On July 1, 2012, a federal law came into force which introduces a new type of commercial business organization - an economic partnership.
Legal regulation of an economic partnership is characterized by a large amount of provisional rules, which makes this type of business more appealing and understandable to foreign investors because it creates a more flexible type of business management.
There aren’t any limitations on legal entities or individuals for participating in economic partnerships; this includes foreign legal entities and foreign organizations that are not classified as legal entities according to foreign law.
Anywhere from two to fifty participants may be involved in an economic partnership.
CHARTER AND PARTNERSHIP MANAGEMENT AGREEMENT
A partnership’s charter is its founding document and it contains general information about the partnership (name, location, size and structure of share capital, etc.). Information about whether the partnership will have a partnership management agreement and information about the participation or non-participation in the agreement of the partnership itself should also be in the charter.
All of the partnership’s shareholders should be party to the partnership agreement, but other parties that are not shareholders may also be part of the partnership. There are many unusual provisions that are unique for Russian corporate law, as they allow parties who are not shareholders to participate in the partnership’s management.
The agreement is intended for detailed regulation of the partnership’s work and may contain any conditions for management of the partnership, its activities, reorganization or liquidation, as long as these provisions are not contrary to existing legislation. On the basis of this agreement, the parties have maximum freedom to determine the rights and obligations of the shareholders and other parties, to regulate the management process, and to distribute profit and expenses.
In contrast to the charter, which is a public document, the management agreement can be divulged only in a strictly prescribed manner. This attests to the non-transparency of the partnership’s corporate structure.
The procedure for making contributions to the partnership’s share capital is not regulated by the law and should be written out in the partnership management agreement. Shareholders are not relieved of their obligation to make contributions; however, contributions may be made in parts at different times. In other words, any procedure can be set for making contributions that is convenient for the shareholder. A minimum amount of share capital for the partnership is also not stipulated. Taken together, all of this ensures a flexible, step-by-step system of financing.
In addition, the legislation stipulates that the partners have a right to participation in the partnership’s management and to distribution of profit and compensation that does not have to be proportional to the size of their share in the partnership.
LIMITATION OF LIABILITY
Shareholders are not responsible for the partnership’s liabilities and assume the risk of losses related to the partnership’s business activities to the extent of the amount of their share capital contributions. The partnership is not liable for its shareholders’ obligations and is responsible for its own obligations for all property belonging to it.
The law allows for the possibility of making provisions in the agreement with creditors on full or partial termination of partnerships’ obligations with them if certain conditions are indicated in such an agreement.
The partnership’s management body, without which its existence is not possible, is the sole executive body. It is elected from among the partnership’s shareholders by a unanimous decision of all shareholders for a term established in the charter. The management agreement determines the system, structure, formation procedure and activities of the partnership’s supervisory authorities. The law does not establish any kind of directions or limitations with regard to their number, interactions, functions or powers.
The partnership may engage in any form of activity that is not unlawful, except for issuing bonds or other issuable securities and advertisements of their activities, founding legal entities or participating in them (with the exception of unions and associations).
REGISTER OF SHAREHOLDERS
The partnership should make a shareholder register indicating the size of their shares and information about share capital contributions. However, the only public information is the list of the partnership’s shareholders and not the size of their shares. The register also does not include entities that are parties to the management agreement but not shareholders.
RIGHTS AND OBLIGATIONS
The rights and obligations for the partnership’s shareholders are indicated in general form in the law; however, a large part may be established in the partnership management agreement. As a general rule, shareholders perform management activities in the partnership proportional to the size of their share capital. However, it should be noted that other management procedures may be outlined in the management agreement.