Becker F4 - Corporate and Business Law (Russia) - Revision Question Bank

ACCA
PAPER F4
CORPORATE AND BUSINESS LAW

(RUSSIA)
REVISION QUESTION BANK
For December 2017 and June 2018 Examinations
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Accountants and have been reproduced by kind permission.
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REVISION QUESTION BANK – CORPORATE AND BUSINESS LAW (F4) RUSSIA (RUS)
CONTENTS
Question Name Page Answer Marks Date worked
MULTIPLE CHOICE QUESTIONS
1 Sources of law 1 1001 41

2 Court structure 5 1003 42
3 Constitutional rights 9 1005 25
4 Contract law 12 1006 66
5 Non-contractual obligations 19 1010 46
6 Employment law 24 1012 47
7 Partnerships 29 1014 30
8 Legal personality and company formation 32 1015 32
9 Voluntary representation 35 1017 24
10 Capital and financing of companies 38 1018 38
11 Company management and administration 42 1019 34
12 Company meetings 45 1021 36
13 Insolvency law 49 1022 43
14 Corporate fraudulent and criminal behaviour 53 1024 38
Section B of the Examination will include only six mark questions (see Specimen Exam).
All past exam questions shown below have been adapted.
CONSTITUTIONAL RIGHTS
1 Student Petrov 58 1026 6

2 Mrs Klushkina (ACCA D01) 58 1026 6
3 Anna (ACCA J06) 58 1027 6
4 Rosa and Dimitri (ACCA J09) 59 1028 6
CONTRACT LAW
5 OOO Book (ACCA J07) 59 1029 6

6 OOO Picture (ACCA D08) 60 1029 6
7 OOO Grow (ACCA J09) 60 1030 6
8 OOO Festival (ACCA J10) 61 1031 6
9 Ekaterina, Leonid and Nikolai (ACCA D10) 61 1032 6
10 OOO Learnfast (ACCA J11) 62 1033 6
11 OOO Clothes (ACCA J12) 62 1034 6
12 OOO Sweet (ACCA D12) 63 1034 6
13 Peter (ACCA D13) 63 1035 6
14 Alexei and Boris (ACCA J14) 64 1036 6
NON-CONTRACTUAL OBLIGATIONS
15 Alexander (ACCA J06) 64 1037 6

16 OOO Food (ACCA D07) 65 1038 6
17 OOO Consult (ACCA D09) 65 1039 6
18 PAO Trade (ACCA D11) 66 1040 6
19 OOO Vision (ACCA J13) 66 1040 6
©2017 Becker Educational Development Corp. All rights reserved. (iii)

CORPORATE AND BUSINESS LAW (RUSSIA) (F4) – REVISION QUESTION BANK
EMPLOYMENT LAW
20 OOO Teach (ACCA D06) 67 1041 6
PARTNERSHIPS
21 Andrei and Nikolai (ACCA J06) 67 1042 6

22 Rosa and Alexei (ACCA D07) 68 1043 6
23 Alexei, Iulia and Leonid (ACCA J08) 68 1043 6
24 Helena, Rosa and Yuri (ACCA D09) 69 1044 6
25 Boris, Maria and Oleg (ACCA J11) 69 1045 6
26 Anna, Oleg, Peter, Rosa and Viktoria (ACCA D11) 70 1046 6
27 Anatoly, Bogdana and Valeriya (ACCA J12) 70 1047 6
28 Natasha and Nikita (ACCA D13) 71 1047 6
29 Rosa and Sergei (ACCA J14) 71 1048 6
LEGAL PERSONALITY AND COMPANY FORMATION
30 OOO Investor 71 1049 6

31 Sven, Trudi, Uri and Viktor (ACCA D08) 72 1050 6
32 Natasha and Maria (ACCA D10) 72 1051 6
33 OOO Holiday (ACCA D12) 73 1052 6
VOLUNTARY REPRESENTATION
34 Mr Chaikin (ACCA D01) 73 1053 6

35 Nikita (ACCA D05) 74 1053 6
36 OOO Trade (ACCA D09) 74 1054 6
37 OOO Vendor (ACCA J13) 75 1055 6
CAPITAL AND FINANCING
38 PAO X (ACCA D03) 75 1055 6

39 OOO Musicmaster (ACCA J06) 76 1056 6
40 PAO Volatile (ACCA J07) 76 1057 6
41 PAO Sportclub (ACCA D08) 77 1058 6
42 OOO Snack (ACCA J10) 77 1059 6
43 PAO Educate (ACCA J12) 78 1060 6
44 PAO Mix (ACCA J13) 78 1061 6
COMPANY MANAGEMENT AND ADMINISTRATION
45 PAO Zvezda 79 1062 6

