Stricter Rules For Capital Stock Will Have Negative Impact on Business

Dmitriy Kafanov, partner of the Law Company Inmar Legal Ltd, believes this offer to hinder mostly fair market participants.

The suggestion on significant increase of companies’ capital stock amount has no whatsoever economic or legal grounds and may cause serious negative consequences for small and medium businesses, as Dmitriy Kafanov, partner of Primorye Law Company Inmar Legal Ltd, stated to the RIA PrimaMedia. He believes the certain amendments of the Civil Code to affect country’s investment attractiveness not in a good way.  

The standard on the increase of a capital stock is included into the Civil Code amendments list, developed by the Council on Codification. As RIA has informed before, the changes particularly mean more strict rules for companies’ capital stock. The bill suggests increasing the amount necessary for capital stock and clearer defining of assets that could be added to the stock. The authors of these amendments refer to the European practice that requires up to 25 thousand euros for company registration.  

The amendments were presented to the Russian President on December 30 of the last year, government comments were planned to be presented by the 1st of March, but there are still no news about them. According to the Russian Business Channel Daily, the Council on Codification states that the government supports the proposed variant, but still there are some points of argument, especially with The Ministry of Economic Development and Trade.

Authors of these amendments believe them to be necessary for restriction of short-living companies use, as well as for protection of creditors’ interests in case of legal body’s insolvency.

“At the same time the success of fight against short-living companies is possible only with elimination of basic economic preconditions for tax evasion, also by harmonizing tax system, improving tax administration and criminal law of procedure”, Dmitriy Kafanov believes.  “Official measures like significant increase of capital stock will be more obvious for fair market participants instead of affecting those who are supposed to be hindered by this law, and that would create additional barriers for business”.

The expert does not think these amendments are required to protect creditors’ interests. “Modern business turnover has the amount of capital stock as a guarantee for the third parties’ demands only for some special market participants, like banks, insurance and investment companies”, the partner of the Law Company Inmar Legal Ltd states. “All other organizations are more concerned with the cost of net assets, instead of par value of the capital stock. Thus, it is more important to improve bankruptcy laws considering all special features of modern business and corporate work”.