Major and Interested-Party Transactions under Russian Law: When Can a Contract Be Challenged?
What Foreign Entrepreneurs Need to Know About Corporate Approvals, Conflicts of Interest and Contract Validity in Russia.
Law stated as at 17 July 2026
Law stated as at 17 July 2026
A foreign counterparty dealing with a Russian company must consider not only the authority of the signatory, but also whether the transaction requires corporate approval. The principal regimes are those governing major transactions and interested-party transactions under the laws on limited liability companies and joint-stock companies.
Failure to obtain approval does not normally make a contract automatically void. Such transactions are generally voidable and may be invalidated only if the statutory conditions are met.
Russian corporate-capacity rules may apply even where the contract is governed by foreign law. The capacity of a Russian legal entity, its internal decision-making and the authority of its corporate bodies are generally determined by Russian law.
Failure to obtain approval does not normally make a contract automatically void. Such transactions are generally voidable and may be invalidated only if the statutory conditions are met.
Russian corporate-capacity rules may apply even where the contract is governed by foreign law. The capacity of a Russian legal entity, its internal decision-making and the authority of its corporate bodies are generally determined by Russian law.
1. Major transactions
A transaction is generally considered major where:
The rules expressly cover, among other things, loans, credit facilities, suretyships and pledges. Several economically connected agreements may be treated as one transaction where they pursue a common purpose, concern the same assets or counterparties, or were divided into separate documents to avoid the statutory threshold.
The relevant figure is normally taken from the company’s latest applicable financial statements. For a disposal, the higher of the asset’s balance-sheet value and the disposal price is generally used; for an acquisition, the acquisition price is used.
The 25% threshold is not the only test. The transaction must also be outside the company’s ordinary course of business. A transaction may be ordinary where it is customary for the company or comparable businesses and does not lead to termination of operations, a substantial change in their scale, or a change in the company’s principal business.
Recent Supreme Court jurisprudence has placed increased emphasis on the qualitative significance of the transaction. A disposal of an operationally indispensable asset may therefore create major-transaction risk even where its formal value is below 25%. Accordingly, the 25% figure should not be treated as an absolute safe harbour where the transaction concerns a key income-producing or operating asset.
- it falls outside the company’s ordinary course of business; and
- it involves the acquisition, disposal or possible disposal of property with a value equal to at least 25% of the company’s balance-sheet assets.
The rules expressly cover, among other things, loans, credit facilities, suretyships and pledges. Several economically connected agreements may be treated as one transaction where they pursue a common purpose, concern the same assets or counterparties, or were divided into separate documents to avoid the statutory threshold.
The relevant figure is normally taken from the company’s latest applicable financial statements. For a disposal, the higher of the asset’s balance-sheet value and the disposal price is generally used; for an acquisition, the acquisition price is used.
The 25% threshold is not the only test. The transaction must also be outside the company’s ordinary course of business. A transaction may be ordinary where it is customary for the company or comparable businesses and does not lead to termination of operations, a substantial change in their scale, or a change in the company’s principal business.
Recent Supreme Court jurisprudence has placed increased emphasis on the qualitative significance of the transaction. A disposal of an operationally indispensable asset may therefore create major-transaction risk even where its formal value is below 25%. Accordingly, the 25% figure should not be treated as an absolute safe harbour where the transaction concerns a key income-producing or operating asset.
2. Interested-party transactions
An interested-party transaction may arise where a director, chief executive officer, member of an executive body, controlling person or person entitled to give binding instructions has a personal or economic interest in the transaction.
An interest may exist where that person, certain family members, or entities controlled by them:
The concept of beneficiary is broad. For example, a borrower may be treated as the beneficiary of a guarantee or pledge granted by another group company to secure its obligations.
Unlike major transactions, interested-party transactions do not generally require mandatory prior approval merely because an interest exists. Approval may, however, be requested by specified corporate officers, directors or shareholders and is often obtained voluntarily to reduce litigation risk.
A transaction may fall within both regimes. In that case, the major-transaction approval procedure must be followed, together with any applicable interested-party requirements.
An interest may exist where that person, certain family members, or entities controlled by them:
- act as a party, beneficiary, intermediary or representative;
- control a party or beneficiary; or
- hold management positions in the relevant entity.
The concept of beneficiary is broad. For example, a borrower may be treated as the beneficiary of a guarantee or pledge granted by another group company to secure its obligations.
Unlike major transactions, interested-party transactions do not generally require mandatory prior approval merely because an interest exists. Approval may, however, be requested by specified corporate officers, directors or shareholders and is often obtained voluntarily to reduce litigation risk.
A transaction may fall within both regimes. In that case, the major-transaction approval procedure must be followed, together with any applicable interested-party requirements.
