A deal with an interest is what?

The legislation of the Russian Federation provides for the implementation of special legal relations - in the form of transactions with interest. What is their specificity? How is interest in the main legal forms of business of the Russian Federation - LLC and JSC determined?

What is an interested-party transaction?

An interested party transaction is a legal relationship involving the entities in whose activities various third parties may be interested. For example, if an economic society participates in a transaction, those interested in it may be:

- heads of this organization;

- shareholders - in particular, those who own 20% of the company's authorized capital and more;

- relatives of managers and owners of the company.

In this case, the fact of their interest is also established. It can be fixed if they:

- are direct beneficiaries;

- can use the results of the activities of other beneficiaries - as a leader or shareholder.

What is the deal with interest, we determined. Let us now consider how these legal relationships can be carried out.

Order of transaction with interest

The main condition for the legal implementation of legal relations in question is the approval of a transaction with an interest on the part of competent internal corporate structures. For example, a board of directors or a meeting of shareholders of an economic company . The way in which an interested party transaction is approved depends primarily on the organizational and legal status of the enterprise.

So, in the event that the firm operates as an AO, this approval can be implemented through one of three main mechanisms:

- by a majority of votes of those directors who are not interested in concluding a deal;

- by a majority of directors who are also not interested in the transaction, but have the status of independent executives;

- by a majority of votes of shareholders who are not interested in the transaction.

The first mechanism characterizes transactions involving business entities in which up to 1000 shareholders having voting shares exercise the activity, the second is used if the number of shareholders exceeds 1000. In both cases, the condition must be fulfilled: the subject of the transaction is one or several that are linked together , Should be represented by property that has a value of less than 2% of the balance sheet assets of the organization in accordance with the data of the accounting statements.

The third mechanism, within which a decision is made to approve a deal with an interest, is implemented:

- if the subject of the agreement is a property that has a value of 2% of the book value of the assets of the enterprise and more;

- in a situation where the board of directors failed to take a decision within the framework of the standard mechanism for approving the transaction.

In the event that an LLC enters into a legal relationship, the decision to approve a transaction in respect of which certain persons are of interest is taken within the general meeting of founders by a majority of votes from those participants who are not interested in concluding the relevant agreement.

In addition, if a board of directors is formed in a business company, the decision to approve a legal relationship, which is an interested party transaction, may be attributed to the competence of this collegial management body by constituent documents. This mechanism, however, can not be implemented if the amount of the transaction costs or the value of the property that is the subject of the contract exceeds 2% of the value of the property owned by the company - based on the information that is recorded in the financial statements.

So, we have studied how legal relations are carried out with the participation of firms, which can be influenced by persons with an interest in the transaction. It will also be useful to consider which contracts can not be assigned to the appropriate type.

In which cases can the transactions not be characterized by interest?

These transactions generally include legal relationships that:

- carried out by an economic company consisting of one founder, who simultaneously performs the functions of the head;

- assume the interest of all shareholders of the enterprise that concludes the contract;

- represent a transaction made subject to the pre-emptive right to purchase shares issued by the company;

- represent the legal relationship made during the purchase, as well as the repurchase of the issued shares by the company;

- are carried out in the process of reorganization - in the form of a merger with the company, the authorized capital of which more than three quarters belongs to the reorganized economic entity;

- are obligatory from the point of view of ensuring compliance of the enterprise with the requirements of legislation;

- are carried out on terms that do not differ materially from those that characterize similar transactions involving the company and an interested entity in the ordinary course of business of the organization, which occurred before the fact of the interest of a person in the conclusion of the contract was established.

A deal with an interest is a legal relationship in which economic entities most often participate in the status of a joint-stock company or an LLC. The conclusion of contracts by firms of the first and second type is characterized by a number of features. It will be useful to study them.

Transactions with interest with the participation of LLC: nuances

So, the first type of economic entity that can enter into such a relationship, as an interested party transaction, is a limited liability company. The conclusion of contracts, of which the LLC is one of the parties, must comply with the requirements of the legislation regulating the activity of these enterprises - in the event that the relevant contracts are characterized by interest.

In particular, to those requirements that are established by the law on LLC, there must correspond to transactions in which the interest is defined:

- a person from the board of directors of the company who is a party to legal relations;

- General Director;

- the collegial executive body of this organization, a member of the company that owns 20% of the votes of the owners and more in the firm;

- a person who has the authority to issue instructions with respect to an economic company that are mandatory for execution.

Interest in the transaction of these persons is established in accordance with the criteria that are defined in the law on LLC. In particular, this fact is determined if the listed citizens, their relatives, as well as affiliates with them:

- act as a party to legal relations or represent the interests of third parties in the framework of interaction with the business community;

- own 20% or more securities or the authorized capital of a legal entity that is a party to legal relations or represents the interests of third parties in their interaction with the firm;

- occupy positions in the management system of the company, which acts as a party to the transaction or represents the interests of third parties within the framework of legal relations with the business community, or are top managers in the management company of the relevant legal entity.

Apart from the grounds specified in the law on LLC, the fact of the presence of interest of certain persons with regard to the conclusion of a contract can be determined on other grounds. In particular, the criteria by which the interest of persons in a transaction can be determined can be prescribed in the charter of a limited liability company.

Those citizens who are recognized as being involved in transactions on the grounds under consideration may bear a number of obligations specified by law. Consider them.