46 PAO Trucking (ACCA J07) 79 1062 6
47 PAO Office (ACCA J09) 80 1063 6
48 PAO Hopeful (ACCA J11) 80 1064 6
49 OOO Sport (ACCA D12) 81 1065 6
50 PAO Clothes (ACCA D13) 81 1066 6
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REVISION QUESTION BANK – CORPORATE AND BUSINESS LAW (F4) RUSSIA (RUS)
COMPANY MEETING
51 A, B, C and D (ACCA J03) 82 1066 6

52 OOO Signet (ACCA D03) 82 1067 6
53 PAO CAET (ACCA J04) 83 1068 6
54 Mikhail (ACCA D05) 83 1069 6
55 Alexander (ACCA D10) 84 1070 6
56 PAO Relax (ACCA D11) 84 1070 6
INSOLVENCY
57 OOO Perituus 85 1071 6

58 PAO KraiTeploEnergo 85 1072 6
59 PAO Fail (ACCA D07) 86 1073 6
60 OOO Flop (ACCA J14) 86 1074 6
CORPORATE FRAUDULENT AND CRIMINAL BEHAVIOUR
61 Artem 87 1074 6
62 Anna and Nikita (ACCA J08) 87 1075 6
63 Iosif (ACCA D11) 88 1076 6
DECEMBER 2014 (Specimen Exam)

Section A 45 Multiple Choice Questions 2 17 70
Section B 5 Multi-Task Questions
1 OOO Teaching 12 17 6
2 Natasha and Veronika 12 18 6
3 Grigor 13 18 6
4 OAO Acquire 13 18 6
5 Yuri 13 19 6
Marking Scheme 21
JUNE 2015
Section A (not published by ACCA)

Section B 5 Multi-Task Questions
1 OOO Plant 11 15 6
2 Galina and Veronika 11 15 6
3 OOO College 11 15 6
4 Clothes Co 12 16 6
5 Leo 12 16 6
Marking Scheme 17
Publisher’s note: ACCA has not published more recent past exam papers.
©2017 Becker Educational Development Corp. All rights reserved. (v)

CORPORATE AND BUSINESS LAW (RUSSIA) (F4) - REVISION QUESTION BANK
(vi) ©2017 Becker Educational Development Corp. All rights. res.erved

REVISION QUESTION BANK – CORPORATE AND BUSINESS LAW (RUSSIA) (F4)
MCQs 1 SOURCES OF LAW
1.1 Which of the following statements about the Russian legal system is true?
A It is primarily derived from decisions of the Russian courts

B It is a civil law system
C It resembles the UK legal system (1 mark)
1.2 Which of the following statements about the sources of Russian law are true?
(1) Among other sources, Russian law derives from universally accepted principles of
international law and regulatory legal acts
(2) Among other sources, Russian law derives from treaties of the Russian Federation
and legal precedent
A 1 only
B 2 only
C Both 1 and 2
D Neither statement (2 marks)
1.3 When would regulations in an international treaty take precedence over the laws of the
Russian Federation?
A When the regulations concern human rights and liberties

B An international treaty never takes precedence over laws of the Russian Federation
C When the treaty has been signed by the President
D When the treaty has been ratified by the State Duma and Federation Council
(2 marks)
1.4 In relation to public and private laws, which of the following statements is true?
A Public law regulates relations between a citizen and society

B Public laws include civil, labour and family laws
C Private law regulates relations between a citizen and society
D Private laws include financial and penal laws (2 marks)
1.5 Which of the following statements about the Constitution of the Russian Federation is
true?
A It is not a regulatory legal act

B It takes precedence over any international treaty
C It guarantees the human rights of Russian citizens (1 mark)
1.6 Which of the following sources of law has the highest authority?
A Decrees and other regulatory legal acts of the heads of the Federation
B A federal law
C Acts of the government of the Russian Federation
D Regulatory legal acts of federal bodies of the executive power (2 marks)
1.7 Accomplishment of a law is described by which of the following?
A A form of law implementation involving the prohibition of actions

B A form of law implementation involving use of the law to realise opportunities
C A form of law implementation involving enforcement (1 mark)
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1.8 The peculiarity of the enforcement form of law realisation is described by which of the
following statements?
A It is executed by subjects of the Federation and is applicable to a defined group of

persons
B It is executed by government bodies and is applicable to a defined group of persons
C It is executed exclusively by municipalities and is applicable to an indefinite
number of persons
D It is executed by different government bodies and is applicable to an indefinite
number of persons (2 marks)
1.9 Which of the following is NOT an example of law enforcement?
A Compulsory military service

B Appointment of a government minister
C The distribution of state welfare payments
D Juridical prosecution (2 marks)
1.10 A law lacuna is described by which of the following statements?
A It is a law enacted by the legislative body of a subject of the Federation

B It is the absence of a provision necessary to resolve a legal issue
C It is a law imposing an obligation, such as payment of taxes
D It is a law proposed by the highest judicial body (2 marks)
1.11 Which of the following statements relating to a law lacuna are true?
(1) It may be resolved by adoption of a law by competent bodies or by decree of the