3. Competence of the board and general meeting
Limited liability companies
For an LLC ("OOO"), approval of a major transaction is generally within the competence of the participants’ general meeting. The charter may authorise the board of directors to approve transactions involving between 25% and 50% of the company’s assets. Transactions exceeding 50% must normally be approved by the general meeting.
For an interested-party transaction, board approval is possible only if the charter gives the board such authority. Transactions exceeding the statutory value threshold must be referred to the participants’ meeting. Interested participants (owners / members) and persons controlled by them do not vote.
Joint-stock companies
For a joint-stock company ("AO"), a major transaction involving between 25% and 50% of the company’s assets generally requires unanimous approval by the board of directors. If unanimity is not achieved, the matter may be referred to the shareholders’ meeting.
A transaction exceeding 50% requires approval by a three-quarters majority of the voting shares participating in the meeting.
Interested-party transactions may be approved by non-interested directors or, in cases specified by law, by the general meeting. In public companies, additional eligibility requirements apply to directors voting on the approval.
The company must verify the actual composition of its board at the date of approval, including whether a director’s powers have legally terminated.
For an LLC ("OOO"), approval of a major transaction is generally within the competence of the participants’ general meeting. The charter may authorise the board of directors to approve transactions involving between 25% and 50% of the company’s assets. Transactions exceeding 50% must normally be approved by the general meeting.
For an interested-party transaction, board approval is possible only if the charter gives the board such authority. Transactions exceeding the statutory value threshold must be referred to the participants’ meeting. Interested participants (owners / members) and persons controlled by them do not vote.
Joint-stock companies
For a joint-stock company ("AO"), a major transaction involving between 25% and 50% of the company’s assets generally requires unanimous approval by the board of directors. If unanimity is not achieved, the matter may be referred to the shareholders’ meeting.
A transaction exceeding 50% requires approval by a three-quarters majority of the voting shares participating in the meeting.
Interested-party transactions may be approved by non-interested directors or, in cases specified by law, by the general meeting. In public companies, additional eligibility requirements apply to directors voting on the approval.
The company must verify the actual composition of its board at the date of approval, including whether a director’s powers have legally terminated.
4. Content and scope of approval
A corporate approval should identify the parties, beneficiaries, subject matter, price or pricing mechanism and other material conditions.
For an interested-party transaction, it should also identify the interested person and the circumstances giving rise to the interest.
The approval must correspond to the actual agreement. Material amendments—such as an increase in the loan amount, extension of maturity, replacement of collateral, expansion of indemnity exposure or significant price adjustment—may require a new corporate analysis and fresh approval.
A resolution may approve a package of interrelated documents, a series of similar transactions, alternative terms, or minimum and maximum transaction parameters.
For an interested-party transaction, it should also identify the interested person and the circumstances giving rise to the interest.
The approval must correspond to the actual agreement. Material amendments—such as an increase in the loan amount, extension of maturity, replacement of collateral, expansion of indemnity exposure or significant price adjustment—may require a new corporate analysis and fresh approval.
A resolution may approve a package of interrelated documents, a series of similar transactions, alternative terms, or minimum and maximum transaction parameters.
5. Consequences of missing approval
Major transactions
A major transaction made without the required approval is voidable. It may generally be challenged by the company, a board member or shareholders or participants holding at least 1% of the relevant votes.
The claimant must normally prove that:
The court must reject the claim if valid subsequent approval is produced before the case is decided.
Interested-party transactions
The absence of approval alone is not sufficient to invalidate an interested-party transaction. The claimant must generally prove:
Harm may consist not only of a sale below market value, but also of an unjustified transfer of a key asset, assumption of disproportionate risk, provision of security for an affiliate’s debt, or another transaction serving insiders rather than the company.
If a transaction is invalidated, the usual consequence is restitution: each party must return what it received or reimburse its value. In an SPA, this may require the return of the shares and purchase price. Invalidity of security does not normally invalidate the underlying loan, although the lender may lose its secured status.
Directors, controlling persons and interested parties may also face damages claims even where the contract itself remains valid.
A major transaction made without the required approval is voidable. It may generally be challenged by the company, a board member or shareholders or participants holding at least 1% of the relevant votes.
The claimant must normally prove that:
- the transaction was major;
- the required approval was absent or defective; and
- the counterparty knew or manifestly should have known that the transaction was major or that approval had not been obtained.
The court must reject the claim if valid subsequent approval is produced before the case is decided.
Interested-party transactions
The absence of approval alone is not sufficient to invalidate an interested-party transaction. The claimant must generally prove:
- the existence of a statutory interest;
- harm to the company; and
- that the counterparty knew or manifestly should have known of the interest or the absence of consent.
Harm may consist not only of a sale below market value, but also of an unjustified transfer of a key asset, assumption of disproportionate risk, provision of security for an affiliate’s debt, or another transaction serving insiders rather than the company.
