All
 
|
 
 


Problems Of Corporate Governance In Companies With State Participation Of The Power Grid
 
PIIS231243500022430-1-1
DOI10.18572/2410-4396-2020-2-93-96
Publication type Article
Status Published
Authors
Mikhail S. Gorshkov 
Affiliation: Kutafin Moscow State Law University (MSAL)
Address: Russian Federation, Moscow
Journal nameEnergy law forum
EditionIssue 2
Pages93-96
Abstract

The past few years saw major legislative action aimed at increasing the effectiveness of corporate governance, for example, implementation of the astreinte mechanism, piercing the corporate veil, adoption of the Code of Corporate Governance (as enacted by Letter of the Bank of Russia No. 06-52/2463 dated April 10, 2014), expanding grounds for challenging interested-party and major transactions, as well as introduction of new amendments to the Law on Joint-Stock Companies designed to prevent dilution of rights to dividends and shares in the company’s authorized capital, namely Federal Law No. 55 on Introduction of Amendments to Articles 40 and 75 of the Federal Law on Joint-Stock Companies dated April 15, 2019. One way or another, the current state of the electrical power market shows that, although companies are attracting external investments, the state reserves the majority stake in the companies, controls and supervises strategically important businesses and industries. Some energy companies of the electric power industry have a special legal status established by laws and regulatory legal acts. The state reserves full and comprehensive control over the energy sector while maintaining a high level of state support in the form of budget investments, as well as stable functioning of the said companies. When “external” investors are involved and company shares are sold at the stock exchange, potential shareholders are concerned about protection of their corporate rights and transparent, independent and effective corporate governance. The article examines whether implementation of tasks formulated by the state by the power grid companies via a corporate mechanism of subsidiary management can be deemed a potential conflict of interest.