President
(2) It may be resolved by applying a provision of law regulating similar relations
A 1 only
B 2 only
C Both 1 and 2
1.12 Which of the following statements relating to the Constitution of the Russian Federation
is NOT correct?
A It provides the framework for the creation of laws by the different organs of
government
B It defines the nature of the federal republic and the roles of the three branches of
government
C It has supremacy over every regulatory legal act except decrees of the President
D It provides the procedures for constitutional amendment (2 marks)
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1.13 Which of the following entities does NOT have the right to submit drafts of legislation
for consideration by the State Duma?
A Deputies of the State Duma

B The President
C The Federation Council
D Subjects of the Federation (2 marks)
1.14 How many deputies of the State Duma must vote in favour of a law in order for it to be
adopted initially?
A 50%
B More than 50%
C Two thirds (1 mark)
1.15 What vote is required to override a veto by the President?
A Two-thirds of the Deputies of the State Duma and of the members of the Federal
Council
B Three-fourths of the deputies of the State Duma and of the members of the Federal
Council
C Two-thirds of the deputies of the State Duma and a simple majority of the members
of the Federal Council (1 mark)
1.16 Which statement about a decree issued by the President of the Russian Federation is
true?
A It must be limited to a narrow range of military matters

B Where appropriate it may supersede the Constitution
C It may provide for the coordinated functioning and interaction of bodies of state
power
D It can only be made in response to issues based on law and not in the absence of law
(2 marks)
1.17 Which of the following statements relating to acts of the Government of the Russian
Federation are true?
(1) These acts are deemed obligatory on the entire territory of the Russian Federation
(2) The Russian Federation President may not abolish acts of the Government
contradicting a Presidential Decree
(3) The Russian Federation President may abolish acts of the Government contradicting
the Constitution
(4) Acts of the Government are superior to law and to decrees
A 1 and 3 only
B 3 and 4 only
C 1, 2 and 4
D All of the above statements (2 marks)

1.18 An act issued by a ministry of the Government may NOT be enforced in which of the
following circumstances?
A It applies to activity beyond the ministry itself and it has not been published
B It concerns human and civil rights and has been published
C It purports to apply to all citizens and organizations (1 mark)
1.19 A conflict between two regulatory legal acts may be settled in which of the following
ways?
(1) Interpretation
(2) Abolishing one of the conflicting acts
(3) Public referendum
(4) Amending the acts
A 1, 2 and 3
B 1, 2 and 4
C 1, 3 and 4
D 2, 3 and 4 (2 marks)
1.20 If an international treaty sets rules different from rules already established by the
Russian Federation, which of the following is true?
A The President decides which prevails

B The issue is litigated in the International Court of Justice
C The rule of the Russian Federation prevails
D The international treaty prevails (2 marks)
1.21 If the government wishes to commit the Russian Federation to an international treaty
that conflicts with the Constitution, what is its most likely course of action to achieve
that result?
A Amend the Constitution

B Request that the President issue a decree altering the Constitution
C Enter into the treaty with more than one other country, because multi-lateral treaties
have greater binding effect than bilateral treaties
D Proceed with the treaty and allow the courts to determine its proper application in
light of the Constitution (2 marks)
1.22 Which of the following is NOT a category of international treaties?
A Interstate
B Supranational
C Inter-governmental (1 mark)
1.23 The Ministry for Taxes and Charges of the Russian Federation issues an ordinance that
contradicts with an act of the Government of the Russian Federation.
Which law prevails?
A Both are void

B The President must decide the issue by decree
C The act of the Government prevails (1 mark)

1.24 A Ministry issues two regulatory legal acts, one in January and another in September of the
same year. The two regulatory acts contain provisions that contradict one another.
Which of the following statements are true?
(1) The President may overrule either legal act by decree, but not both
(2) The President may overrule both legal acts by decree
(3) In the absence of action by the President, the most recent legal act will prevail
(4) Neither legal act will apply if both violate a treaty
A 2, 3 and 4
B 1, 3 and 4
C 1, 2 and 4
1.25 Subsequent to the ratification of an interstate treaty, the Russian Federation passes legislation
in conflict with specific provisions of the treaty.
Is the new legislation subordinate to the treaty?
A Yes
B No
C Yes, unless the President issues a decree to the contrary (1 mark)
(41 marks)
MCQs 2 COURT STRUCTURE
2.1 Which of the following is a component of the Russian judicial system?
(1) Courts of general jurisdiction

(2) Arbitration courts
(3) Crown courts
A 1 and 3 only
B 1 and 2 only
C 2 and 3 only
2.2 Which of the following is NOT within the scope of courts of general jurisdiction?
A Constitutional contest by a citizen of a regulatory act