Liabilities of interested parties under the LLC Law

The main obligation of stakeholders, as reflected in the law on LLC, is that these citizens are required to timely inform the general meeting of shareholders:

- about legal entities in which these persons, as well as their relatives, own 20% or more of the authorized capital;

- about the enterprises in which these citizens, as well as their relatives, occupy posts in the management system;

- about the legal relationships known to these persons, within the framework of which they can be defined as interested subjects.

Certain nuances characterize the procedure for approving the transaction in accordance with the law on LLC. Above we considered the general aspects of this procedure. We will study it in more detail from the point of view of the regulatory provisions of the law.

Approval of transactions under the LLC law: nuances

In accordance with the main regulatory act governing the activities of the LLC, an interested party transaction is a legal relationship that can be exercised subject to approval by a decision of the shareholders' meeting of the firm. It is generally accepted by a majority vote of owners from among those who are not interested in concluding a treaty. The corresponding decision (deals with interest may predetermine the need for compiling various documents supplementing the contract) should be formalized in the form of a separate source, in which:

- specify those persons who act as parties or beneficiaries in legal relationships;

- reflects the subject of the transaction, as well as its essential conditions.

The LLC Law allows the management bodies of the corporation to take the decision in question on transactions that may be concluded in the future as part of the company's core business activities. In this case, the decision on approval of the transaction with interest fixes the maximum amount that can be fixed in the relevant contract. The normative act adopted by the company's management bodies is valid until the next meeting of shareholders is held - unless other regulations are stipulated by the managers' decision to approve the contract.

Law on LLC: in which cases approval of interested transactions is not required?

There are cases in which the law on interested-party transactions allows the management of LLC not to make a decision on approving the relevant legal relationships. So, it is possible in the event that the terms of the contract do not fundamentally differ from the parameters of similar transactions that are committed between the managing company, as well as by any interested person in the course of the firm's normal activities. But they must take place before the subject with interest gets an appropriate status. True, this exception has limitations. It can only apply to transactions made from the moment when the entity that has an interest has obtained the status of an interested person, and before the next meeting of shareholders.

In a number of cases, major transactions and interested-party transactions of a corresponding type under the LLC law may be declared void. Let's see why this is possible.

Law on LLC: Recognizing a Deal with Voting Interest

In this case, it is a question of recognizing the transaction as invalid in a judicial procedure. The grounds for adjudication by the court are:

- proved fact of voting of the disinterested participant of LLC, in which his vote did not influence the results of the meeting;

- lack of proof of the fact that the transaction was not accompanied by causing damage to the business company or the participant filed with the court, or the possibility of negative consequences for the said entities;

- the availability at the time of the court session of evidence of a subsequent decision to approve a contract, which by virtue of the provisions of the law on LLC should be declared invalid;

- the proof of the fact that the other party to the legal relationship was not informed of the transaction that was concluded in violation of the norms fixed in the law on LLC.

So, we have studied how the conclusion and challenge of a transaction with interest in limited liability companies is carried out. Let us now consider the main features of these legal relationships in other major economic entities - joint-stock companies. The relevant type of transactions are governed by the provisions of a separate law on joint-stock companies. It will be most interesting to study what the norms of this legal act are regarding the definition of interest.

Law on joint-stock companies: definition of interest

The term under consideration in the law on joint-stock companies is disclosed in approximately the same way as in the normative act regulating the activities of limited liability companies. Interest in this case can have:

- manager, who is a member of the board of directors of the enterprise;

- General Director of the company;

- a manager who carries out activities within the framework of a collegial executive body that owns 20% or more of the company's shares;

- a person who has the right to give orders to employees of the SA, which are binding.

At the same time, the fact of interest of these persons is recognized if they, their relatives or affiliates with them:

- act as one of the parties to the transaction;

- are the beneficiary, intermediary or representative within the framework of legal relations;

- have 20% or more of the authorized capital of the company, the party to the transaction;

- have positions in the management bodies of the firm, which is the subject of legal relations, beneficiary, intermediary or representative.

Law on JSC: determination of lack of interest

In turn, the lack of interest in the transaction under the law on joint stock companies is determined by default:

- in relation to joint-stock companies, which consist of one shareholder, who is simultaneously also the general director;

- for legal relations, which are carried out in the interests of all participants of the joint-stock company;

- when the company places securities through an open subscription, as well as when exercising the pre-emptive right to purchase the issued shares;

- with the purchase or repurchase by the joint-stock company of the issued securities;

- in case of reorganization of an economic entity in the form of a merger or accession;

- in transactions that must necessarily be made in accordance with the requirements of the legislation of the Russian Federation - for prices and tariffs established by the government of the Russian Federation;

- for legal relations carried out in accordance with the law on electric power;

- with respect to the contribution of the shareholders of the firm to the deposits in its property.

What are the characteristics of the procedure for approving the legal relations in question, of which we are talking? In principle, the law on AO as a whole reflects the same principles for the approval of related-party transactions, as discussed above at the beginning of the article. The specifics of making specific decisions may depend on the number of shareholders, as well as on the value of the transaction relative to the property valuation indicators in accordance with the accounting records.

It should be noted that in the legislation regulating the legal relations in question, in 2017 there will be significant changes. Transactions with an interest are subject to legal regulation within the limits of norms that may be substantially amended by the legislator over time. This may be due to various factors. For example, the need for increased control over the relevant legal relationships in which settlements are made using budgetary capital. A sample of an interested-party transaction can be characterized by greater or lesser importance from the point of view of regulators, but norms that are common to all types of relevant legal relations allow for their effective monitoring. And, if necessary, it is possible to intensify the existing legal mechanisms in order to exercise control over any transaction.