Grow is prepared to granta legal mortgage over its head office building, oralternatively if Vladimir’s wealthy father will give a personal guarantee to underpin the lending contract.

• Required:• Explain the nature of the two types of security

sought by Loan Bank. (6 marks)

• Explain the potential risks and consequences of thesetypes of security for the parties involved.

(4 marks)(10 marks)

Anna Shashkova

Breach of Contract

� Prior to Performance� Failure to Perform � Performance in Defective Manner

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Anna Shashkova

Fault

� Intention� Negligence

Anna Shashkova

Loss "De Facto"

� Expenses to Restore Violated Right� Damage to Property

Anna Shashkova

Non-Discharge of Monetary Obligations

� Illegal Retention� Avoidance to Return� Delay in Payment � Non-Grounded Receipt

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Anna Shashkova

The Contract May Be Dissolved Unilaterally by a Court’s Decision

� In Case of Essential Violation � In Case of Refusal of Party to Contract to

Fulfil Obligations � In Case of Essential Changes to

Circumstances

Anna Shashkova

Termination of Contract� Agreement

� Condition� New Agreement� Indemnity� Remittance

� Performance� Proper� Overdue Performance (Purpose Ended)� Partial Performance

� Novation� Offset� Coincidence of Debtor and Creditor � Frustration/Force Major� Act of State Body� Death or Liquidation

Anna Shashkova

Novation

�Different object or �Different way of discharge

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Anna Shashkova

Termination of Contract� Agreement

� Condition� New Agreement� Indemnity� Remittance

� Performance� Proper� Overdue Performance (Purpose Ended)� Partial Performance

� Novation� Offset� Coincidence of Debtor and Creditor � Frustration/Force Major� Act of State Body� Death or Liquidation

Anna Shashkova

Offset Impossible

� Limitation Period Expired� For Compensation of Harm to Life or Health� On Recovery of Alimony� For Life Maintenance

Anna Shashkova

Not a Discharge by Frustration

� Alternative Mode of Performance Is Possible� Performance Becomes More Expensive� One Party Accepted Risk of Probable

Impossibility to Perform Obligations� Counter-Agents of Debtor Violated

Obligations� Commodities Absent on Market� Lack of Monetary Means of Debtor

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Anna Shashkova

In February 2008 a shop entered into a contract with a shoe manufacturing company “Record” for the manufacturing and delivery of 20 000 pairs of children’s shoes. The agreed delivery date was 25 April 2008. On the 20 March 2008 there was a catastrophic fire at the shoe manufacturing company, which destroyed both the stock and the sewing rooms. Because of the fire the shoe manufacturing company were unable to deliver the order on time and, as a consequence the shop suffered financial losses.

Required:• Is the shoe manufacturing company liable to the shop for non-

execution of its obligations?(4 marks)

• Would the case be resolved in a different way if the shoe manufacturing company failed to execute its obligations because its supplier had not delivered the materials for production of shoes in time?

(3 marks)• Will the shoe manufacturing company be exempted from liability

in case it was found liable for non-execution of its obligations in case of compensation of losses to the shop?

(3 marks)(10 marks)

Anna Shashkova

Obligations in TortObligations in Tort

�� Undue Action or DeedUndue Action or Deed�� Fault Committed or PresumedFault Committed or Presumed�� Real Damages PresentReal Damages Present�� The Damages are the Direct Consequences The Damages are the Direct Consequences

of the Deedof the Deed

Anna Shashkova

Moral Damage Reimbursed Moral Damage Reimbursed Regardless FaultRegardless Fault�� Activity with Increased Hazard to People Activity with Increased Hazard to People

AroundAround�� Result of Illegal Conviction Result of Illegal Conviction �� Spread of Information Denigrating Business Spread of Information Denigrating Business

ReputationReputation

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Anna Shashkova

Subject to CompensationSubject to Compensation

�� EarningsEarnings�� Expenses Incurred Expenses Incurred �� Sanatoria TreatmentSanatoria Treatment�� Acquisition of Special Transport VehiclesAcquisition of Special Transport Vehicles�� RetrainingRetraining

Anna Shashkova

Death of BreadwinnerDeath of BreadwinnerInjury RedressedInjury Redressed�� Minors up to 18 Minors up to 18 �� Students up to 23 Students up to 23 �� Women over 55 Men over 60Women over 55 Men over 60�� Disabled PersonsDisabled Persons�� One of Family Members, Who Takes Care of One of Family Members, Who Takes Care of

DependentsDependents

Anna Shashkova

-ZAO- Food operates several shops that sell fresh, processed and frozen foods to retail shoppers. Having taken a delivery of frozen foods from a supplier, the goods were placed in temperature-controlled display units in the shop.

The display units were supplied by the frozen food manufacturer, who also provided documentation on how the units were to be used. Sasha, an employee in one of the shops, accidentally set the temperature of the frozen food storage units incorrectly. As a result, several customers complained that members of their families had become unwell after consuming frozen food purchased in the shop. Some customers havestated that they will take legal action to recover medical costs and lost wages due to absence from work. Sasha claims that he was not given training on the use of the display units. -ZAO- Food claims that the documentation supplied with the display units does not clearly indicate correct storage temperatures.

• Required:Discuss the potential liability of the frozen food manufacturer, -ZAO- Food, and Sasha for injury caused to the customers of the shop, and the matters that the court will take into account whenattributing liability.

(10 marks)

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Anna Shashkova


EMPLOYMENT LAW

Anna Shashkova

Labour Legislation Does Not Cover

�Members of LE Board of Directors� Contractors under Civil Law Contracts

Anna Shashkova

Employee and Contractor

� Protection by Labour Code � Employer Is Liable for

Wrongful Acts� Employer Pays Income Tax� Work Remuneration Not Less

MMAWS� Rights Regarding

Redundancy Payments � Shall Observe In-House

Labour Rules and Working Schedule

� Employer Owes Greater Duty Regarding Health and Safety at Work

� Protection under Civil Code� Contractor Liable for

Wrongful Acts� Contractor Pays Taxes� No Requirement to Minimum

Pay� No Rights Regarding

Redundancy Payments� Not Obliged to Observe In-

House Labour Rules and Working Schedule

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Anna Shashkova

Labour Agreement

� Employer shall:� Provide an employee with the work � Ensure proper labour conditions� Pay labour remuneration in full and in time� Provide social insurance

� Employee shall:� Personally carry out the work � Observe in-house labour rules

Anna Shashkova

Employer – Natural Person

� Individual entrepreneurs� Natural persons, who are not individual

entrepreneurs

Anna Shashkova

Mandatory Terms of LabourAgreement

� Place of Work � Date of Beginning of Work� Employee's Position � Description of Working Conditions � Schedule of Working Hours and Rest � Remuneration Size and System � Compensations and privileges for employees

working at hazardous jobs� Terms of the character of work (movable)� Terms on mandatory social insurance

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Anna Shashkova

Additional Terms of LabourAgreement

� Elaboration of the place of work� Probation terms and period� The confidentiality clause � The employee's obligation to work for a certain

period after training effected for account of the employer

� Types and terms of additional insurance of the employee

� Improvement of social conditions of the employee and his/her family

� Other terms

Anna Shashkova

A Term of a Labour Agreement

� An Indefinite Period� A Definite Period Not over Five Years

Anna Shashkova

Mandatory Fixed-Term LabourAgreement

� To substitute a temporarily absent employee� With employees at short-term (up to two months) jobs � With employees at seasonal jobs (may exceed 6

months)� With persons, directed to work abroad� To provide works in the enterprise, which are not

included into the ordinary activity of the enterprise)� In the organizations, set up for a definite period� With persons employed to perform a specific job� To perform works which are directly linked with

training� With persons elected for a fixed term for a paid job� With persons directed by employment service� For alternative civil service

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Anna Shashkova

Agreed Fixed-Term LabourAgreement

� In small business entities �With the retired due to age limit� In the Far North� To prevent accidents �With elected under competition �With creative employees of mass media�With a CEO �With intramural students �With by-workers

Anna Shashkova

A Fixed-Term Labour Agreement upon Expiry

� Cancelled� Renewed for Definite Term � Recognized as Renewed for Indefinite

Period:� After Expiry Employee Continues Work � Agency Effecting Control over Labour Law

Observance or Court Finds Out That There Were No Reasons for Fixed-Term Agreement

Anna Shashkova

Restrictions to Employ

� At Educational Field Prohibited� By Court Decision� Due to Medical Indications � Previous Convictions

� Women - at Jobs Implying Lifting and Carrying Heavy Items Exceeding Weight Limit Established by Law

� Persons under 18 Years of Age � At Jobs with Hazardous Conditions� At Jobs That May Damage Their Health or Morals� At Jobs Implying Lifting and Carrying Heavy Items

Exceeding Weight Limit Established by Law or at Work by Shifts

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Anna Shashkova

Entering into Force

� On the Day It Is Signed by both Parties� On the Day, Stipulated in the Labour

Agreement or Russian Law � On the Day the Employee De Facto

Gets Access to Work

Anna Shashkova

Probation May Not Be Established

� Persons Hired for up to Two Months� Persons Transferred from Another Job� Persons under 18 Years of Age� Recent Graduates within the first year of

graduation� Persons Selected after Competition� Persons Elected� Expecting Mothers � Women with children up to a year an a half� In Other Cases Stipulated by Laws and

