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.

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.

Maintaining and updating a list of affiliated parties is mandatory for both open and closed joint-stock companies (JSCs) under clauses 3 and 8 of Instruction No. 43. This requirement is linked to the fact that JSCs regularly submit periodic reports, including a dedicated form titled “Information About Affiliated Parties” (clause 6 of Instruction No. 43).

As for limited liability companies (LLCs) and additional liability companies (ALCs), keeping such a list is not strictly mandatory but becomes highly relevant in certain situations:

– Internal Rules or Disputed Director Actions

When the company’s participants adopt internal rules requiring compliance with affiliate disclosure laws or when they challenge transactions made by the director without prior approval from the general meeting.

– Seeking Bank or Financial Institution Funding

When the company seeks funding from banks or financial institutions, whether domestic or foreign.

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.