Information on the sole shareholder is now public

On April 26, 2021, Federal Law No.350-FZ “On introducing amendments to Article 5 of Federal Law ‘On state registration of legal entities and individual entrepreneurs’” dated October 27, 2020 took effect, under which the Companies Register (EGRUL) must contain information on the sole shareholder of a joint stock company. This means that the information on the person who owns 100% of shares in a joint stock company has become public information, and joint stock companies comprising of a single person now have a new duty.

A company is given 7 days to submit information on the sole shareholder to the EGRUL, and there is liability as provided by Parts 3 and 4 of Article 14.25 of the Russian Code of Administrative Offences for untimely submission of information, or for not submitting it, or for submitting false information.

At the same time, pursuant to explanations of the Russian Federal Tax Service, the duty to report the information on the sole shareholder, as well as the liability as provided by Parts 3 and 4 of Article 14.25 of the Russian Code of Administrative Offences applies only to cases where the sole shareholder acquired all the shares starting April 26, 2021 (Letter No.KV-4-14/5689@ of the Russian Federal Tax Service “On introducing information to the EGRUL concerning the sole shareholder” dated April 26, 2021).

At the same time, we should remind everyone that Article 51 of the Russian Civil Code establishes the principle of public authenticity of the information contained in the EGRUL, which means that a person relying in good faith on information from the EGRUL has the right to assume that such information is in line with the actual facts. Furthermore, if it is revealed that the EGRUL contains invalid information (in respect to a joint stock company, this could be information that the company is owned by a sole shareholder and the information on such shareholder), an entry could be made in the EGRUL that information on the legal entity is invalid.

This provided, information on the shareholder must be included in the EGRUL only if the joint stock company was created by a single person or became that way at a later point in time. Therefore, this duty does not apply to joint stock companies that are owned by at least two persons, even if one of them holds an insignificantly small share in the charter capital, as well as to companies where the end owner is a single person, provided there are at least two direct shareholders.

In this connection, we recommend making sure that information in the EGRUL is up to date, keeping these changes in mind when forming the ownership structure, structuring transactions and not forgetting to make changes to the EGRUL if all the shares of a company start belonging to a single person.

This overview is prepared by Capital Legal Services Partner Dmitry Churin and Associate Elizaveta Dvoinishnikova.