If a transaction is invalidated, the usual consequence is restitution: each party must return what it received or reimburse its value. In an SPA, this may require the return of the shares and purchase price. Invalidity of security does not normally invalidate the underlying loan, although the lender may lose its secured status.
Directors, controlling persons and interested parties may also face damages claims even where the contract itself remains valid.
6. Awareness of a foreign counterparty
Foreign counterparties are subject to the same knowledge test as Russian counterparties.
There is generally no automatic duty to investigate all of the company’s financial statements, internal regulations, ownership links and corporate approvals. A counterparty may ordinarily rely on the Russian corporate register as evidence of who may act for the company without a power of attorney.
However, actual or constructive knowledge may be established through:
A representation that all necessary approvals have been obtained is commercially useful but is not conclusive. It does not protect a counterparty that actually knew approval was required and missing.
There is generally no automatic duty to investigate all of the company’s financial statements, internal regulations, ownership links and corporate approvals. A counterparty may ordinarily rely on the Russian corporate register as evidence of who may act for the company without a power of attorney.
However, actual or constructive knowledge may be established through:
- documents provided during due diligence;
- financial statements showing that the transaction exceeds the relevant threshold;
- draft approval resolutions;
- correspondence discussing the need for approval;
- common ownership or management;
- express conditions precedent requiring approval; or
- deliberate division of one transaction into several contracts.
A representation that all necessary approvals have been obtained is commercially useful but is not conclusive. It does not protect a counterparty that actually knew approval was required and missing.
7. Subsequent approval
For a major transaction, valid subsequent approval is a complete defence to a challenge based on the absence of prior consent. Approval may be given after signing, after performance has begun or even after court proceedings have been commenced.
For an interested-party transaction, subsequent approval does not automatically prevent invalidation. Its principal effect is evidential: where approval exists, the claimant normally retains the burden of proving that the transaction harmed the company.
Subsequent approval cures only the corporate-approval defect. It does not cure illegality, fraud, sham arrangements, separate authority defects or bankruptcy-related grounds for avoidance.
For an interested-party transaction, subsequent approval does not automatically prevent invalidation. Its principal effect is evidential: where approval exists, the claimant normally retains the burden of proving that the transaction harmed the company.
Subsequent approval cures only the corporate-approval defect. It does not cure illegality, fraud, sham arrangements, separate authority defects or bankruptcy-related grounds for avoidance.
8. Limitation period and burden of proof
The limitation period for challenging both major and interested-party transactions is generally one year. A missed period cannot normally be restored.
The period usually runs from the date when the person exercising the functions of the company’s chief executive knew or should have known of the transaction and the relevant defect. The fact that the executive personally signed the agreement does not necessarily postpone the starting date.
Where the executive colluded with the counterparty, the knowledge of another non-colluding executive may be relevant. A later purchaser of shares or an LLC participation interest does not receive a new limitation period.
In a major-transaction case, the claimant generally bears the burden of proving the value and extraordinary nature of the transaction, absence of approval and the counterparty’s knowledge.
In an interested-party case, the claimant normally bears the burden of proving the interest, harm and counterparty knowledge. Harm may be presumed in certain cases where approval was absent and properly requested information was not disclosed, but the knowledge requirement remains relevant.
The period usually runs from the date when the person exercising the functions of the company’s chief executive knew or should have known of the transaction and the relevant defect. The fact that the executive personally signed the agreement does not necessarily postpone the starting date.
Where the executive colluded with the counterparty, the knowledge of another non-colluding executive may be relevant. A later purchaser of shares or an LLC participation interest does not receive a new limitation period.
In a major-transaction case, the claimant generally bears the burden of proving the value and extraordinary nature of the transaction, absence of approval and the counterparty’s knowledge.
In an interested-party case, the claimant normally bears the burden of proving the interest, harm and counterparty knowledge. Harm may be presumed in certain cases where approval was absent and properly requested information was not disclosed, but the knowledge requirement remains relevant.
9. Importance of the charter and corporate documents
The charter determines important matters such as:
A breach of a charter-only restriction is not necessarily treated as a statutory major or interested-party transaction. It may instead be challenged under the Civil Code rules on exceeding internal limitations, which generally require proof that the counterparty knew or should have known of the restriction.
An LLC or non-public joint-stock company may, subject to statutory conditions, modify the interested-party approval procedure in its charter. It cannot, however, authorise fraudulent, abusive or knowingly harmful transactions.
Although third parties are not always required to inspect the charter, a charter supplied during due diligence may become evidence that the counterparty knew of an approval requirement.
- whether an LLC board may approve transactions involving between 25% and 50% of the company’s assets;
- whether the board has competence over interested-party transactions;
- whether higher voting thresholds apply; and
- whether additional internal approval requirements exist.