Collective Labour Agreement

Anna Shashkova

Collective Labour Agreement Include

� Forms, systems and volumes of labourremuneration

� Works of regulation of the labour remuneration � Payment of pensions, compensations� Work and rest regimes� Full or partial payment of food supply of

employees� Observation of interests of employees while

privatization of state or municipal property

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Anna Shashkova

Basic Rights of Employee

� Conclude, Amend or Dissolve Labour Agreements� Be Provided with Work Stipulated in Labour

Agreement� Receive Labour Remuneration in Full and in Time � Receive Due Rest and Leisure� Form and Join Trade Unions � Get Compensation for Work-Related Injuries� Settle Individual and Collective Labour Disputes� Get Vocational Training and Re-Training

Anna Shashkova

Obligations of Employer

� Provide with the work � Ensure safety of working conditions � Pay labour remuneration in full and in time� Comply with legal acts � Compensate harm caused to employees � Guarantee equal pay for equal work� Execute instructions of the state bodies

Anna Shashkova

Rights of Employer

� Conclude, amend or dissolve labouragreements

� Demand from employees to perform their job duties properly

� Reprimand and impose penalties on employees

� Conclude collective labour agreements� Encourage employees � Adopt local normative labour acts

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Anna Shashkova

Basic Obligations of Employee

� Perform Work Properly � Comply with In-House Labour Rules � Fulfill Work according to Norms

Established� Treat Carefully Property of Employer � Inform Employer about Arising at Work

of Situation Representing Threat to Human Life or Health

Anna Shashkova

Termination of LabourAgreement

� Parties' Mutual Consent� Expiry of Fixed-Term Labour Agreement� Employee's Initiative� Employer's Initiative� Employee's Transfer to Another Employer upon His/Her Consent � Employee's Refusal to Continue Working under Employer's

Reorganization or Change of Founders� Employee's Refusal to Continue Working Due to Amendment of

Terms of Labour Agreement� Employee's Refusal to Transfer to Another Work Required Due to

Medical Statement� Employee's Refusal to Transfer to Another Work When Such Transfer

Is Required Due to Relocation of Employer� Circumstances beyond Control of Parties � Violation of Labour Code for Conclusion of Labour Agreement

Anna Shashkova

Termination under Employer’s Initiative

� Liquidation� Redundancy� Employee's Poor Condition of Health or Poor Qualification� Employee's Multiple Failure to Perform Job Duties with No

Valid Reason� Gross Violation of Job Duties� Immoral Behavior � With respect to Dismissal of CEO:

� Change of Property Owners of Non-Commercial Organizations� Decision of CEO Inflicted Damage to Organization’s Property� Bankruptcy of LE� Termination of Labour Agreement before Schedule by Authorized

Body� False Information Submitted by Employee for Labour

Agreement

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Anna Shashkova

Additional Guarantees

� Persons with family obligations� Young workers under 18 years of age� Persons combining jobs� Educational specialists

Anna Shashkova

Guarantees and Allowances

� Redundancy - Another Job and Severance Pay � Poor State of Health - Two-Week Average

Remuneration� Employees Who Combine Working and Studying:

� Additional Unpaid Leave� Shorter Working Week � Reimbursement for Round Trip Ticket

� Employees Transferred to Lower-Paid Job:� Due to Poor Health - Pay at Previous Rate for One Month� Due to Injury - Pay at Usual Rate Until They Recover

� Injury at Work - Expenses � Sick Leaves

Anna Shashkova

Mr Brown, UK citizen, was invited to work with a RussianScientific centre. The centre suggested Mr Brown to signthe labour contract. As he has never been to Russia and hasno idea of Russian legal system, he has got several questionsthe answers for which will help him to take final decisionwhether to accept the invitation or not.

• Will it be possible for the parties to the labour contractto introduce changes thereto and how?

(2 marks)• Is it possible to demand an Employee to fulfil additional

employment duties other than those provided for in thecontract?

(2 marks)• If Mr Brown signs the contract, within which period of

time must he start to work with his new Employer?(3 marks)

• Is it possible to introduce any probation period for theEmployee?

(3 marks)(10 marks)

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Anna Shashkova

In relation to employment law:• Explain what is meant by‘redundancy’, stating examples ofsituations in which redundancy mayarise.

(5 marks)• State and explain the rights of theemployee when a labour agreementis terminated on the grounds ofredundancy.

(5 marks)(10 marks)

Anna Shashkova

• ZAO Capital is a company that manufactures electronic equipment. It distributes its products throughout the Russian Federation. The company has 500 workers at its factory.

• Recently the company has encountered cash flow difficulties owing to a reduction in orders. As a result it needs to cut costs urgently. It has been decided that 75 factory workers will be dismissed. At a meeting of management the job losses have been discussed.

• It is the opinion of the general director that the company should dismiss female workers, especially those with young families. In his opinion, many of the workers are married to people with higher wages and that as a consequence they need the jobs less than other workers in the factory. He also believes that female workers with young children are less reliable as they take more time off when their children are sick.

• The finance director has emphasized the seriousness of the cash flow problem and he feels that the company should dismiss some of theworkers with longer periods of service. These workers are on higher wages, and by releasing these workers immediately the payroll can be reduced without delay.

• By contrast, the production manager believes that younger workers with shorter periods of service should be released as a priority. These persons are on lower wages but their skills have not been developed fully and so they are less productive than more experienced workers.

Required:• State what would be the consequences of ZAO Capital making 75

members of its work force redundant and advise ZAO Capital of the legal and financial matters that should be considered when deciding on the specific workers to be released as part of the programme to reduce staff costs.

(10 marks)

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Anna Shashkova


THE FORMATION AND CONSTITUTION OF BUSINESS ORGANIZATIONS

Anna Shashkova

Models of LE

� Founders Loose Right of Estate – Receive Right of Obligation

� Founders Do Not Loose Right of Estate� Founders Loose Right of Estate – Do Not

Receive Any Right

Anna Shashkova

Types of LE

� Commercial� Non-Commercial

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Anna Shashkova

Non-Commercial Legal Entities

� Consumer Cooperative� Public and Religious Organizations� Fund� Institutions� Associations and Unions of Legal Entities

Anna Shashkova

Business Activity of Non-Commercial Legal Entities

� It Helps Them to Achieve Goals, They Have Been Established for

� Business Activity Is of the Kind That Corresponds to These Goals

Anna Shashkova

Commercial Legal Entities

� Commercial Partnerships and Companies� Production Cooperatives� State and Municipal Unitary Enterprises

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Anna Shashkova

Termination of Partnership

� By agreement� On dissolution of the contract � On repudiation of either partner � If either of the partners lacks active legal capacity� In case of death, reorganization, liquidation or

insolvency� On expiry of the term of the partnership� On alienation of the partner’s share under the claim

of the creditor� By the state bodies

Anna Shashkova

Commercial Partnerships and Companies

� General Partnership� Commandite (Limited) Partnership� Joint-Stock Company� Limited Liability Company� Additional Liability Company

Anna Shashkova

A Partnership A Company

� Association of Persons� Participants Directly Take Part in

Business Activity

� Participants – LE and Individual Entrepreneurs

� Activities - Only Activities of Partnership

� No Norm for Charter Capital� Full Property Subsidiary Liability

� Association of Capital� Participants Take Part in

Business Activities by Capital Participation

� Participants - Any Subjects of Civil Law of the RF

� Rights and Obligations Accrued by Activities of Management Bodies

� Minimum Amount of Charter Capital Established by Law

� No Property Liability.Participants Bear Risk of Losses in Amount of Contributions

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Anna Shashkova

Rights of Limited Partners

� Receive Part of Partnership's Profit� Be Instructed of Partnership's Annual Reports

and Balances� Withdraw from Partnership� Transfer Its Share in the Joint Capital

Anna Shashkova

Main Features of a Company

� Unity of the Organizational Structure� Separate Estate � Independent Property Responsibility� Ability to Act in Civil Relations on its Own

Behalf

Anna Shashkova

Types of Legal Capacity

� General Legal Capacity� Special Legal Capacity

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Anna Shashkova

Legal Capacity Limited

� By Law� By License � By Constituent Documents

Anna Shashkova

Constituent Documents of Legal Entities

� Constituent Agreement and the Charter� Limited Liability Companies� Additional Liability Companies� Associations and Unions of Legal Entities

� Constituent Agreement� Commercial Partnerships

� Charter� Joint-stock Companies� State and Municipal Unitary Entities� Production Cooperatives� Consumer Cooperatives� Public and Religious Organizations� Funds

Anna Shashkova

Constituent Agreement

� The name of the legal entity� The place of location of the legal entity� The way in which the legal entity's activity is

managed� Other information, required by the law for

legal entities of the corresponding type

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Anna Shashkova

Agreement of Formation� Procedure for Participation of Founders in Creation

of the Company� Amount of the Charter Capital� Categories and Types of Shares subject to

Floatation among the Founders� Amount and Procedure for Paying the Shares� Rights and Duties of the Founders concerning the