B Dispute arising over land rights
C Civil dispute between citizens
D Contest over the refusal to register or to issue a licence to a mass media body
(2 marks)
2.3 Courts of general jurisdiction consider all disputes EXCEPT which of the following?
(1) Those in the jurisdiction of the Constitutional Court

(2) Those in the jurisdiction of Arbitration Courts
(3) Criminal cases
A 1 and 2
B 1 and 3 only
C 2 and 3 (1 mark)

2.4 In relation to major level courts of general jurisdiction which of the following statements
is true?
A They include the city courts of Moscow and Saint-Petersburg

B They are courts of first instance
C They have jurisdiction over constitutional questions
D They commonly hear appeals of cases from other major level courts (2 marks)
2.5 Which of the following statements about medium level courts of general jurisdiction are
correct?
(1) They are generally courts of second instance (courts of appeal)

(2) In certain cases, they may act as courts of first instance
(3) They include the supreme courts of the republics of the Russian Federation
A 1 and 2 only
B 2 and 3 only
C 1 and 3 only
D All of the statements are correct (2 marks)
2.6 When does the Supreme Court of general jurisdiction act as a court of first instance?
A Never
B In criminal cases of extra complexity
C In all criminal cases (1 mark)
2.7 Business partners Anatoly and Olga are registered entrepreneurs. Upset over the distribution
of profits from their business, Olga wishes to bring an action against Anatoly to recover her
fair share.
In which type of court will this case initially be heard?
A Arbitration court of federal district

B A major level court of general jurisdiction
C A medium level court of general jurisdiction
D Arbitration court of subjects of the Russian Federation (2 marks)
2.8 A local newspaper publishes an article describing Ivan, an accountant, as a paedophile. As a

result, many of Ivan’s clients cease to do business with him.
If Ivan wishes to bring a claim against the newspaper, which of the following courts has
jurisdiction in the first instance?
A A court of arbitration
B A regional court of general jurisdiction
C A major level court of general jurisdiction
D The Supreme Court (2 marks)
2.9 Oleg, who is not a registered entrepreneur, files a claim in arbitration court against his
insurance company for refusing to pay a claim for damage to Oleg’s delivery vehicle.
Will the arbitration court hear the case?
A Yes, because it involves insurance

B Yes, because it involves an economic dispute
C No, because Oleg is not a registered entrepreneur (1 mark)

2.10 Which of the following is NOT a matter on which an arbitration court would rule?
A Changing the terms of a business agreement

B Non-fulfilment or insufficient fulfilment of business obligations
C Reimbursement of business losses
D Actions to revoke a ministry’s ban on a company’s issuance of securities (2 marks)
2.11 Which of the following cases would an arbitration court accept, even if one of the parties
is not an entrepreneur?
(1) Insolvency (bankruptcy)

(2) A dispute related to the liquidation of a commercial legal entity
(3) Eviction from a commercial office building
(4) A dispute related to distribution of shares after the death of the shareholder
A 1 and 2 only
B 3 and 4 only
C 1, 2 and 3 only
D All four (2 marks)
2.12 Among the four levels of arbitration courts, which are considered to be the courts of
first instance?
A Federal arbitration courts of subjects of the Russian Federation

B Arbitration courts of appeal
C Arbitration courts of federal districts
D The Supreme Court of the Russian Federation (2 marks)
2.13 A Moscow-based manufacturer wishes to bring a claim against a St Petersburg-based

distributor for breach of contract. Both parties are registered entrepreneurs.
In which of the following courts would the case be heard?
A A court of general jurisdiction in Saint Petersburg

B A court of general jurisdiction in Moscow
C An arbitration court in Saint Petersburg
D An arbitration court in Moscow (2 marks)
2.14 When a defendant’s residential location is unknown, where is proper jurisdiction?
(1) A court at the plaintiff’s residential location

(2) A court at the location of the defendant’s property
(3) A court at the defendant’s last known location
(4) A court at the location of the plaintiff’s property
A 2 only
B 1 and 2 only
C 2 and 3 only
D 3 and 4 only (2 marks)

2.15 Alexei and Neda’s partnership agreement provides that disputes between the parties will be
heard by a court in Moscow. Both parties lived in Moscow when the agreement is signed, but
Alexei later moves to Sochi.
If Neda wishes to bring a claim against Alexei concerning the partnership, in which
location must the claim be heard?
A Moscow
B Sochi
C Either Moscow or Sochi
D Both Moscow and Sochi (2 marks)
2.16 Which of the following claims would be proper for a citizen to bring before the
Constitutional Court?
A That a regulatory act of a governmental ministry has infringed his constitutional

rights
B That a specific action of another citizen has infringed his constitutional rights
C That a federal law has infringed his constitutional rights
D That other citizens have also had their constitutional rights infringed in the same
manner (2 marks)
2.17 Mikhail wants to bring a claim against the government for failure to pay him for construction
work performed on a government building.
What is the most likely reason that the Constitutional Court will refuse to hear the
claim?
A This is an economic matter more proper for the arbitration courts