Keywordsenergy law, corporate governance in state-owned energy companies, liability of management body members
Received06.05.2020
Publication date03.06.2020
Number of characters12641
Cite     Download pdf
1 At the moment, corporate governance in the Russian Federation undergoes significant changes. Current economic processes and global economic environment makes it necessary to consider the scheme and structure of management in companies with state participation. The most important strategic economy sectors must be controlled, their development must be stimulated in the interests of the state, because well-being, safety, and other aspects of life of the population depend on functioning of energy companies.
2 One way or another, the current state of the electrical power market shows that, although companies are attracting external investments, the state reserves the majority stake in the companies, controls and supervises strategically important businesses and industries.
3 Some energy companies of the electric power industry have a special legal status established by laws and regulatory legal acts.
4 For instance, System Operator of the Unified Energy System, JSC (hereinafter referred to as JSC SO UES) develops process flow charts and development programs for the Russian Unified Energy System and submits them to the Ministry of Energy of Russia, controls the health of electric power facilities, and monitors the health of energy facilities.
5 Rosseti, PJSC, is the principal business entity due to its dominant participation in authorized capitals of subsidiaries or under the corporate agreement entered into by and between them, or otherwise controls its subsidiaries.
6 Rosseti, PJSC, can also use corporate mechanisms to influence subsidiaries of said companies. If we take a look at the electrical power market, we will see that the largest players on the energy generation market are companies controlled by the state: RusHydro, PJSC, (the Russian Federation owns 61.2% of its authorized capital), OGK-2, PJSC, (controlled by Gazprom Energoholding, LLC, which, in its turn, is a wholly owned subsidiary of Gazprom, PJSC), Mosenergo, PJSC, (controlled by Gazprom Energoholding, LLC similarly to OGK-2, PJSC), TGC-1, PJSC, (controlled by Gazprom Energoholding, LLC), Rosenergoatom, JSC (controlled by Rosatom State Nuclear Energy Corporation), etc.
7 Network activities are mostly performed by a state holding, Rosseti, PJSC, (the Federal Agency for State Property Management (hereinafter referred to as Rosimushchestvo) owns 88.04 % of the authorized capital of Rosseti, PJSC), which includes the IDGC, PJSC, Group, as well as FGC UES, PJSC. The major shareholder of Rosseti, PJSC, and Rosimushchestvo have entered into an agreement for management and voting with shares of FGC UES, PJSC. Under this agreement, the extent of Rosimushchestvo’s control (direct and indirect) is 80.72%.[1] Thus, the state reserves full and comprehensive control over the energy sector while maintaining a high level of state support in the form of budget investments, as well as stable functioning of the said companies.
8 At the same time, although the state owns a significant share in this industry, private investments are needed for further development and improvement of performance of the country’s power grid.
9 When “external” investors are involved and company shares are traded at a stock exchange, potential shareholders are concerned about protection of their corporate rights and transparent, independent and effective corporate governance.
10 The past few years saw major legislative actions aimed at increasing the effectiveness of corporate governance, for example, implementation of the astreinte mechanism, piercing the corporate veil, adoption of the Code of Corporate Governance (as enacted by Letter of the Bank of Russia No. 06-52/2463 dated April 10, 2014), expanding grounds for challenging interested-party and major transactions, as well as introduction of new amendments to the Law on Joint-Stock Companies designed to prevent dilution of rights to dividends and shares in the company’s authorized capital, namely, Federal Law No. 55 on Introduction of Amendments to Articles 40 and 75 of the Federal Law on JointStock Companies dated April 15, 2019.
11 Many problematic aspects of corporate governance in companies with state participation are targeted by scientific and research efforts, including international ones. [2] Legal studies are focused on topical issues of corporate governance in such companies. A recent monograph edited by
12 Romanova titled Topical Issues and Tasks of Corporate Law [3] is of interest. It describes the current state and problems of legal regulation of corporate governance in state-owned companies in the Russian Federation and other countries, offers recommendations and suggestions on improvement of such regulation and also it is to necessary mention legal research of V.V. Romanova, dedicated to problems and tasks of legal regulation of corporate governance in companies with state participation in the sphere of energy. [4]
13 In this article, let us take a closer look at corporate disputes involving power grid companies.
14 Particular attention should be paid to a dispute (case No. А40-226105/2016 [5]) where minority shareholders of IDGC of Center, PJSC, (hereinafter also referred to as the Company) sought to recover damages from the board members of the Company and Rosseti, PJSC.

views: 216

Readers community rating: votes 0 

1. Share Capital Structure // Rosseti FGC UES. URL: https://www.fsk-ees.ru/shareholders_and_investors/  information_on_shares/shareholding_structure/
2. Rosseti Discussed Issues of Corporate Governance in Energy Companies // Rosseti FGC UES. URL: http://www.  rosseti.ru/pres /news/index.php?ELEMENT_ID=36566.
3. Topical Issues and Tasks of Corporate Law : Monograph / Edited by V.V. Romanova. Moscow : Yurist Publishing House, 2020.
4. Topical Issues and Tasks of Corporate Law : Monograph / Edited by V.V. Romanova. Moscow : Yurist Publishing House, 2020. P. 116–126 ; Romanova V.V. Problems and tasks of Legal Regulation og Corporate Management in Companies with State Participation in Energy Sector / V.V. Romanova // Energy Law Forum. 2020. № 1. P. 58–63.
5. Court Rulings in Case No. A40-226105/2016. URL: https://ras.arbitr.ru/. 
6. Court Rulings in Case No. A40-266105/2016. URL: https://ras.arbitr.ru/. 
7. Order of the Government of the Russian Federation No. 511-r on Approval of the Development Strategy of the Russian Power Grid dated April 3, 2013 // Official Web Portal of Legal Information http://www.pravo.gov.ru.  4/8/2013.
8. Court Rulings in Case No. A40-266105/2016. URL: https://ras.arbitr.ru/. 
9. Letter of the Bank of Russia No. 06-52/2463 on the Code of Corporate Governance dated April 10, 2014 // Bank of Russia Bulletin. 2014. No. 40.

Система Orphus

Loading...
Up