Formation of the Joint-Stock Company

Anna Shashkova

Charter of Joint-Stock Company Must Include

� General Information � Type of the Joint-Stock Company� Classes of the Issued Shares� Nominal Value of the Shares and their Quantity� Volume of the Share Capital� Rights of Shareholders� Membership and Competence of the Management Bodies of

the Company and the Procedure of Decision-Making Process� Questions, which are Considered Unanimously or by the

Qualified Majority

Anna Shashkova

Internal Documents� Derive Legal Force from Law � Guarantee Execution of Laws � Are Taken by Correspondent Management

Bodies of the J-SC� Extend Their Force to All Subjects of Law � Are Taken into Consideration by Court

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Anna Shashkova

Types of Internal Documents� On Regulation of the Activity of the Management

Bodies� On Regulation of the Activity of the Joint-Stock

Company� On Regulation of the Activity of the Personnel � Regulating Structural Units of the Company� Regulating Holding Structure of the Company

Anna Shashkova

Structural Subdivisions� Set-Apart Subdivisions� Subdivisions, Situated at Place of Location of

Legal Entity

Anna Shashkova

Relationship between LE and Branch

� The decision on creation of the branch � The constituent documents of the legal entity� Articles on the branch � A power of attorney, given to the head of the

branch

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Anna Shashkova

Legal Entity May Be Terminated

� By Reorganization� By Liquidation

Anna Shashkova

Termination of Legal EntitiesParticipants’ Decision Court’s Decision

� Expiration of Term � Achievement of Goals� Multiplication or Reduction of

Number of Participants � Court Decision on Invalid

Registration� Insolvency (Bankruptcy)

� Business Activity without License

� Business Activity Prohibited by Law

� Multiple and Gross Violation of Law

� Systematic Activity of Public or Religious Organization, Charity or Other Fund, Not Provided by Charter of Such Legal Entity

� Insolvency (Bankruptcy)

Anna Shashkova

Forms of Reorganization

� Merger� Take Over � Division� Separation (Spin-Off)� Transformation

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Anna Shashkova

Stages of Liquidation� Decision on Liquidation� Formation of Liquidation Commission� Entry to the Unified State Register of Legal Entities of the

Liquidation Commencement Data� Publication on the Liquidation� Finding of the Creditors and the Exaction of the Debit

Indebtedness� Compiling of an Intermediary Liquidation Balance � Approval of an Intermediary Liquidation Balance� Creditor Settlement� Compiling of the Final Liquidation Balance� Approval of the Final Liquidation Balance� Distribution of Remaining Property� Entry into the Unified State Register of the Legal Entities

Anna Shashkova

Priority of Satisfaction of Creditor’s Claims

� Individuals, to Whom Harm to Life or Health Was Caused

� Payment of Retirement Allowances and in Remuneration of Labour

� Debts by Obligatory Payments into Budget � Other Creditors

Anna Shashkova

Order of Distribution of Property LLC

� Distributed but Unpaid Part of Profit � Distribution of Property among Participants

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Anna Shashkova

Priority in Distribution of Property J-SC

� Payments relating to Shares which are Subject to Redemption at the Demand of Shareholders

� Payments for Dividends Credited but not Paid with regard to Preference Shares

� Distribution of Assets of the Company under Liquidation Among the Holders of Ordinary Shares and All Types of Preference Shares

Anna Shashkova

Characteristics of Representation

� Representative Acts on behalf of Representee

� Representee Acquires Contractual Rights and Obligations

� Representative Acts Strictly Within His Powers

Anna Shashkova

Types of Representation

� Obligatory� Voluntary

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Anna Shashkova

Types of Power of Attorney

� General� Special� One-Time

Anna Shashkova

Termination of Power of Attorney

� Expiry� Revocation by Person, who Granted it� Refusal of Person, to whom it Was Given� Termination of Legal Entity� Death of Individual

Anna Shashkova

Contract of Mandate

� On Behalf of Mandator� For Account of Mandator

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Anna Shashkova

Obligations of Mandatory

� To Perform Mandate � To Perform Mandate In Person � To Report All Information � To Transfer All Received � To Return Power of Attorney

Anna Shashkova

Obligations of Mandator

� To Give Lawful Instructions� To Provide with Power of Attorney� To Compensate Costs� To Provide with Pecuniary Means � To Accept All Performed

Anna Shashkova

Termination of Mandate

� Revocation of Mandate � Abandonment of Mandatory� Death of Mandator or Mandatory

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Anna Shashkova

Commission Contract

� On Its Own Behalf� For Account of Principal

Anna Shashkova

Commission Contract

� For Indefinite Period � With Reference to Territory of Execution� Sole Commission � With Conditions for Bailment

Anna Shashkova

Rights of Commission Agent

� Conclude Contract of Sub-Commission � Retain Commission Fee � Withhold Things Subject to Transfer to

Principal� Demand Compensation for Losses

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Anna Shashkova

Obligations of Commission Agent

� Perform Commission Instructions on Most Favorable Terms

� Compensate for Difference in Price� Bear Liability for Loss � Submit Report and Transfer All Received

Anna Shashkova

Obligations of Principal

� Pay Commission Fee and Compensate Incurred Expenses

� Inform on Objections to Report � Accept Everything Performed � Pay Additional Fee for Del Credere

Anna Shashkova

Termination of Contract of Commission

� Revocation of Principal� Death of Commission Agent � Recognition of Commission Agent as

Bankrupt� Abandonment of Commission Agent

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Anna Shashkova

Agency Contract

� On Its Own Behalf, but For Account of Principal

� On Behalf and For Account of Principal

Anna Shashkova

Termination of Agency Contract

� Refusal of One of Parties� Death of Agent � Recognition of Agent as Bankrupt

Anna Shashkova

Mandate Commission AgencyMandate� On Behalf and For Account

of Mandator� May Be Both Onerous and

Gratuitous

Commission� On Its Own Behalf, but For

Account of Principal� Only Onerous

Agency� May Combine Contracts of Mandate and

Commission� Subject-Matter Is Wider � Only Onerous� Does Not Require Power of Attorney� Has Continuous Character

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Anna Shashkova

• Rosa and Alexei are partners in a successful unlimited partnership. Rosa is highlyambitious and wishes to pursue rapid growth, but Alexei does not want to takeunnecessary risks and is satisfied with the business as it is currentlystructured.

• Rosa has been taking decisions that exceed her authority under the partnershipagreement. She recently ordered expensive new IT equipment. Alexei is angryas he considers the equipment to be far too sophisticated for the needs of thebusiness in the foreseeable future. Rosa argues that the business needs toinvest heavily to build on its success.

• The partners meet to resolve their differences. Alexei demands that the IT equipment, which is now installed and ready for use with new software, bereturned to the supplier. The supplier of the equipment has submitted itsinvoice and this is due for payment immediately. Rosa refuses to agree to returnthe equipment.

• Required:• Explain whether Alexei can demand that the IT equipment be returned to

the supplier. (3 marks)

• Explain what Alexei must do if he wishes to withdraw from the partnership, and whether his withdrawal will relieve him of all responsibilities incurred bythe partnership to date.

(4 marks)• Explain whether Alexei can take any action against Rosa for breaking the

terms of the partnership agreement.(3 marks)

(10 marks)

Anna Shashkova

Farmer Sidorov entered into a commission agreement with company Y. Under theagreement Y undertook either to find a buyer for 200 kg of apples and 300 kgof tomatoes (that had been produced by Sidorov) and sign the contracts of salein respect to the apples and tomatoes or sell them in the market place. Sidorovinsisted that the price of apples should be no less than five rubles per kg andtomatoes - no less than eight rubles per kg. Y’s remuneration was stipulated asequal to 400 rubles for the services completed. A day later Y found a buyer forthe tomatoes and signed the contract of sale in respect of all the tomatoes at12 rubles per kg and hired company Z (on the sub commission basis) to performall the necessary actions in respect to the apples. The same morning Z sold allthe apples in the market place at four rubles per kg.

Required:Consider the situation with respect to the rules governing the law ofcontract and the contract of commission in particular(a) In whose name is the contract of sale of tomatoes signed (Sidorov or Y) and who is responsible for the quality of the tomatoes sold under thiscontract (Sidorov or Y).

(5 marks)(b) Please make the calculation of money due from Sidorov, Y and Z to eachother and comment on your calculation.

(5 marks)(10 marks)

Anna Shashkova

In relation to legal entities:• Explain the meaning and consequence of

‘Separate Legal Personality’. (5 marks)

• Explain the extent to which the concept of limited liability applies to the shareholders, directors and the company itself in a company limited by shares.

(5 marks)(10 marks)

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Anna Shashkova

In relation to Statutory Capital:• Explain what is meant by statutory capital

and describe its purposes. (4 marks)

• Explain the minimum legal requirements in relation to statutory capital for open and closed companies limited by shares.

(4 marks)• What are the consequences for any

company that fails to adhere to the minimum legal requirements in relation to statutory capital?