B Mikhail has not alleged a violation of his constitutional rights
C Breach of contract claims cannot be brought against the government
D Only legal entities and public organisations may file claims in the Constitutional
Court (2 marks)
2.18 May a citizen challenge the constitutionality of a Federal law at the moment of its
passage or at any time before it becomes effective?
A Yes, because an unconstitutional law will not be allowed to stand

B Yes, because allowing the law to be enforced would create an injustice
C No, unless he obtains the approval of the President
D No, because the law must be enforced or is to be enforced in a particular case
(2 marks)
2.19 If an arbitration court overrules the decision of a court of general jurisdiction, which of
the following would be the most likely reason?
A No medium level court of general jurisdiction is located near the defendant

B The appeal was first been heard and denied by a medium level court of general
jurisdiction
C The case involves entrepreneurial activity and should have been heard in an
arbitration court in the first instance
D The President has issued a decree ordering the arbitration court to examine the
proceedings (2 marks)

2.20 According to the Russian Constitution, which of the following statements about the
exercise of judicial power are true?
(1) Justice is administered by all levels of government and all government officials
(2) Justice is administered by the courts alone
(3) All cases must be decided by juries
(4) Justice is blind
A 1 only
B 2 only
C 2 and 3 only
2.21 A judge’s role in the Russian Federation includes which of the following?
(1) Interpreting and applying legislation

(2) Applying judicial precedent
(3) Ensuring proper processes are followed
(4) Determining sentences or fines
A 1, 2 and 3
B 1, 2 and 4
C 1, 3 and 4
2.22 Trial by jury applies in which types of cases?
A Cases before a major level court of general jurisdiction

B Cases designated by federal law
C Cases in the arbitration courts
D Cases in which a defendant demands a jury trial (2 marks)
2.23 In a jury trial, which party determines the sentence or penalty if the verdict is against
the defendant?
A The judge
B The jury
C The next level of court above the court of first instance (1 mark)
(42 marks)
MCQs 3 CONSTITUTIONAL RIGHTS
3.1 Zima, Egor and Dmitri form a club for the purpose of collecting matryoshka dolls. They meet
in a Moscow park and trade the dolls with one another, but the club is not incorporated and all
the dolls are owned by the club members individually.
If Nina accidentally runs over and destroys one of the dolls, who is entitled to bring a
claim against Nina for the damages?
A Both the club and individual owner of the doll

B Both the club and any or all of its members
C Only the individual owner of the damaged doll
D Only the club (2 marks)

3.2 Which of the following is NOT a subject regulated by the Civil Code of the Russian
Federation?
A Relations between regulatory agencies and the President

B Ownership of private property
C Copyright and patent law
D Probate law (2 marks)
3.3 What is defined as “an independent activity, performed at one’s own risk, aimed at
systematically deriving profit from the use of property, the sale of goods, the
performance of work or the rendering of services by legal entities or individual
citizens”?
A Capitalism
B Commercialism
C Entrepreneurship
D Globalisation (2 marks)
3.4 Who must register in order to engage in entrepreneurial activity?
A Legal entities
B Individual citizens
C Both legal entities and individual citizens (1 mark)
3.5 Registered entrepreneurs are treated differently from ordinary citizens in which of the
following ways?
(1) Entrepreneurs who fail to meet their debts are still responsible for them, regardless
of fault
(2) Disputes relating to entrepreneurial activity are heard in different courts from
disputes between ordinary citizens
(3) They have the rights to undertake certain activities such as banking and insurance
that ordinary citizens cannot undertake
A 2 only
B 1 and 2 only
C 1 and 3 only
3.6 All citizens possess “passive capacity” from birth through death.
Citizens have passive capacity to do which of the following?
(1) Own property

(2) Set-up legal activities
(3) Engage in entrepreneurial activity of any kind
(4) Choose a place of residence
A 2 and 3 only
B 3 and 4 only
C 1, 2 and 4 only
D All of the above (2 marks)

3.7 Amelia is 14 years of age.
Which of the following can she do independently?
(1) Own property

(2) Sell property
(3) Inherit property
A 1 and 2 only
B 1 and 3 only
C 2 and 3 only
3.8 At what age does an individual attain full “active capacity” under Russian law?
(1) Age 18
(2) At the age of marriage
(3) Age 17
(4) Age 16 if working under a labour contract with court approval
A The earlier of 1 and 2

B The earlier of 2 and 3
C The earlier of 1 and 4
D The earlier of 1, 2 and 4 (2 marks)
3.9 Nikolai, who is 15, has written and published a book.
Under what circumstances may Nikolai exercise his rights as author of the book?
A With the assistance and cooperation of his parents

