Developing Corporate Law

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There are an enormous number of factors that determine what conditions are attractive for investors. Top of the list, of these factors must be laws that ensure comfort and understanding for investors and adequate clarity and transparency in terms of the whole economy. This is why we, in the end, are building a country with an open market economy. Ultimately, the national economy is an information receptacle. Therefore it is imperative and urgent to make sure that the system we lead is adequate and durable. It is this that appears to be the determining factor for making an investment decision, whether is it worth it or not to invest money here.

What amounts to the perfect model of corporate rights in developed economies? The conventional view formulates the following: The majority shareholders sit closer to leadership of the companies and disclose information to the minority shareholders about dividends. That is to say, they prove to everyone, minority holders and regulatory bodies, that a suitable share of the dividends is paid out. Thereupon the minority holders will leave the majority shareholders to it and do not interfere in the running of the company.

In Russia there is already a nearly 20-year history of corporate relationships. But this is little compared to what has been formed, improved and advanced of corporate relationships in Britain or the United States. In these countries there are centuries long relationships, and the majority of norms generally are standard business practise.

Therefore it needs to be understood that with us there has not yet been a real chance to build up a civilised business relationship, which includes complex features of such a finely tuned mechanism, itself a difficult branch of the law. We do not yet have the possibility to construct legal tools, which are intelligible, suitable for the situation in Russia and also recognisable for the rest of the world.

Therefore until we start a normal opposition, in the course of which the same mechanisms will emerge, and invent "weaponry" on the one side, then when other side -- counter weapons, counter hold, counter possibilities. Only in this way will corporate laws improve. However, since we do not want a calm, evolved 200-year path to developing corporate law, the necessity arises to consolidate for the purpose of accumulating international experience and to consider our own experience and gradually begin to mark out our norms in existing laws. The need is for laws that hinder hostile takeovers, but do not preclude mergers and acquisitions. It is a difficult task, and a fine balance, to avoid outlawing everything.

And in the end we will not get a normal, evolved economy, wherein corporate restructuring seems an indispensable tool for adjusting to a changing situation.

On either side it is possible to set up an enterprise under while attack from the modern day "convoy raiders," that we struggle with today, who have already become genuine professionals in their field. They supply their service to whoever requests them, whether it is "greenmail" -- corporate blackmail, or helping to take over factories. If someone thinks that this is a problem of little consequence, then I will point out that it must not have reached them yet.

The overwhelming majority of directors of open joint stock companies (the very type of companies that we are talking about) generally don't understand much about corporate law, where his own interests lies, as well as those of the owners in relation, and what danger might hide in them.

And today problems with long-term development of corporate laws in Russia is not just a task of counteracting the "raiders" (to begin with solving the problems will advance the number of laws on paperless securities), but in the search for a new balance between minority and majority shareholders, it necessary for a civilised impression on the large crowd of small (and non public) open joint stock companies in other forms -- a limited liability company, for example. This and the lack of legislation concerning integrated structures and legal restructuring is a task, as well as the liquidation in all manner of legal substitutes, e.g. faction shares, which accrue as an inheritance from the transition years.