(2 marks)(10 marks)

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Anna Shashkova


CAPITAL AND FINANCING OF A COMPANY

Anna Shashkova

Payment for Shares

� In Money � By Property � By Securities� By Property Rights � By Other Rights, Having Monetary

Evaluation

Anna Shashkova

Increase of Charter Capital

� By the Company's Assets� By the Additional Contributions of

Participants of the Company� By the Contributions of Third Persons

to be Accepted to the Company

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Slides

Anna Shashkova

Diminution of Charter Capital

� By Reducing Nominal Value of Stakes of All Participants

� By Acquitting Stakes Belonging to the Company

Anna Shashkova

Priority Right

� Participants pro rata their stakes � Company, if participants do not

exercise their right

Anna Shashkova

Acquisition by LLC of Stake

� If a prohibition to transfer a participatory share to the third parties exists in the Charter and participants refuse to acquire it

� If there is no consent in the Charter for transfer of a participatory share to a participant or to a third party

� In case of participant's withdrawal or dismissal

� In case the contribution to the charter capital was not made in full

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Anna Shashkova

Must Not Distribute Profit

� Until Payment In Full of Company's Charter Capital

� Until Payment of Current Value of Stake of Company's Participant

� Shows Signs of Bankruptcy � Value of Net Assets Less Than

Charter Capital + Reserve Fund

Anna Shashkova

Distinctions between LLC and J-SC

� Charter and Constituent Agreement

� Withdrawal Possible � Dismissal Possible� Board of Directors May

Exist� Reserve Fund Not

Required

� Charter

� Withdrawal Impossible� Dismissal Impossible� Board of Directors

Compulsory� Reserve Fund

Compulsory

Anna Shashkova

Open Closed Joint-Stock Company

� Shares Distributed among Indefinite Number of Persons

� Charter Capital Not Less Than 1000 Multiples of MMAWS -100 000 roubles

� Participants May Sell or Otherwise Transfer Shares without Prior Consent of Other Shareholders

� Company Has Right to Carry Out Public Subscription for Shares It Issues and Has Right to Sell Them to Unlimited Circle of Persons

� Company Must Publish Every Year Annual Report, Accounting Balance and Profits and Losses Account

� Shares Are Distributed among Definite Number of Persons – Not More Than 50

� Charter Capital Not Less Than 100 MMAWS - 10 000 roubles

� Participants Have Priority Right on Acquisition of Shares of Other Shareholders

� Company Has No Right to Carry Out Public Subscription for Shares It Issues and Do Not Have Right to Sell Them to Unlimited Circle of Persons

� Only in Cases Directly Provided by Law Must Publish Accounting Balance

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Most Fundamental Shareholders Rights

� To Dividend� To Attend and Vote at Company’s

Meetings� To Participate in Surplus of Assets at

Liquidation after All Creditors Are Paid

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Shareholders Concerned

� Current earnings� Future earnings� Dividend policy� Relative risk of their investment

Anna Shashkova

Defending Minority Shareholders

� Qualified majority of votes� Redemption of shares� Appealing decisions of the management bodies� Requirement of the state registration of issuance of

shares� Requirements to the Register of Shareholders � Special requirements to approval of major and

interested transactions� Anti-monopoly legislation

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Anna Shashkova

Register of Shareholders

� Entry Means Acquisition of Shareholder’s Rights

� Confirm Fact of Ownership of Shares� List of Shareholders to Participate in

General Meeting Is Prepared� Right of Shareholders to Receive

Dividends Is Conditioned by the Date of Entry

Anna Shashkova

Register of Shareholders Include

� Names and Addresses of Members� Shares Held� Share Numbers� Amount Paid Up� Date of Becoming a Member� Date of Ceasing To Be a Member

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Redemption of Shares

� Reorganization of the Company � Conclusion of a Major Transaction� Amendments and Modifications to the

Charter

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Notice to Shareholders

� On the existence of their right to demand the redemption of shares by the J-SC

� On the price of the redemption of shares

� On the procedure for the redemption of shares

Anna Shashkova

In Closed J-SC Shares Are Placed among Persons Defined

� Charter Contains List of Such Persons� Charter Provides That List of Such

Persons Shall Be Approved by General Shareholders’ Meeting

Anna Shashkova

Decisions Adopted While Setting Up J-SC

� On Creation of a Company� On Approval of the Charter� On Approval of the Monetary Valuation

of Securities, Other Items or Property Rights, or Other Rights Having Monetary Valuation Contributed by the Founders to Pay for the Company Stock

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Anna Shashkova

Types of Shares

� Ordinary and Preference � Documentary and Non-

Documentary� Registered and Bearer � Ordinary and Authorized

Anna Shashkova

Preference Shares Vote

� On Charter Amendments Limiting their Rights as Preference Shareholders

� On Reorganization or Liquidation � At Shareholders' Meetings Following

Meeting where Adopted Decision Not to Pay Dividends

� Charter May Provide Voting of Convertible Preference Shares

Anna Shashkova

Types of Preference Shares

� “Golden Share”� Convertible� Revocable� Participating in Profit� Cumulative� Priority

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Anna Shashkova

Fractional Shares Created

� Priority right to acquire shares sold by a shareholder of a closed J-SC

� Priority right to acquire additional shares

� Priority right when consolidation of shares is effected

Anna Shashkova

Increase of Charter Capital

� By Increasing the Face Value of Shares

� By Floating Additional Shares

Anna Shashkova

Diminution of Charter Capital

� By Diminishing the Face Value of Shares

� By Diminishing the Number of Shares

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Anna Shashkova

Not Entitled to Diminish the Charter Capital

� Until the entire charter capital of the company is paid up in full

� Until the redemption of all the stock � In case of criteria of insolvency (bankruptcy) � If as of the date of such a decision the value of net assets of

the company is less than:� The charter capital of the J-SC� The reserve fund� The excess over the par value of the liquidation value

determined by the Charter of the issued preference stock, or � If it becomes less than the amount thereof as a result of the

adoption of such decision. � Until payment in full of the divided declared, but not paid

Anna Shashkova

Methods for Placement of Shares

� While Setting Up J-SC� By Subscription � By Conversion � By Placing Additional Shares

Anna Shashkova

75% of Votes Required to Place

� All Shares by Closed Subscription� Ordinary Shares Which Constitute

More Than 25% of Ordinary Shares Already Placed

� Registered Securities Convertible into Ordinary Shares, Which Constitute More Than 25% of Ordinary Shares Already Placed

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Priority Right to Acquisition of Shares

� Any shares placed by open subscription

� Shares placed by closed subscription, in case the shareholder voted against or did not vote on that issue

Anna Shashkova

Restrictions on Transfer

� Priority Right � J-SC Prohibited from Acquisition of Its

Shares from Shareholders� Shareholders’ Right to Redeem

Shares� Anti-Monopoly Restrictions

Anna Shashkova

Acquisition of Placed Shares by J-SC Allowed

� When Reducing Charter Capital by Acquisition and Redemption of Part of Shares

� By Decision of General Meeting or Board of Directors

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Anna Shashkova

Acquisition of Placed Shares by J-SC Not Allowed

� Until Charter Capital Paid Up In Full� Company Meets Criteria of Insolvency

(Bankruptcy)� Value of Net Assets Is Less Than Charter

Capital + Reserve Fund + Excess of Liquidation Value over Par Value:� Of Placed Preference Shares� Of Placed Preference Shares Having Priority on

Liquidation Value � Until All Shares Are Redeemed

Anna Shashkova

Types of Bonds

� Secured by Pledge of Property of Company

� Secured by Assets Provided by Third Parties

� Unsecured Bonds

Anna Shashkova

Limitations on Bond Issuance

� After charter capital has been paid up in full� Nominal value of all issued bonds cannot

exceed the amount of the company's charter capital or the amount of security

� Unsecured bonds may not be issued prior to the company's third year of existence

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Anna Shashkova

Advantages and Disadvantages of Issuing Bonds

� Advantages:� Ownership of business does not change� Interest on bonds is tax deductible� Flexibility in interest payments in case of

revocable bonds� Disadvantages:

� Paying interest on debt securities� Debt capital is the risk of default� Restrictive terms

Anna Shashkova

Rights of Equity Holders and Bondholders

� Right to attend general meeting

� Right to vote at general meeting

� No right to an income from investment

� No right to a return of capital

� Right to participate in extra profit

� Position in liquidationlowest

� No right to attend general meeting

� No right to vote at general meeting

� Right to an income from investment

� Right to a return of capital

� No right to participate in extra profit

� Position in liquidationabove equity

Anna Shashkova

Company Must Not Disburse Dividends on Shares

� Until the Entire Charter Capital of the Company Is Paid up in Full

� Until the Redemption of All the Stock � If the Company Meets the Criteria of Insolvency

(Bankruptcy)� If the Value of the Net Assets of the Company Is

Less Than� the Charter Capital of the Joint-Stock Company� the Reserve Fund� the Excess over Par Value of the Liquidation Value of the

Issued Preference Stock Determined by the Charter

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Anna Shashkova

Dividend Is Paid

� Under the decision of the general meeting of shareholders

� Out of net profits of the company� By money and in cases stipulated by

the Charter - by other property� Within the period set out by the

Charter

Anna Shashkova

Mr Leikin is the owner of 100% of the shares of a Limited LiabilityCompany Pexo and is a general director thereof. 1 June 2006 Pexo andMr Kovalenko came to a decision to create a Company limited by sharesPexomal specialising in providing selling consumer goods and signed a Founders’ Agreement of Pexomal as well as other initial documents ofPexomal. According to this Agreement Mr Kovalenko was responsible forexercising all actions necessary to set up and register the Company. Pexomal was registered by Federal Tax Service on 16 July 2006. Withinthe period between 1 June 2006 and 16 July 2006 Mr Kovalenkoconcluded the following contracts: a contract with an independentappraiser for making the appraisal of property transferred ascontribution to the initial share capital of the company, contract ofpurchase and sale of consumer goods.

