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Lubov Gribanova Director |
The Supreme Court overturned the rulings of the lower courts which considered that the General Director, pursuant to the Company’s charter, had the right to independently dispose of the Company’s property and funds, and therefore could, at their own discretion, increase the amount of salary payable to them.
The Supreme Court clarified that despite the fact that the sole executive body acts independently on behalf of the Company, the General Director remains accountable to the general meeting of the Company’s participants or the Board of Directors (if any), particularly in matters concerning an increase in the CEO’s salary (Review of the corporate disputes cases practiced by arbitration courts concerning the application of Article 531 of the Civil Code of the Russian Federation, approved by the Supreme Court Presidium on July 30, 2025).
The General Director’s actions aimed at increasing their salary without the approval of a higher administrative body not only violate the balance of interests within the Company, but can also be considered as bad faith business conduct. Ultimately, the General Director can be held financially liable for losses caused to the Company as a result of such actions, pursuant to Article 531 of the Civil Code of the Russian Federation.
In this regard, any change in the General Director’s remuneration (as well as change of other essential terms of the employment contract) shall be formalized only with the approval of the Company’s higher administrative body. In accordance with paragraph 1 of Article 40 of Law No. 14-FZ on LLCs, an addendum to the General Director’s employment agreement concerning such changes shall be executed on behalf of the Company by the following authority (depending on the management structure of the Company):
- the chairman of the general meeting of Company’s participants, adopting all changes concerning the General Director;
- one of the Company’s participants or their representative authorized by the relevant resolution;
- the sole participant or their representative authorized by the relevant resolution;
- the chairman of the Board of Directors or their authorized representative.
By analogy with the provisions of the legislation on LLCs, a similar principle is established in joint-stock companies (JSCs). Under paragraph 2 of clause 3 of Article 69 of Federal Law No. 208-FZ on JSCs, the employment agreement with the General Director must be executed in accordance with a resolution of the general meeting of shareholders, or by the chairman of the board of directors of the JSC, or by its authorized representative.
To avoid conflicts of interest and other adverse consequences for both the Company and its executive, it is recommended to verify the proper formalization of employment relations with the General Director.
Marillion legal team is ready to provide support in ensuring that your company’s internal procedures are fully compliant with applicable legislation.