B By permission of a court
C At any time
D Not at all, because he is a child with only partial active capacity (2 marks)
3.10 Which of the following statements about a legal entity is true?
A It has no active capacity

B It may acquire property and property rights
C It may not be a plaintiff in court (1 mark)
3.11 What is the crucial characteristic of a legal entity?
A It possess its own property

B It is registered as required by law
C It has partial active capacity
D It is composed of individuals and not of other organisations (2 marks)
3.12 Which of the following is a characteristic of a legal entity?
(1) It is responsible for its property

(2) It may act in civil matters on its own behalf
(3) It possesses organisational unity and a stable structure
A 1 only
B 2 only
C 3 only

3.13 Delta, a legal entity that is a registered entrepreneur, manufactures and sells shoes. One of
Delta’s suppliers sues Delta and all its officers and shareholders for breach of contract.
If the supplier wins the lawsuit, which of the following is true about the supplier’s rights
to collect damages?
A In general, damages may only be collected from the assets held by Delta in its own
name
B In general, both Delta and its shareholders are liable for the damages
C The supplier may collect from Delta or from any of its shareholders or officers
D Only the individual officers involved directly in the contract breach will be liable
for the damages (2 marks)
3.14 Olga, the president and major shareholder in OOO Odessa, defaults on a loan she took out to
improve her home.
What is OOO Odessa’s liability for the loan?
A It is liable for the loan in an amount not to exceed the value of Olga’s shares in
Odessa
B It is liable for the full amount of the loan, but only if Olga cannot repay it from her
own assets
C It is not liable for the repayment of the loan (1 mark)
(25 marks)
MCQs 4 CONTRACT LAW
4.1 Which of following defines the concept of “privity”?
A A person offering to conclude a contract is committed upon receipt

B Promises of parties supported by some consideration
C Only parties to a contract can enforce its provisions (1 mark)
4.2 In relation to the award of damages, which of the following statements is correct?
A The court may reduce the amount of damages if the creditor did not take reasonable
measures to reduce them
B Creditor’s negligence will not be considered in assessing damages owed
C Damages do not include compensation for mental distress (1 mark)
4.3 Which of the following is NOT one of the four essential elements of a contract?
A An agreement of terms between parties

B Capacity of parties and free consent
C Promises supported by some consideration
D A written document (2 marks)
4.4 A contract is regarded as concluded in which of the following situations?
A When consideration is given

B When the parties have agreed on all essential terms in a proper form
C When the contract is notarised (1 mark)

4.5 A contract’s essential terms include which of the following?
A The object of the contract, terms deemed essential by law and dispositive norms
B The object of the contract and intentions of the parties
C The object of the contract, terms deemed essential by law and terms required by the
parties
D The terms deemed essential be law and the intentions of the parties (2 marks)
4.6 Which of the following describes a “dispositive norm”?
A An essential term
B A term that is applied unless the parties agree to the contrary
C A proposal to conclude a contract (1 mark)
4.7 Methods of concluding a contract include which of the following:
(1) By procedure in the Civil Code

(2) Compulsorily
(3) By a tender
(4) By expiry
A 1, 2 and 3
B 1, 2 and 4
C 1, 3 and 4
4.8 Which of the following statements relating to an offer is true?
A An offer must be addressed to only one specific party

B An offer must express the intention of the offeror that he regards the contract as
concluded
C An offer may be worded so as to prompt a response from an unlimited number of
persons
D An advertisement is an offer (2 marks)
4.9 Which of the following is a correct statement about offers?
A An offer may be revoked at any time regardless of the terms of the offer
B Once sent to an addressee, an offer cannot be revoked
C An offer cannot be revoked during the time set for its acceptance
D If the addressee receives the offer and a revocation simultaneously, the revocation is
ineffective (2 marks)
4.10 Which of the following is a feature of a public offer?
A It is binding only for individual private citizens

B A willingness to conclude the contract with any responding person
C It can be accepted only by commercial entities (1 mark)
4.11 Who may accept an offer?
A Anyone who performs acts in compliance with the contract terms

B Anyone with knowledge of the offer
C Only the person or entity to whom the offer was directed (1 mark)

4.12 Which of the following describes when silence would NOT be regarded as acceptance?
A The offer states that silence will be regarded as acceptance

B Silence as acceptance follows from the former business relations between the parties
C Silence as acceptance follows from customs of the business
D The person receiving the offer performs acts in compliance with the terms of
contract (2 marks)
4.13 Aleksandra offers to sell Boris her antique chandelier for 3.500 roubles. Boris sends a
response that he accepts for 3.000 roubles.
What is the effect of Boris’s response?
A Conclusion of the contract for 3.000 roubles

B Rejection of Aleksandra’s offer
C Conclusion of the contract for 3.500 roubles
D No effect (2 marks)
4.14 Which of the following statements about an offer are true?
(1) In general, an offer may be terminated at any time prior to acceptance