Required:• What is the date of creation of Pexomal?

(1 marks)• Who is responsible for due payment of the appraiser’s remuneration?

(3 marks)• Who is responsible for due exercising of obligations under the

contract of purchase and sale of goods?(2 marks)

• Is it possible for Mr Kovalenko to sell his shares in the initial sharecapital of Pexomal to Pexo LLC and, if so, why?

(2 marks)• Is it possible for Mr Kovalenko to sell his shares in the initial share

capital of Pexomal to Mr Leikin and, if so, why?(2 marks)

(10 marks)

Anna Shashkova

The share capital of open company limited by shares, X equals 100 000 rubles and isdivided into 1000 shares (800 ordinary shares; 100 preference cumulative shares and 100 preference shares with no reference to their cumulative character). Please note that allthe preference shares, provided for annual dividend, were equal to 100% of their nominal(face) value.In March 2006 the company was finalising the financial results of the year 2005 and theBoard of Directors of the company was preparing for the general meeting of shareholders.According to the balance sheet the profit of the company in the year 2005 (after alltaxes were paid) was equal to 100 000 rubles. The Board of Directors thought that itwould be useful to leave 50 000 rubles in the company for development purposes and todistribute the other 50 000 rubles as a dividend payment between the shareholders. Itshould be noted that the company did not pay dividends for the years 2003 and 2004.

Required:• State the restrictions stipulated by law on the amount of preference shares that

may be issued. Is company X meeting these requirements? (1 marks)

• State who is entitled to take decisions on profit distribution and dividend payments. (2 marks)

If the Board of Directors’ suggestion of a dividend distribution of 50,000 rubles wasadopted,what dividend payment would be due to the holder of each of the threedifferent types of share? (Show and explain your calculations.)

(4 marks)• If preference shares are not specifically stated to be cumulative, can they be

considered to be cumulative or not? (1 marks)

(10 marks)

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Anna Shashkova

• OAO Sportclub is a high profile sports and leisure company that owns a professional football club. The club has enjoyed considerable success inthe last three seasons. Revenues from spectator attendances haveincreased and sales of merchandise have become highly profitable. Konstantin is the club’s major shareholder. He has injected new capitalin recent years, but he now has to decide how to fund ambitious andcostly expansion plans for the stadium and sports facilities. Hispreferred approach is to issue new shares in order to raise capital, andhe feels that the club’s supporters would be prepared to invest for thispurpose. However, Konstantin does not want to reduce his own personalinfluence in the company. Marina is the company’s finance director. Shehas suggested that the company should consider issuing bonds in orderto raise the necessary funds.

• Both Konstantin and Marina are aware that the financial performance ofa sporting enterprise can change quickly and feel that they need toseriously consider the implications of each option before any decision istaken.

• Required:• Analyse the legal rights and obligations that will be created by

funding the company’s future plans by issuing new shares and thosethat will be created by funding the plans by issuing company bonds.

(10 marks)

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Anna Shashkova


COMPANY MANAGEMENT AND ADMINISTRATION

Anna Shashkova

Decision-Management

� General Meeting of Participants� Board of Directors (or Supervisory

Board)� Collective Executive Body� Sole Executive Body

Anna Shashkova

Exclusive Jurisdiction of General Meeting

� Determination of the Basic Directions of the Company's Activity� Alteration of the Company's Charter� Introduction of Amendments to the Constituent Agreement� Formation of the Company's Executive Bodies � Election and Anticipatory Cessation of the Powers of the Company's

Auditing Commission or Inspector� Approval of Annual Reports and Annual Balance-Sheets� Adoption of a Decision on the Distribution of the Company's Net

Profits Among its Participants� Approval of Documents Regulating the Company's Internal Activity� Adoption of a Decision on the Floatation of Bonds by the Company� Appointment of an Audit Check� Adoption of a Decision on the Company's Reorganization or

Liquidation� Appointment of a Liquidation Commission and Approval of

Liquidation Balances

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Anna Shashkova

Extraordinary General Meeting Convened

� By the Company's Executive Body at Its Initiative

� On the Demand of the Board of Directors� On the Demand of the Auditing Commission � On the Demand of the Auditor� On the Demand of the Company's

Participants who Possess Not Less Than 1/10 of the Total Number of Votes of the Company's Participants

Anna Shashkova

Two-Thirds Majority Decisions

� On Questions Indicated in Charter� On Modification of Charter

Anna Shashkova

Unanimous Decisions

� On Introduction Amendments to Constituent Agreement

� On Decisions on Reorganization or Liquidation

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Anna Shashkova

CEO

� Represents Interests of LLC� Concludes Transactions in the Name

of Company� Confirms Personnel Hiring� Issues Orders and Gives Instructions

Binding On All Employees

Anna Shashkova

CEO’s Duties

� To exercise due skill, care and diligence� To exercise their powers for the benefit of

the company� Not to benefit from their position, without

disclosure of this fact to the company� To avoid a conflict of interest between the

company and their own personal or business interests

Anna Shashkova

Decisions In Force

� Voting of Participant Could Not Affect Results of Vote

� Admitted Violations Not Substantial � Decision Has Not Involved Infliction of

Damage on Company's Participant

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Anna Shashkova

Jurisdiction of General Meeting

� Exclusive� Alternative

Anna Shashkova

Decisions upon Recommendation of Board

� Reorganization� Increase of Charter Capital � Fractionalization and Consolidation of

Shares� Approval of Interested Transactions� Approval of Major Transactions� Acquisition of Placed Shares� Participation in Holding Companies

Anna Shashkova

Decisions May Be Assigned to Board

� Formation Company's Executive Body � Approval of Interested Transactions� Approval of Major Transactions� Company’s Acquisition of Placed Shares� Participation in Associations of Commercial

Organizations� Approval of Internal Documents � Other Issues under J-SC Law

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Anna Shashkova

Decision on Convening Annual Meeting Include

� Place and Time of Meeting� Persons Present � Agenda� Matters Put Up for Voting and

Possible Results of Voting � Decisions Adopted

Anna Shashkova

Agenda of Annual General Meeting Include Issues

� On Election of Board of Directors � On Election of Internal Audit

Commission� On Approval of External Auditor� On Approval of Annual Statement� Distribution of Profits and Losses� Payment of Dividends

Anna Shashkova

Persons to Participate in General Shareholders’ Meeting

� Shareholders – Owners of Ordinary Shares � Shareholders – Owners of Preference Shares of Special Type

after the Decision on Non-Payment of Dividends� Shareholders –Owners of Cumulative Preference Shares in

case of Non-Payment of Dividends� Shareholders – Owners of Preference Shares If Agenda

Contains Issues on Reorganization or Liquidation � Shareholders – Owners of Preference Shares If Agenda

Contains Issues on Amendments and Modifications Restricting Rights

� Representatives of the RF in case of “Golden Share”� Managers of Share Investment Funds� Trust Administrators

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Anna Shashkova

2% Voting Shares

� Put issues on the agenda of an annual general meeting

� Nominate candidates to the board of directors of the company, collective executive body, etc.

Anna Shashkova

Information to Shareholders

� The full name and location of the company� The form of holding the shareholders’

general meeting� The date, the time and the place the

shareholders’ general meeting is to be held� The deadline for accepting the absentee

ballots� The date of closing the list of shareholders � The issues on the agenda� The order of access to information

Anna Shashkova

Financial Information

� Annual report of the company� The internal audit commission opinion

on the authenticity of the data of the annual report

� The board of directors recommendations on the distribution of profits

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Anna Shashkova

Extraordinary General Meeting Convened

� By the Board of Directors under its own initiative

� On the Demand of the Auditing Commission � On the Demand of the Auditor� On the Demand of the Company's

Shareholders who Possess Not Less than 1/10 of the Total Number of Voting Shares

Anna Shashkova

Voting Procedure

� Voting In Presence of Shareholders� Mixed Voting � Absentee Voting

Anna Shashkova

Ballot Paper Contains

� The full company’s name and the location � The form of the general meeting of shareholders � The date, place and time of the general meeting� The wording of the decisions on each issue � Voting options for each agenda item expressed with

the words "for", "against" or "abstain"� An indication that the ballot paper must be signed

by the shareholder

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Anna Shashkova

Super-Majority Votes

� Changes to Charter � Decisions to Reorganize or Liquidate Company � Determination of Quantity, Face Value, Category of

Authorized Shares � Company's Acquisition of Placed Shares� Major Transactions over 50% of Balance Value of

Assets� Appointment of executive bodies, internal audit

commission and independent auditor by the founders at the moment of formation of the J-SC

Anna Shashkova

Counting Commission

� Checks the authority and registers participants of the general meeting of shareholders

� Determines the quorum� Clarifies the order of voting� Ensures compliance with the established order and

the shareholders' rights� Counts the votes and summarizes the voting results� Draws up the minutes on voting results� Deposits the ballots with the record-keeping office

