INVESTMENT PARTNERSHIP AGREEMENT - NEW LEGAL FRAMEWORK FOR CARRYING OUT JOINT INVESTMENT ACTIVITY

Federal Law 335-FZ dated 28 November 2011 "On Investment Venture" has come into effect on 1 January 2012

The Federal Law regulates the specifics of a simple (non-incorporated) partnership agreement entered into for the purposes of carrying out joint investment activity - an investment partnership agreement under which joint investment activity by the partners may involve only acquisition and disposal of shares, stakes, bonds of business companies and business partnerships not publicly traded, financial derivatives and shares in economic partnerships.
The most essential provisions of the Law include the following:

1 Investment partnership agreement:
• The title of the agreement must include the words “investment partnership”, the agreement must be entered into for a specific term or purpose but for no longer than 15 years;
• the agreement may not include any terms prohibiting disclosing the existence of the investment partnership to third parties (silent investment partnership);
• the terms and conditions of the investment partnership must not be disclosed and are protected by commercial secrecy;
• the agreement and all addenda thereto, including the joint activities policy (investment declaration), amendments, agreements on full or partial assignment by the partners of their rights and obligations thereunder, as well as Powers of Attorney for joint activities, require notarisation.
2 Participation in the agreement:
• participants may include Russian profit-making and (if provided for by federal law) non-for-profit organisations, individual entrepreneurs and foreign legal entities and organisations;
• the right to participate in several investment partnership agreements at a time may not be limited.
3 Participant categories with different scope of rights, obligations and liability:
• a partner (partners) may make contributions in the form of money only;
• a managing partner(s) may make contributions in any form, including not only money and other property but professional expertise and business reputation, may also carry out joint activities of the partners under a Power of Attorney and receives a remuneration (fixed, depending on the profits of the partnership, etc.).
• the authorised managing partner is the managing partner of the legal entity responsible for separate accounting for revenues and expenditures, tax accounting and some other duties.
4 Liability of the partners:
• a partner will be subject to interest and penalties for delay in making a contribution;
• all partners are jointly and severally liable (with all their property) for joint non-contractual obligations and joint contractual obligations to persons other than business entities;
• partners that are not managing partners are liable for joint contractual obligations to business entities proportionate to and within the limits of the value of their paid up ownership interest, and, if this does not suffice, subject to joint and several subsidiary liability (with all their property) of the managing partners;
• the managing partner's liability to third parties under joint obligations while party to the agreement survives termination of the agreement for three years with regard to this partner (if the agreement is still in force), as if the managing partner remained party thereto.
5 A partner's withdrawing his/her share from the joint property:
• a partner's share is determined in proportion to his/her contribution to the joint activity;
• the joint property may not be divided up and a partner may not withdraw his/her share therefrom throughout the effective term of the agreement, unless otherwise provided for by the agreement;
• a share in the joint property may be withdrawn only in the manner provided for by the agreement after expiry thereof or achievement of the purpose stated therein.
6 Assignment:
• a partner not being a managing partner is entitled to assign, in whole or in part, his/her rights and obligations to other partners or third parties, unless otherwise provided for by the agreement, in which case no consent from business partners is required to transfer debts under joint contractual obligations of the partnership;
• rights and obligations may not be assigned by the managing partner;
• the pre-emptive right of partners may be provided for acquisition, in full or in part, of rights and obligations under the agreement in the event of their assignment to third parties.
7 Withdrawal from the agreement before expiry thereof or achievement of the purpose stated therein:
• a managing partner may withdraw from the agreement only subject to the consent of all the other parties thereto;
• a partner not being a managing partner may not withdraw from the agreement, unless otherwise provided for thereby.
8 Other significant provisions:
• limits may be imposed on transactions by managing partners, including transactions with their affiliates;
• the powers of the managing partner may be terminated judicially (in the event of a breach of the agreement) or (if provided for by the agreement) extra-judicially, at the request of the parties thereto;
the agreement may provide for establishment of an investment committee to act as a corporate governance body.