(2) Once an offer is terminated it cannot be accepted
(3) An offer remains open for the time specified regardless of attempts to terminate it
(4) An offer is not terminated by a counter offer
A 1 and 2
B 2 and 3
C 3 and 4
D 1 and 4 (2 marks)
4.15 In relation to revocation of offers, which of the following statements is correct?
A All offers may be withdrawn at any time unless the offer states that it cannot be
revoked
B If the offeree has begun performance, the offer becomes irrevocable when the
performance is complete
C An offer must be held open for a reasonable time
D An offer is irrevocable during the period established for its acceptance (2 marks)
4.16 A contract may be concluded in which of the following forms?
(1) Orally
(2) Simple written form
(3) Notarial written form
(4) Concluding actions
A 1 and 2 only
B 2 and 3 only
C 1, 2 and 3 only

4.17 For which of the following contracts is the simple written form compulsory?
(1) Contracts of legal entities

(2) Contracts between citizens involving a sum of 3.500 roubles or more
(3) Contracts between citizens for a sum of at least 10 times more than the minimum
monthly pay
A 1 and 2 only
B 1 and 3 only
C 2 and 3 only
4.18 “Minimum monthly pay” is described by which of the following statements?
A The minimum amount employers must pay full time employees

B The average monthly pay of citizens within the Russian Federation
C An amount set by the government to be used as a yardstick for certain calculations
D Three thousand roubles (2 marks)
4.19 A written contract certified by a notary is compulsory in which of the following

circumstances?
A Only when stipulated by the parties’ agreement

B When the contract is for a sum exceeding 10.000 roubles
C When the contract involves immovable property
D When the contract involves transferring a share in a limited liability company
(2 marks)
4.20 Which of the following correctly states the effect of failure to use the proper form of
contract?
A Non-observance of the required notarial form renders the contract null and void
B Non-observance of the required simple written form renders the contract null and
void
C Non-observance of the required notarial form does not render the contract void but
makes the terms difficult to prove (1 mark)
4.21 When is the oral form of a contract invalid?
A Always
B Whenever a written form is compulsory
C Only when notarial authentication is required
D When any other method other than simple written form is deemed invalid (2 marks)
4.22 Whether an obligation is discharged is ascertained by determining whether the action

was performed and what else?
(1) Whether the action was performed properly

(2) Whether there is proof that the performance was accepted
(3) Whether the parties signed an acknowledgment of performance
A 1 only
B 2 only
C 1 and 2

4.23 Which of the following is the proper person to discharge a contractual obligation?
A Any third person with the debtor’s consent

B One of multiple joint debtors
C A third person who has taken no action but may lose their right to the debtor’s
property (1 mark)
4.24 Generally, the proper place of discharge of a contract involving the transfer of
immovable property is which of the following?
A The residence of the purchaser

B The residence of the seller
C The location of the property (1 mark)
4.25 Which of the following statements describes the compensation a contracting party is
entitled to when the other party does not discharge his obligation or does so improperly?
A Compensation for expenses and damage only

B Compensation for losses based on prices in the creditor’s location
C Compensation for losses based on prices that existed when the contract was formed
D Compensation for loss de facto plus lost profits (2 marks)
4.26 In relation to the time within which an obligation must be discharged, which of the
following statements is NOT true?
A The obligation must be discharged on the day stated in the contract

B If no time is specified in the contract, the obligation must be discharged within a
reasonable time.
C Discharge of the obligation in advance of the deadline is disallowed unless
permitted by the contract
D The obligation must be discharged within seven days after the moment of demand
by the creditor (2 marks)
4.27 Pecuniary obligations may be expressed in which of the following ways?
A Roubles
B Roubles or euros
C Any specified currency
D Roubles, euros, or US dollars (2 marks)
4.28 Which of following state the four generic ways in which a contract can be terminated?
A Agreement, cancellation, breach, concluding action

B Discharge, agreement, breach, pledge
C Agreement, discharge, pledge, concluding action
D Discharge, agreement, cancellation, breach (2 marks)
4.29 Which of the following statements about cancellation of a contract is true?
A Novation is a form of discharge by cancellation

B A contract may be cancelled only if both parties agree
C A contract may be cancelled when it is impossible to fulfil its obligations (1 mark)

4.30 Which of the following can result in the termination of a contract?
A Privity
B Breach
C Consideration
D Novation (2 marks)
4.31 Which of the following lists are composed of methods allowed by the Civil Code for
obligation security?
(1) Pledge, surety, bank guarantee

(2) Forfeit, withholding, earnest money
(3) Discharge, damages, consideration
A 1 and 2 only
B 1 and 3 only
C 2 and 3 only
4.32 Which of the following statements about forfeit is true?
A A forfeit agreement may be in oral form