Anna Shashkova

Jurisdiction of Chairman

� Organize Work� Convene Meetings and Preside at

Them� Organize Keeping of Minutes� Preside at General Meeting of

Shareholders

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Anna Shashkova

CEO

� Represents Interests of J-SC� Concludes Transactions in the Name

of Company� Confirms Personnel Hiring� Issues Orders and Gives Instructions

Binding On All Employees

Anna Shashkova

May Not Perform Functions of CEO

� Civil Servants� Judges� Deputies of State Duma and

Federation Council� Military Servants

Anna Shashkova

Directors Liable

� Breached Duties� Voted in favor of Resolution� Resolution Caused Losses� Company, Shareholder or Director

Prove Above

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Anna Shashkova

Interested Transaction

� Member of Board � CEO� Member of Collective Executive Body � Shareholder� Person Entitled to Issue Directions

Binding for J-SC

Anna Shashkova

Interested Persons

� Are a Party, Beneficiary, Mediator or Representative in the Transaction

� Own 20 or More Per Cent of the Shares of a Legal Entity - a Party to Transaction

� Hold Positions in the Management Bodies of a Legal Entity - a Party to Transaction

� Hold Positions in the Management Bodies of the Management Organization of a Legal Entity - a Party to Transaction

Anna Shashkova

Not-Interested Transactions

� If a Company Consists of One Shareholder who at the Same Time Performs the Functions of a Sole Executive Body

� If All the Shareholders Are Interested in Such Transaction� If the Priority Right of Acquisition of Shares Floated by the

Company Is Exercised� In Case of Acquisition or Redemption of Floated Shares by

the Company� In Case of Reorganization of the Company in the Form of

a Merger if Another Company Taking Part in the Merger Owns More than 3/4 of All the Voting Shares of the Company Undergoing Reorganization

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Anna Shashkova

Interested Transaction Adopted by General Meeting

� Subject-Matter of Transaction Is 2 and More Per Cent of Balance Sheet Value of Company's Assets

� Transaction Is Floatation by Subscription or by Sale of Shares, Which Consist over 2 Per Cent of Ordinary Shares Floated Earlier by Company

� Transaction is Floatation by Subscription of Issue Securities Which Can Be Converted into Shares,Consisting over 2 Per Cent of Ordinary Shares, Floated Earlier by Company

Anna Shashkova

Essential Violations In Interested Transactions

� Absence of the approval of the corresponding management body before conclusion of the transaction

� Absence of price of the property being alienated in the decision of the general shareholders’ meeting

� Absence of the decision of the board of directors stating the price of the property being alienated or being acquired and adopted before the general meeting

Anna Shashkova

No Major Transactions

� In the Course of Ordinary Economic Activity

� Relating to Placement of Ordinary Shares by Subscription

� Concerning Placement of Issue Securities Converted into Ordinary Shares

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Types of Control

� 30 – 50% - minority voting share control

� 50 - 75% - majority voting share control

� 75 – 95% - qualified majority voting share control

� More than 95% - overwhelming majority voting share control

Anna Shashkova

Four Procedures

� Voluntary Offer on Purchase of More Than 30% of Shares

� Obligatory Offer on Purchase of Shares in an Open J-SC and Other Emission Securities Convertible into Shares

� Purchase of Shares by the Person Having More Than 95% of the Shares in the Open J-SC

� Purchase of Other Emission Securities Convertible into Shares by the Person Having More Than 95% of the Shares in the Open J-SC

Anna Shashkova

Requirements Not Applied

� Purchase of shares while setting up or reorganizing an open J-SC

� Purchase of shares under the voluntary offer forwarded earlier

� Purchase of shares under the obligatory offer forwarded earlier

� Transfer of shares from a person to its affiliated persons � Payment of part of shares by an open J-SC� Purchase of shares as a result of execution of priority

right� Purchase of shares as a result of their placement by a

person, indicated in the Prospectus of the securities as a person, providing services on placement of shares

� In case a person has purchased more than 95 per sent

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Anna Shashkova

Only GM Shall Adopt Decisions on

� Increasing the charter capital of the company by means of the company placing additional shares within the limits of the quantity and categories of authorized shares

� Issuing of securities, convertible into shares, including options of the open J-SC

� Approval of a transaction or several interconnected transactions with the property value over 10% of assets book value

� Approval of interested transactions� Purchase by the company of placed shares� Increase of the remuneration to the persons in the

management of the company

Anna Shashkova

Rights of Auditors

� Determine Forms and Methods of Audit

� Examine and Verify In Full Documents � Obtain Oral or Written Explanations

from Officials � Refuse to Perform Audit � Exercise Other Rights

Anna Shashkova

Obligations of Auditors

� Carry Out Audit in compliance with Legislation of RF

� Provide Necessary Information � Deliver Audit Report � Ensure Safety of Documents � Execute Other Duties

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Anna Shashkova

Liability of Auditors

� Audit License Found Void� Auditor Qualification Certificate

Found Void� Criminal Liability

Anna Shashkova

Compulsory Audit

� Open J-SC� Credit Organization or other Whose

Resources Are Generated by Individuals’and Legal Entities' Voluntary Deductions

� Proceeds from Sale of Products in One Year Exceeds 500 000 Multiples MMAWS, or Sum of Balance Sheet Assets Exceeds as of End of Accounting Year 200 000 Multiples of MMAWS

Anna Shashkova

NonNon--compliance with the norm compliance with the norm requiring mandatory requiring mandatory participation of the independent participation of the independent appraiser shall not be a ground appraiser shall not be a ground of finding the transaction invalidof finding the transaction invalid

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Anna Shashkova

The share capital of an open company limited by shares equals 10 000 000 rubles andis divided into 10 000 ordinary shares. The names of the shareholders are shownbelow, together with the amount of shares belonging to each of them.A – 4 000 shares;B – 2 000 shares;C – 2 700 shares;D – 1 300 shares.The general shareholders’ meeting adopted a decision to exercise a consolidation ofshares on a pro rata basis 1000 to 1. After the consolidation had been completed anordinary shareholders’ meeting was convened. The agenda of the meeting contained a question concerning dividend payments and a question concerning the reorganisationof the company.Only Shareholders A and B were present at the meeting, Shareholders C and D didn’tattend. Shareholder A voted ‘for’ both questions, Shareholder B – voted ‘against’ bothquestions.

Required:• What amount and face value of shares is held by each shareholder after the

consolidation? (4 marks)

• Is the ordinary shareholders’ meeting empowered to take the above mentioneddecisions (in general and in this particular case) and is the necessary quorumpresent?

(2 marks)• Was the decision on dividend payments, made at the ordinary shareholders’

meeting, legally adopted?(2 marks)

• Was the decision on reorganisation of the company, made at the ordinaryshareholders’ meeting, legally adopted?

(2 marks)(10 marks)

Anna Shashkova

ZAO ‘A’ is being created by five participants (founders); four ofthese founders will get 10% of the share capital of ZAO ‘A’ each, and the fifth founder, Mr X, will get the remaining 60% of theshare capital of ZAO ‘A’. Mr X would like to make his contributionto the share capital by means of transfer of property (non-monetary). Soon after the state registration of ZAO ‘A’ theGeneral Director decided to sell this property.

Required:• Can Mr X make his contribution to the share capital by means

of transfer of property? What are the obligatoryrequirements concerning property valuation, if this is done?

(3 marks)• Who is the owner of property after it is transferred to the

charter capital of ZAO ‘A’ and what rights does Mr X have inrespect of the above mentioned property?

(2 marks)• Advise the General Director of ZAO ‘A’ on how to act in order

to sell the property in full conformity with the legislation. (3 marks)

• What rights do the shareholders who are against the sale ofthe above-mentioned property have?

(2 marks)(10 marks)

Anna Shashkova

Mikhail has been the general director of –ZAO– ABC for two years. The company operatesin the highly competitive field of ladies’ fashion goods and accessories. Mikhail is employedon a fixed term contract due to expire in three years’ time. He is also a shareholder in thecompany, owning 15% of the ordinary shares.Olga is the finance director of the company. One day she is looking for documentation inMikhail’s office and discovers a business card on Mikhail’s desk. The card is in the name ofthe President of –ZAO– XYZ, which is the main competitor of –ZAO– ABC in the marketplace. On further inspection, Olga finds correspondence with the President of –ZAO– XYZ that includes confidential sales information on the performance of –ZAO– ABC. It alsocomments on future development plans for the business.Olga reports her findings to one of the directors, who decides to confront Mikhail on thematter. Mikhail’s response is that the President of –ZAO– XYZ is a personal friend andthat he has just taken the opportunity to share ideas on the prospects for the industryand that networking is a normal business practice. Mikhail also admits that he is a shareholder in –ZAO– XYZ.

Required:(a) Explain whether the company can remove Mikhail as a director and a shareholder.

(5 marks)(b) Explain whether Mikhail has any right to make representations to the generalmeeting of shareholders on the matter if he is dismissed as a consequence of hisactions.

(5 marks)

(10 marks)

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Anna Shashkova

• Sven, Trudi, Uri and Viktor are four business colleagues who have beenrunning a successful business in Scandinavia for several years. Theircompany operates a chain of retail outlets that sell premium teas andcoffees, with high quality, healthy lunches and dinners. They now wish tointroduce their business model to large cities in Russia.

• All four colleagues have agreed that they do not wish to expose theirpersonal assets to risk but are prepared to make substantial personalinvestments to capitalise the new business. They are unsure of the bestbusiness form to adopt.

