Bill No. 797057-8 has been introduced in the State Duma, proposing the removal of a specific restriction on chains of single-member companies. This is a change to a particular rule of corporate law, rather than the first legal recognition of holding structures in Russia.
Scope of the restriction
The current rule restricts a situation in which a company’s sole member is another company that itself has only one member. It does not prohibit holding structures in general: ownership composition and statutory exceptions are relevant.
The bill would amend the corresponding provisions of the Joint-Stock Companies Law and the Limited Liability Companies Law. As at the publication date, it is a legislative proposal that has been introduced, not an enacted law.
The condition attached to the proposed model
The text as introduced would permit such a chain subject to separation of the companies’ sole executive bodies. The functions of the subsidiary’s sole executive body could be performed neither by the person heading its sole member nor by the sole member itself. The bill allows for exceptions under federal law.
It should therefore not be described as an unconditional permission for any structure. The availability of a particular ownership chain would depend on the final law and compliance with its conditions.
Significance for corporate structures
The change could simplify certain ownership chains and reduce the need to introduce an additional member solely to comply with this restriction. Separate questions of governance, liability and special rules applicable to the group would remain.
Before the amendments are adopted, there is no basis for restructuring solely on the assumption that they will take effect. Preparatory work can be limited to identifying companies affected by the current restriction and reviewing the allocation of executive powers.