Along with the owners (shareholders), each business company has affiliates who can potentially influence the conduct of business or whose business is influenced by the company itself. Affiliates are often interested in the company’s transactions. Such transactions are concluded in a special order. When this procedure is not fulfilled, transactions may be invalidated. Our lawyers will evaluate the client’s transactions according to the criterion of interest of affiliated persons and prepare documents for the transaction. If the transaction is disputed in court, we are ready to represent the interests of the client. More than 10 years of experience in judicial representation allows us to do this.
Who are the affiliates?
Affiliates influence or, in theory, can influence the decisions that a company makes on business issues. Affiliated companies also include companies whose decision-making may be influenced by the business community itself. Affiliated persons include individuals and companies:
- members of the governing bodies;
- owners of shares;
- companies whose business is influenced by a business entity, as the owner of a share or shares and members of the management bodies of such companies;
- relatives of affiliated individuals.
Companies that exist on the market in the form of business entities must compile a list of affiliated persons, keep the list up-to-date and keep records of them.
It is not always easy to determine the circle of affiliated persons. Our lawyers can analyze the company’s corporate documents and prepare the necessary documents, including a list of affiliated persons, and advise on maintaining this list.
When affiliates are interested in a deal
An affiliated person is interested in making a transaction when he is one of the parties to the transaction or represents the interests of third parties in relations with the company.
There are some other cases where affiliates are interested in a deal:
- When they own 20% or more of the shares of the company, the parties to the transaction or a representative of third parties in relation to the company.
- When they are the owners of the company’s property, the parties to the transaction or represent third parties in relations with the company.
- When they are members of the management bodies of a business partner of the company or a partner who represents the interests of third parties in relations with the company.
- When other affiliated persons are listed in the company’s articles of association or the procedure for determining them.
What are the features of making a decision on concluding transactions with the interest of affiliated persons
1. Decision-making by the general meeting of participants
The decision on making a transaction with the interest of an affiliated person is made by the company’s management body. This is usually a general meeting of the participants (shareholders) of the company. Another management body of the company may be prescribed in the company’s charter, which decides on a transaction with the interest of affiliated persons.
The General Meeting of Participants (shareholders) makes a decision by a majority vote of the participants who are not interested in the transaction.
2. Decision-making by the Board of Directors (Supervisory Board)
When a company has a board of directors (supervisory board), it decides on an interested party transaction when:
- This is stated in the company’s articles of association.
- The transaction price is not higher than 2% of the value of the company’s assets for the last reporting period before the transaction. A higher percentage may be prescribed in the charter.
The decision on the transaction is made by a majority vote of all members of the Board of Directors (Supervisory Board) who are not interested in making the transaction — independent directors. When the number of independent directors is insufficient to make a decision, the decision is made by the general meeting of the company’s participants.
3. Decision-making by the Director
The decision on a transaction involving the interests of affiliated persons is made by the director or the management board of the company when:
- All affiliated persons are the owners of the company and are interested in the transaction.
- The company buys its own shares by its own decision or repurchases shares at the request of shareholders. In these cases, transactions are concluded in the usual way for the company to conclude transactions that have been concluded three or more times in the last year.
What are the features of invalidation of transactions with the interest of affiliated persons
When a company does not comply with the procedure for making a transaction with the interest of an affiliated person, such a transaction can be declared invalid in court. This does not mean that the court will automatically invalidate it. The person who decided to go to court will need to prove that such a transaction:
- violated his rights,
- caused losses to the company, its owners and personally the applicant of the claim.
When a transaction involving the interests of affiliated persons is not recognized as invalid
Even when the company has not fulfilled the requirements for making a transaction with the interest of affiliated persons, it will not be invalidated when:
- The voting of the company’s owners, members of the Board of Directors, who were notified of the general meeting and who demand that the transaction be declared invalid, could not affect the results of voting on the transaction.
- The transaction did not cause losses to the company or the owners of the company who went to court and there are no other adverse consequences.
- Before the case is considered in court, the decision on the transaction is executed in accordance with the procedure defined for making transactions with the interest of affiliated persons. The relevant documents must be sent to the court.
What can we do for you in case of invalidation of a transaction with the interest of affiliated persons
Corporate relations is one of the specializations of our company. We can:
- Advise you on the issue of invalidation of a transaction involving the interests of affiliated persons;
- Prepare the documents for the transaction with the interested affiliates;
- Prepare documents on invalidation of the transaction with interested affiliated persons;
- Prepare a package of documents and a statement of claim for invalidation of the transaction with interested affiliated persons to the court;
- Represent your interests in court.
Contact us
If you have any questions or disputes regarding the recognition of transactions with affiliated persons invalid in the Republic of Belarus – we will be happy to help you! Our many years of experience in the field of corporate law will help you in resolving any disputes in this area.
Phone and email communication options are available for your convenience:
- +375293664477 (WhatsApp/Telegram/Viber);
- info@ambylegal.by.
