Registration of transactions with affiliation

DEFINITION OF AN AFFILIATE PERSON

Affiliated persons of a business entity are individuals and legal entities capable of directly or indirectly (through other individuals or legal entities) making decisions or influencing their adoption by the business entity, as well as legal entities whose decision-making is influenced by the business entity. For example, such persons are:

members of the board of directors (supervisory board), representatives of the executive body of this company;
a legal entity that is a member of a holding company in which this company is a member;
an individual who alone or jointly with his or her spouse, parents, children and their spouses, adoptive parents, adopted children and their spouses, persons under guardianship (guardianship), grandfather, grandmother, grandchildren and their spouses, relatives brothers and sisters and parents of the spouse owns or has the right to dispose of a share in the authorized capital (shares) of a business company in the amount of twenty percent or more;
a legal entity that owns or has the right to dispose of a share in the authorized capital (shares) of a business company in the amount of twenty percent or more, or has the ability to determine the decisions made by such a company in accordance with the agreement;
a legal entity, in the authorized capital of which the economic company owns or has the right to dispose of a share in the authorized capital (shares) in the amount of twenty percent or more, or has the ability to determine the decisions made by such a legal entity in accordance with the agreement;
unitary enterprises created by an economic society;
members of collegial management bodies of a legal entity that is an affiliated person of a business company, a representative of the executive body of this legal entity.

The Republic of Belarus and its administrative-territorial units, the National Bank of the Republic of Belarus, republican government bodies, other state organizations subordinate to the Government of the Republic of Belarus, local executive and administrative bodies cannot be recognized as affiliated persons of a business company.

The economic company independently establishes the procedure for determining its affiliated persons, keeps records of such persons and is obliged to notify the affiliated persons in writing about this.

AFFILIATE INTEREST

The specifics of concluding a transaction with the participation of affiliated persons appears if they are interested in the business entity making this transaction.

Interest occurs if the affiliates:

are a party to the transaction or act in the interests of third parties in their relationship with the business entity;
own (each individually or in aggregate) twenty or more percent of shares in the authorized capital (shares) of a legal entity that is a party to the transaction or acts in the interests of third parties in their relations with a business entity;
are the owners of the property of a legal entity that is a party to the transaction or acts in the interests of third parties in their relations with the business entity;
are members of the management bodies (hold the relevant position) of the management of a legal entity that is a party to the transaction or acts in the interests of third parties in their relations with the business entity;
in other cases that may be determined by the charter.

TAKING DECISION ON THE TRANSACTION

If there is an interest of affiliated persons, a decision of the general meeting of participants of the economic company on the conclusion of the transaction is required. Such a decision is made by the general meeting of the participants of the business company by a majority of the total number of votes of the participants in the business company who are not interested in the transaction.

The charter of a business company may refer to the competence of the board of directors (supervisory board) to make a decision on a transaction in which there is an interest of affiliated persons, if the value of the property that is the subject of the transaction or several interconnected transactions does not exceed two percent of the book value of the assets of the business entity. a company determined on the basis of data from the accounting (financial) statements for the last reporting period. The charter may provide for a higher percentage.

The charter or the decision of the general meeting of the company’s participants may determine that in order to classify transactions in which there is an interest of affiliated persons, to the competence of the board of directors (supervisory board), the value of the property that is the subject of a transaction or several interconnected transactions should be compared with the value of the assets of an economic company, determined on the basis of an independent assessment on the first day of the month in which the transaction is made.

A decision on a transaction in which there is an interest of affiliated persons is made by a majority vote of all members of the board of directors who are not interested in the transaction. A member of the board of directors of a business company who is not an affiliate of this company is recognized as an independent director. If the number of independent directors in the board of directors is less than the quorum established by the charter for holding a meeting of the board of directors, the decision on such a transaction is made by the general meeting of the participants of the business company.

WHEN THE DECISION OF THE GENERAL MEETING IS NOT REQUIRED

However, the decision of the general meeting of participants of a business company (board of directors (supervisory board)) on a transaction is not required if all participants of the business company are its affiliates and are interested in making such a transaction.

Also, the decision of the general meeting of participants of the business company (board of directors) is not required if the transaction simultaneously meets the following conditions:

the transaction is made by a business entity in the course of its ordinary business activities;
the terms of such a transaction do not materially differ from the terms of similar transactions made by a business entity in the course of its normal business activities.
Transactions made by a business entity in the course of its normal business activities are transactions made by the business entity three or more times during the last twelve months, in particular, transactions involving the acquisition by the company of raw materials and materials necessary for carrying out production and economic activities, selling finished products , the performance of work (provision of services).

Affiliates with an interest in a business entity’s transaction are obliged to act in the interests of that entity and exercise due diligence and good faith as if they were not interested in concluding the transaction. In addition, affiliates are liable for losses incurred as a result of a transaction in which they have an interest.

DISPUTES ON TRANSACTIONS WITH AN AFFILIATE

If the transaction, in which the affiliated persons of the economic company are interested, was made in violation of the requirements stipulated by the legislation or violates the rights and legitimate interests of the business company, the participants of this company, then such a transaction is disputable and may be declared invalid by the court at the suit of the participants of the business company, the business company itself, as well as members of the board of directors (supervisory board), collegial executive body.

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