• Sven and Trudi favour the flexibility offered by the partnership formbut acknowledge that the business has the potential to grow veryrapidly which may create a need for external capital. Uri and Viktor arehighly ambitious and see their business as eventually becoming a majorrecognised brand throughout Europe, enabling them to accumulatewealth for themselves and their children.

• All of them agree that it will be inevitable that new investors will beneeded eventually. They wish to control the business but do not haveconcerns about bringing in outside participants should this becomenecessary.

• Required:• Explain the alternative business forms that should be considered for

the new enterprise, identifying their legal characteristics and therelevance of these to the investors.

(10 marks)

Anna Shashkova

• OAO Office is a large company that sells office supplies to businesses in largecities and towns. In recent times the company has become less reliant on salesthrough retail shops and has concentrated on selling its products throughalternative channels to market, such as the internet and direct postal sales. Twoconsequences of this have been an increase in the disposals of non-currentassets, such as shops owned by the company, and acquisitions of land forcentralised warehousing and other purposes.

• At the most recent general meeting, several shareholders raised their concernsthat OAO Office was buying and selling land for speculative purposes. Theirview was that the directors were carrying out an unacceptable number of dealsin real estate that would expose the company to unacceptable levels of risk. Itwas pointed out that the Charter of the company specifically confines itsactivities to selling office supplies. The views of these shareholders aresupported by the fact that a significant proportion of the company’s income hadbeen generated by transactions in real estate.

• Required:• Explain the actions that may be taken by the shareholders who object to

the increasing involvement of OAO Office in land deals. (6 marks)

• Explain the consequences to OAO Office, its directors and anycounterparties to contracts with the company, if specific land deals areproven to be inconsistent with the provisions of the Charter.

(4 marks)(10 marks)

102



LEGAL IMPLICATIONS RELATING TO COMPANIES IN DIFFICULTY OR IN

CRISIS

Determination of the Amount of Monetary Obligations

�Taken into Account:� Amount of Monetary Obligations� Mandatory Payment Amount

� Not Taken into Account:� Forfeit Money � Interest for Payment � Losses for Default in Obligation� Other Property and/or Financial Sanctions

Conditions of Bankruptcy

� Debtor cannot meet creditors' claims� Three months have passed after creditors

filed their claims� The sum total of his/her obligations exceeds

the value of the property owned by the legal entity or individual entrepreneur

� Arbitrazh court decided upon recognizing the legal entity or individual entrepreneur bankrupt

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Voluntary Liquidation of Insolvent Company

� Bankruptcy Symptoms are Evident� By Decision of Owner of Unitary Enterprise

Obligatory Filing of a Claim to Establish Bankruptcy

� Debtor Is Unable to Discharge Monetary Obligations

� Debtor's Management Body Decided to Find Debtor Bankrupt

� Body Authorized by Owner of Property of Debtor Decided to Find Debtor Bankrupt

� Debtor Is Unable to Pursue Debtor's Economic Activity

Requirements for Arbitrazh Manager

� Registration as an individual entrepreneur� Higher professional education� At least two-year work experience in leading

positions� Successfully passed examinations for arbitrazh

managers� At least six months experience in a position of the

arbitrazh manager's assistant� No convictions for economic crimes and other gross

offences� Participation in one of the self-regulated

organizations of arbitrazh managers� Insured the liability

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Requirements for Self-Regulated Organization

� Membership of at least 100 arbitrazhmanagers

� Participation of the members in at least 100 (in the aggregate) bankruptcy procedures

� Insurance funds to the amount of at least 50 thousand roubles per member

Arbitrazh Manager

� The Monitor (the Interim Manager) in Monitoring (Observation)

� The Administrative Manager in Financial Sanation

� The Trustee (the Outside Manager) in Trusteeship (Outside Management, External Management)

� The Receiver (Liquidator) in Receivership (Bankruptcy Procedures)

Right to File Suit

� Debtor� Bankruptcy creditor � Authorized state bodies

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Participants in Bankruptcy Case

� Representative of Employees of Debtor� Representative of Owner of Property � Representative of Founders � Representative of Creditors’ Meeting or

Committee� Representative of Federal Executive Body in

Area of Security

Types of Creditors� Bankruptcy Creditors� Major and Petty Creditors� Creditors-Claimants� Ordinary and Extraordinary Creditors

May Convene Creditors' Meeting

� Arbitrazh Insolvency Monitor � Creditors‘ Committee� Creditors with over 10% Claims

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Creditors' Meeting Take Decisions

� On Introduction of Financial Sanation, Outside Management or Initiating Receivership

� On Approval of Financial Sanation and Outside Management Plan and Schedule for Debts Repayment

� On Concluding Amicable Settlement � On Election of Members of Creditor's

Committee

Observation Procedure� Introduction of Monitoring by Arbitrazh Court and

Appointment of Monitor � Analyzing Debtor’s Financial Status � Identifying Creditors and Determining Amount of

Claims� Notifying Creditors On Acceptance of Application on

Bankruptcy and on Convening First Creditor’s Meeting

� Establishing Amount of Creditors’ Claims � Holding First Creditors’ Meeting � Arbitrazh Court Takes Decision on Results of

Monitoring

Transactions Only with Approval of Interim Manager

� Disposal of Property with Balance Sheet Value over 5% of Debtor’s Assets

� Taking or Granting Loans, Credits, Guarantees, Assignments and Giving Debtor’s Property in Trust

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Transactions May Not Be Adopted by Debtor

� On Reorganization or Liquidation� On Foundation of LE, Branches or

Representative Offices� On Issuing Securities or Payment of

Dividends� On Acquisition of Shares from Shareholders� On Joining Associations, Holdings, etc.� On Concluding Particular Partnership

Contracts

Legal Consequences of Observation

� Claims to Debtor Presented under Bankruptcy Law

� Court Process Concerning Recovery Stopped� Executory Process Stopped� No Claims of Participants Satisfied� Dividend Payments Prohibited� Offset Not Permitted

Claims Established

� Court has ruled on them� Documents certifying that the debtor

acknowledges these claims are available� Arbitrazh court has not accepted the debtor’s

objections� Debtor has not submitted objections

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Decisions of First Creditors’ Meeting

� To Introduce Financial Sanation� To Introduce Trusteeship � To Recognize Debtor's Bankruptcy and

Initiate Receivership � To Sign Amicable Settlement

Interim Manager's Responsibilities

� Securing safety of the debtor’s property� Analyzing debtor's financial status � Identification of fictitious or intentional

bankruptcy� Creation of the register of the creditors’

claims� Notification of creditors� Convocation of the first creditors' meeting

Schedule for Debts Repayment Must Provide

� Beginning of Debts Repayment within Six Months

� Settlements with Creditors of First and Second Priority Turns within Six Months

� Proportional Settlements with Other Creditors within a Year

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Establishment of External Management

� If it is established that the debtor's solvency can really be restored

� If a petition of the creditors’ meeting was filed with the Arbitrazh court on establishment of the trusteeship

Moratorium on Creditors’ Claims

� Uncontested Recovery Not Allowed� Execution of Writs on Property Recovery

Suspended� Penalties Not Charged� Interest Accrued under Article 395 of the Civil

Code

Powers of External Manager

� Dispose of the debtor's property at his/her discretion, except for cases when the consent of the creditors' meeting is required

� Conclude an amicable settlement on the debtor's behalf

� Announce refusal to perform the debtor's contractual obligations if such performance prevents restoration of the debtor's solvency

� Claim that the Arbitrazh court find invalid transactions of the debtor

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Duties of External Manager

� Take the debtor’s property under his management and hold its inventory

� Develop an outside management plan � Review creditors’ claims, make objections to

them and keep a register of creditors’ claims� Take steps to recover debts owned to the

debtor� Submit to the creditors’ meeting a report on

the results of the implementation of the outside management plan

As of Date of Receivership

� Liabilities and Payments are Mature� Financial Sanctions Not Imposed � Information on Debtor Terminates to Be Commercial

Secret� Transactions on Alienation of Property Executed only

under Bankruptcy Law� Limitations Imposed on Debtor’s Property Recalled� Debtor's Management Bodies Dismissed� Information on Declaration Debtor Bankrupt

Published

Functions of Receiver� Operating the debtor's property and securing its

safety� Making up an inventory of property� Notification of employees� Objections to creditors' claims� Making claims to the third parties bearing subsidiary

liability on the debtor's obligations� Announcement of refusals to honour debtor's

contracts� Sale of the debtor’s property and making settlements

with creditors

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Slides

Bankruptcy Estate

� All of the debtor’s assets, indicated in its balance sheet as of the date of the receiver’s appointment

� Property, exposed during the receivership

Priority in Satisfaction of the Creditors’ Claims

� Top Priority� Legal Costs and the Arbitrazh Managers' Fees� Current Maintenance Expenses� Claims on Liabilities Which Emerged during Bankruptcy Procedures� Debts on Salaries and Dismissal Payments� Other Current Expenses

� First Turn - Claims of Individuals on Payments for Harm Caused to Life and Health

� Second Turn - Discharge Pay and Labour Remuneration under LabourContracts

� Third Turn � Claims on Liabilities Secured by Pledge of Debtor's Assets Emerged

