Similarities and Differences between the UK Company Law system and Russia

  • Differences
  1. Company constitutional documents. The major company documents in the United Kingdom are the memorandum of association and the articles of association.  The association’s articles comprise the company’s constitution and the memorandum of association in the initial statement stating the initial subscriber’s intention to become a member by taking at least one share (Out-law Guide, 2007). Whereas in Russia, the only constitutional document required for a company is a charter. A charter is a public document, and the official copy can be obtained from the Register. A company charter contains the official trade name, the company address, share transfer restrictions, expulsion rules, rules for keeping records and books, and corporate governance bodies’ composition and powers (Slavina, 2020).
  2. Ultra vires. Ultra vires are defined as acting beyond one’s authority or legal power. In the U.K, The Companies Act changed the ultra vires rule substantially, and before 2006, the Company’s objects were limited to those contained in the memorandum of association. However, in the current regime, a company can undertake all transactions it deems fit so long as they are legal unless the articles of association state otherwise (Howell, 2020). However, good because companies are supposed to stick to their original objective, i.e., companies set up for a charity purpose are supposed to stick to that particular purpose. Whereas, Russia does not maintain the ultra vires concept because it is a civil law country. A commercial organization, i.e., a company, has unlimited capacity to enter into any transactions. (Budylin, 2008). However, transactions beyond the CEO’s management powers are considered invalid.
  3. Memorandum of association. In the U.K, the memorandum of association states the initial statement to become a member of a company by at least one share. The memorandum of association no longer forms a principal component of the constitution, and its importance and the content are greatly diminished. However, in Russia, the memorandum of association has significant importance. It contains the company’s predominant activity, its registered name and office, places of residence of the company members, and the number of shares in the company by the shareholders.

 

  • Similarities
  1. Articles of association. The articles of association are a company’s by-laws and internal regulations. They set out how a company is run and the shareholder’s rights. The United Kingdom state how new shares are issued, the appointment of directors including procedures for termination and remuneration and expenses, decision making by shareholders, decision-making procedures of directors, their powers and responsibilities, and the administrative arrangements. The Russia articles of association are detailed on information disclosure of a company, internal control and risk management, board of directors, shareholder rights and equality, corporate secretary of the company, and remuneration of directors (Slavina, 2020).
  2. Model of articles. The Companies Act 2006 sets out the model articles that companies use. Companies House offers different model articles for private companies limited by shares and guarantee. In Russia, the Corporate Governance Code lays down the model articles to be used by Companies.
  3. Registration of articles. In both the United Kingdom and Russia, if a company’s promoters register the company articles, the relevant models’ articles form part of the company’s articles.
  4. Alteration of articles of association. In the United Kingdom, changes of association articles may be prompted by introducing the new law, an order by the court or regulatory authority, a change of company’s objects, and administration. To change the articles, the directors have to hold a board meeting and approve a circular to send to the shareholders stating their intention to amend its articles of association. When a general meeting is held, the change is passed by a resolution of at least 75% of the members agreeing to the proposed changes. Within 15 days, the news articles and any other required forms should be filed at the Companies House. Similarly, in Russia, to effect any changes, a general meeting is convened by the board and any changes made are recorded at the Register. The new amendments bind the shareholders and third parties alike. 
  1. Failure to submit articles of association upon registration. In both U.K and Russia, there is a mandatory requirement necessitating promoters of companies to register the articles of association; failure to register the articles of association deems the company to be unregistered.

 

REFERENCE LIST

Budylin S. (2008), Going Beyond: The Ultra Vires Problem in Russian Corporate Law, accessed on December 16, 2020 from file:///C:/Users/admin/Downloads/SSRN-id1314719.pd 

Howell J. (2020). Memorandum and articles of association of UK limited companies, the QCF blog, accessed on December 16, 2020 from https://www.qualitycompanyformations.co.uk/blog/memorandum-and-articles-association/ 

Slavina M. (2020), Establishing a business in the Russian Federation, Thomson Reuters Practical Law, accessed on December 16, 2020 from https://uk.practicallaw.thomsonreuters.com/7-555-2506?transitionType=Default&contextData=(sc.Default)&firstPage=true 

Out-law Guide (2007), The Company Constitution, Pinsent Mansions, accessed on December 16, 2020 from https://www.pinsentmasons.com/out-law/guides/the-company-constitution#:~:text=Anyone%20forming%20a%20company%20puts,association%20and%20articles%20of%20association .  

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