On Application of the Federal Law On Joint-Stock Companies to Joint-Stock Companies in Which «The Gold Share» Special Right is Exercised.

      Pursuant to para 5, Art. 1 of the Federal Law On Joint-Stock Companies dated 26.12.95, # 208-FZ peculiarities of the legal status of stock companies during privatization of state and municipal enterprises are defined by the legislative acts of RF on privatization of the said enterprises. The Federal Law On Joint-Stock Companies regulating activities of stock companies makes no mention of either «the gold share» or of exercising a special right («the gold share»).

      The special right («the gold share») was established by para 1, Art. 5 of the Federal Law On Privatization of State Property and on Fundamentals of Privatization of Municipal Property in the Russian Federation dated 21.07.97, # 123-FZ. With accrual of this right «the gold share», which was expressly defined by the former legislation as a share in the direct meaning of the word, was canceled.

      Pursuant to the provision of the Law On Privatization of 1997 the special right («the gold share») is the right of the Russian Federation, subjects of the Russian Federation, and municipal entities to participate in management of open joint-stock companies established in the process of privatization. The Law On Privatization also specifies the scope of the rights of the persons participating in management of the company and the procedure of exercising such rights.

      Unlike the former legislation that fixed a 3-year period for use of «the gold share» (para 2.3 of the State Program of Privatization, approved by the Decree of the President of RF dated 24.12.93, # 2284) the Law On Privatization does not specify the exact period of validity of the special right of RF, the subjects of RF, and the municipal entities to participate in management of a joint-stock company.

      The special right is extinguished by a resolution of the Government of RF, a public authority of the subject of the Russian Federation, or a local authority (para 2, Art. 5 of the Law On Privatization), i.e. of the bodies resolving on transformation of an enterprise.

      The stock companies in respect of which the possibility to exercise the special right («the gold share») is established, carry out their activities in compliance with the provisions of the Law On Joint-Stock Companies, and as regards the activities connected with exercise of the special right («the gold share») - in compliance with the provisions of the Law On Privatization. The legislation does not correlate termination of the privatization period with absence or availability of the special right («the gold share»). In this connection, upon termination of the privatization period determined by the privatization plan of the enterprise where the special right (‘the gold share») is exercised, effective become peculiarities of the legal status of stock companies, which are established by the Law On Privatization regarding the special right of the state, subject of the Federation, municipal entity to participate in management of the company («the gold share»). In all other respects the activities of such joint-stock companies are regulated by the provisions of the Law On Joint- Stock Companies. The special right («the gold share») is valid until a resolution on its extinguishment is adopted.