A breach of a charter-only restriction is not necessarily treated as a statutory major or interested-party transaction. It may instead be challenged under the Civil Code rules on exceeding internal limitations, which generally require proof that the counterparty knew or should have known of the restriction.
An LLC or non-public joint-stock company may, subject to statutory conditions, modify the interested-party approval procedure in its charter. It cannot, however, authorise fraudulent, abusive or knowingly harmful transactions.
Although third parties are not always required to inspect the charter, a charter supplied during due diligence may become evidence that the counterparty knew of an approval requirement.
10. Loans, guarantees, pledges and SPAs
Loans
A loan or credit facility may constitute a major transaction where its value and effect satisfy the statutory tests. The analysis should cover the maximum commitment, interest, maturity, permitted increases and related security.
A material amendment or restructuring may itself require approval.
Guarantees and suretyships
A guarantee or suretyship must be analysed from the perspective of the Russian guarantor. Security for the debt of a shareholder, controller, director or affiliate may also constitute an interested-party transaction.
Approval should cover the maximum guaranteed amount, duration, secured obligations and any extensions or amendments.
Pledges and mortgages
A pledge creates the possibility of disposal of the collateral and may therefore constitute a major transaction. Particular caution is required where the collateral is the company’s main production facility, key real estate, core intellectual property, principal bank account or shares in an essential subsidiary.
If the pledge is invalidated, the lender may retain the underlying claim but lose priority over the collateral.
Share purchase agreements
An SPA must be analysed separately for each Russian seller, buyer, guarantor, pledgor and other Russian obligor.
The review should include not only the headline purchase price, but also deferred consideration, earn-outs, indemnities, options, shareholder loans, escrow arrangements, guarantees, pledges, transition agreements and side letters. Economically connected documents may be aggregated as one transaction.
A Russian target is not automatically subject to the approval regime merely because its shares are being sold. It must, however, be analysed separately if it assumes obligations, provides warranties, pays transaction costs or grants security.
A loan or credit facility may constitute a major transaction where its value and effect satisfy the statutory tests. The analysis should cover the maximum commitment, interest, maturity, permitted increases and related security.
A material amendment or restructuring may itself require approval.
Guarantees and suretyships
A guarantee or suretyship must be analysed from the perspective of the Russian guarantor. Security for the debt of a shareholder, controller, director or affiliate may also constitute an interested-party transaction.
Approval should cover the maximum guaranteed amount, duration, secured obligations and any extensions or amendments.
Pledges and mortgages
A pledge creates the possibility of disposal of the collateral and may therefore constitute a major transaction. Particular caution is required where the collateral is the company’s main production facility, key real estate, core intellectual property, principal bank account or shares in an essential subsidiary.
If the pledge is invalidated, the lender may retain the underlying claim but lose priority over the collateral.
Share purchase agreements
An SPA must be analysed separately for each Russian seller, buyer, guarantor, pledgor and other Russian obligor.
The review should include not only the headline purchase price, but also deferred consideration, earn-outs, indemnities, options, shareholder loans, escrow arrangements, guarantees, pledges, transition agreements and side letters. Economically connected documents may be aggregated as one transaction.
A Russian target is not automatically subject to the approval regime merely because its shares are being sold. It must, however, be analysed separately if it assumes obligations, provides warranties, pays transaction costs or grants security.
Conclusion
A missing corporate approval does not automatically invalidate a contract under Russian law.
For a major transaction, the central issues are its value and operational significance, the competence of the approving body, the counterparty’s knowledge and the possibility of subsequent approval.
For an interested-party transaction, the decisive questions are whether a statutory interest existed, whether the company suffered harm and whether the counterparty knew or should have known of the conflict.
Foreign counterparties should examine the complete economic package rather than individual documents in isolation, verify the company’s charter and corporate bodies, obtain properly drafted approvals and require fresh approval for material amendments.
This article provides general information on Russian law as at 17 July 2026 and does not constitute transaction-specific legal advice.
For a major transaction, the central issues are its value and operational significance, the competence of the approving body, the counterparty’s knowledge and the possibility of subsequent approval.
For an interested-party transaction, the decisive questions are whether a statutory interest existed, whether the company suffered harm and whether the counterparty knew or should have known of the conflict.
Foreign counterparties should examine the complete economic package rather than individual documents in isolation, verify the company’s charter and corporate bodies, obtain properly drafted approvals and require fresh approval for material amendments.
This article provides general information on Russian law as at 17 July 2026 and does not constitute transaction-specific legal advice.
How I Can Assist
I advise foreign companies, shareholders and investors on major and interested-party transactions involving Russian businesses. I can review the company’s charter and corporate documents, determine whether approval is required, prepare the necessary resolutions, assess the risks affecting loans, guarantees, pledges and SPAs, and represent clients in disputes concerning the validity of such transactions. Early legal review can significantly reduce the risk of a contract being challenged after signing.