Later Than Claims of First and Second Turns’ Creditors� Obligatory Payments to the Budget and Off-Budgetary Funds� Settlements with Creditors on the Remaining Civil Law Obligations

Refusal to Approve Amicable Settlement (Compromise)

� Debts on the first and second priority claims has not been repaid

� Procedure has been violated or the form of the amicable settlement has not been complied with

� Third parties’ rights have been violated� The amicable settlement contradicts legal

acts of the Russian Federation

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Consequences of Approval of Amicable Settlement

� Monitoring - Bankruptcy Case Is Closed� Trusteeship - Moratorium on Meeting

Creditors’ Claims Is Lifted� Receivership - The Arbitrazh Court’s Ruling

On Adjudication on Bankruptcy and Initiating Receivership Shall Not Be Effected

Illegal Bankruptcy

� Fictitious Bankruptcy� Intentional Bankruptcy

Methods Used in Intentional Bankruptcy

� Founding of new legal entities and transfer to their charter capital assets of the debtor legal entity

� Fictitious sale of property � Withdrawal of participants and transfer of major part of property

of the legal entity to their ownership� Sale of capital assets of the legal entity through colourable firms� Artificial indebtedness of the legal entity before “pocket”

creditors� Payments to counter agents when it is known in advance that

the recourse discharge will not be received� Credits and loans under unreasonably leonine terms� While having credit indebtedness, use of money funds not to

cover such indebtedness

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In relation to corporate insolvency:• Explain the role and responsibilities

of an external manager.(5 marks)

• Explain the alternative outcomes that may follow the submission of an external manager’s report.

(5 marks)(10 marks)

In relation to company insolvency:• Explain the purposes of observation.

(3 marks)• Explain the limitations imposed by

law once the observation process commences.

(3 marks)• Explain the alternative outcomes of

the observation process. (4 marks)

(10 marks)

• –OAO- Fail is insolvent and its assets are about to be liquidated to satisfy the outstanding obligations of the company.

• The company’s obligations include accounts payable to trade suppliers, a large monetary claim awarded by the court to a contractor for personal injury sustained due to the fault of –OAO- Fail, unsecured loans to a bank, capital due to bond holders and share capital. The liquidation process has been complex and time consuming, and therefore substantial liquidator’s fees and costs also have to be paid.

• The assets of the company have been depleted, so the liquidationprocess has only been able to realize the value of inventory and a small amount in accounts receivable. However, the liquidator hasdiscovered that one month before the insolvency procedure commenced, the company repaid a substantial loan that was secured by the personal guarantees of the directors.

Required:• With reference to the provisions of the Law on Insolvency, explain

the order in which the obligations will be met from the realizedassets of –OAO- Fail.

(6 marks)• Explain whether the liquidator can take any action in respect of

the loan that was repaid one month before the insolvency procedure commenced.

(4 marks)(10 marks)

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Anna Shashkova


GOVERNANCE AND ETHICAL ISSUES RELATED TO BUSINESS

Anna Shashkova

J-SC

� Issues shares� Shares are quoted on a stock market� Shareholders delegate control to professional

managers� Separation of ownership and controlPotential conflict of interests

Anna Shashkova

Corporate GovernanceThe internal means by which corporations are operated and controlled, which involve a set of relationships between a company’s management, its board, its shareholders and other stakeholders. Corporate governance also provides the structure through which the objectives of the company are set, and the means of attaining those objectives and monitoring performance are determined. Good corporate governance should provide proper incentives for the board and management to pursue objectives that are in the interests of the company and shareholders, and should facilitate effective monitoring, thereby encouraging firms to use resources more efficiently.

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Slides

Anna Shashkova

Corporate Governance� System of relationships, defined by structures

and processes� Relationships may involve parties with different

and sometimes contrasting interests� All parties are involved in the direction and

control of the company� This is done to properly distribute rights and

responsibilities — and thus increase long-term shareholder value

Anna Shashkova

Corporate Governance Purposes

� Ensure balance of power (monitor those who control recourses belonging to investors)

� Ensure fair remuneration of executive directors� Ensure independence of external auditors� Make board of directors responsible for

managing� Ensure business ethics

Anna Shashkova

Corporate Governance Objectives

� Improve accountability in creating long-term shareholder value

� Increase level of confidence and transparency� Control board of directors� Ensure the company answers ethics

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Anna Shashkova

OECD Corporate Governance

� Fairness (equitable treatment and key ownership functions)

� Responsibility (esp. of the board)� Transparency� Accountability (role of stakeholders)

Anna Shashkova

Moral Stance

� Fairness� Transparency� Independence� Honesty� Responsibility� Accountability� Reputation� Judgment� Integrity

Anna Shashkova

Disclosure of Information

� Annual report, annual financial statements� Issue prospectuses � Announcement of a forthcoming general meeting of shareholders� Any change in the company’s name� Decisions on increasing or diminution of the charter capital� Acquisition of the company of its own shares� Increase or diminution of the company’s share price of at least 5 per

cent� Change in the company’s priority areas of interest� Change of the company’s auditor or registrar� Other information determined by the Financial Markets’ Service

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Slides

Anna Shashkova

Trade Secret� Has actual or potential commercial

value� Unknown to third parties� Not accessible on regular basis� Owner of information seeks to protect

its confidentiality

Anna Shashkova

Russian Specifics

� Concentrated ownership� Little separation of ownership and control� Unwieldy holding structures� Inexperienced and inadequate supervisory

boards

Anna Shashkova

Legal and Regulatory Framework

� Civil Code � Limited Liability Companies’ Law� Joint-Stock Companies’ Law� Securities’ Market Law� Financial Markets’ Service Regulations

www.fcsm.ru� Secondary Regulations (tax, bankruptcy, etc.) � Listing Requirements

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Anna Shashkova

Principles of Corporate Conduct

� Provide shareholders with a real opportunity to exercise their rights in relation to the company

� Provide for the equitable treatment of all shareholders� Provide for the accountability of the supervisory board to shareholders� Ensure that executive bodies manage the day-to-day activities of the

company without undue interference, in good faith, and solely in the interests of the company

� Provide for the full, timely, and accurate disclosure of all material information

� Ensure compliance with applicable laws as related to the statutory or contractual rights of all stakeholders

� Provide for the effective control over the financial and business operations of the company to protect the rights and lawful interests of shareholders

Anna Shashkova

Violations at Securities Market� Insider dealing� Price manipulation � Illegal emission of securities� Illegal transactions with securities� Breach of legislation on public information on issue of securities� Breach of rules on holding the register of shareholders� Breach of currency legislation, legislation on banks and banking

activity and money laundering

Anna Shashkova

Financial Markets’ Service

� Suspend further placement of securities� Publish in mass media the information on unfair issuance of securities� Inform in written form on elimination of violations � Give written permission on further placement of securities in case of

elimination of violations� Suspend activity without license, in case the license is needed� File an action to the Arbitrazh court on recovering of profits obtained on

the activity without license� File an action to the Arbitrazh court on liquidation of the participant of

the securities market in case of non-obtaining of the license within stipulated period

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Slides

Anna Shashkova

Stages of Money-Laundering

� Placement� Layering� Integration

Anna Shashkova

Main Aims on Anti-Money Laundering� Prevention of involvement into bank

operations of income derived from illegal activities

� Timely identification of customers and transactions, which bear signs of possible money laundering activities

� Collection and storage of information

Anna Shashkova

Organizations to Control

� Credit organizations� Professional participants of the securities

market� Insurance and leasing companies� Federal postal service organizations� Pawn-shops� Mediators in sale and purchase operations,

etc.

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Anna Shashkova

Instruments to Fight Money Laundering� ‘Know your customer’ program� Investigations into transactions� Identification of transaction� Reporting� Data storage program� Personnel training

Anna Shashkova

Regulatory Framework on Money Laundering� Criminal Code� Anti-Money Laundering Law � New version of Articles 174, 174.1� Resolution of the High Arbitrazh Court No.23,

dated 18 November 2004� Information Letter of the Central Bank of the

Russian Federation No.11, dated 26 March 2007

Anna Shashkova

In relation to corporate governance:

• Explain the meaning of the term ‘corporate governance’.

(4 marks)• Explain how the laws relevant to limited companies protect shareholders and promote good corporate governance.

(6 marks)(10 marks)

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Slides

Anna Shashkova

• Anna is the executive responsible for information technology in –OAO- Target. Her senior colleagues asked her to participate in confidential discussions regarding the compatibility of the company’s information systems with those of a competitor. Representatives of both companies attended the meeting, and from the discussions that took place it was obvious that the companies had entered into merger negotiations. Anna then purchased shares in both companies in anticipation of making a future capital gain.

• Nikita inherited a large sum of money from his father. He invested this in the shares of his employer, which is a company listed on the stock exchange, bidding up its share price. Immediately after doing so, he sold the shares for a large profit.

Required:• Discuss the extent to which the actions of Anna and

Nikita were legal and ethical.(10 marks)

Anna Shashkova

Subjects Studied� Essential Elements of the Legal System� The Law of Obligations� Employment Law� Company Law

� The Formation and Constitution of Business Organizations

� Capital and Financing of a Company� Company Management and Administration� Legal Implications Relating to Companies in Difficulty

or in Crisis� Governance and Ethical Issues Relating to Business

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