B A forfeit is a sum the debtor is obliged to pay in the event the debtor breaches the
contract
C All forfeits are contract forfeits
D The court can neither increase nor decrease the forfeit stipulated in the contract
(2 marks)
4.33 A pledge is described by which of the following statements?
A Securing the obligation with property that can be sold to pay the debt
B Securing the obligation with a promise to pay
C Securing the obligation by agreeing to pay a penalty if there is a breach
D Securing the obligation by obtaining a surety (2 marks)
4.34 Which of the following property may be the object of a pledge?
(1) Compensation for injuries

(2) Alimony
(3) Intellectual
(4) Immovable
A All of the above property

B 3 and 4 only
C 1 only
D 4 only (2 marks)

4.35 Who bears the risk of loss to pledged property?
A The pledger always bears the risk of loss or damage regardless of which party has
custody of the pledged property
B The pledgee bears the risk for losses caused by force-majeure
C The pledger bears the risk of accidental loss or damage unless otherwise stipulated
in the contract of pledge
D The pledgee always bears the risk of loss (2 marks)
4.36 Anton owes money to Bella. Catryn telephones Bella and promises to pay her if Anton does
not.
Which of the following statements is true?
A Catryn is a surety and is obligated to pay Bella if Anton does not

B If Anton makes even a partial payment, Catryn is discharged as surety
C The contract of surety is invalid and Catryn is not bound (1 mark)
4.37 Which of the following is a correct statement about bank guarantees?
A The principal pays the guarantor a reward for the issue of the bank guarantee
obligation
B The bank guarantee may be revoked by the guarantor at any time unless otherwise
stipulated
C The guarantor’s obligation is terminated after 60 days
D The beneficiary may transfer his right of claim against the guarantor (2 marks)
4.38 Boris and Selianka agree that Boris will buy Selianka’s house for a specified price. Boris
gives Selianka 5% of the purchase price as earnest money.
Which of the following statements about the earnest money is true?
A Earnest money is security and is in addition to the agreed price

B If Boris changes his mind and does not complete the purchase, Selianka can keep
the earnest money
C If Boris breaches the contract, he must pay Selianka double the amount of the
earnest money
D The amount of earnest money is all that Selianka can ever recover for any loss due
to breach (2 marks)
(66 marks)

MCQs 5 NON-CONTRACTUAL OBLIGATIONS
5.1 Olga gives Anatoly a bicycle as a gift. The bicycle is old and Olga knows its brakes are in
need of repair, although that is not obvious unless one is riding the bike at a high speed.
If Anatoly is injured as a result of the failure of the brakes and brings a claim against
Olga for his injuries, what will be the result?
A Olga will not be liable, because the bicycle was a gift.

B Anatoly’s claim will be successful unless Olga warned him about the brakes when
she gave him the bicycle
C Olga will not be liable because bicycles are inherently dangerous
D Anatoly’s claim will be successful, but he will not be able to collect damages
greater than the value of the bicycle (2 marks)
5.2 In relation to torts, a person is not at fault if he took all possible measures for the
performance of the obligation, taking into consideration which of the following?
A The nature of the obligation and conditions of commerce

B The severity of the damage or injury
C Whether there was an unethical motive (1 mark)
5.3 In which of the following instances might a person who caused damage or injury avoid
paying redress?
(1) He proves that damage was not caused through his fault
(2) The damage has been caused at the request or with the consent of the damaged
person
(3) The damage violates the moral principles of the society
(4) He proves that he lacks the ability to pay
A All of the above

B 1, 2 and 4 only
C 3 and 4 only
5.4 Which of the following statements about tort is true?
A A tort is a civil wrong

B A tort is generally a public offence, for which the law requires monetary
compensation for the damaged party
C Torts can never be criminal acts (1 mark)

5.5 Which of the following conditions must be present simultaneously in order for tortious
liability to arise?
(1) An event of damage

(2) Unlawful conduct of the person who inflicted harm
(3) Causation between the event and the unlawful conduct
(4) Fault, whether intentional or negligent, of the person inflicting harm
A 1, 2 and 3
B 2, 3 and 4
C 1, 2 and 4
D All four (2 marks)
5.6 For which of the following torts would motive be relevant in determining whether the
person committing the act is at “fault”?
A Malicious prosecution
B Battery
C Negligent infliction of emotional distress
D Negligent damage to property (2 marks)
5.7 What is the usual redress or relief for damage caused by a tortious act?
A Injunction
B Monetary damages
C Imprisonment
D Loss of employment (2 marks)
5.8 Anatoly is a truck driver for Odessa Corporation. While making a delivery in a company
vehicle, Anatoly fails to see a stop sign and crashes into Olga’s car, causing damage to Olga’s
vehicle and injuries to Olga.
Which of the following is true about Olga’s rights in this case?
A Olga has a valid claim against Anatoly, but not against Odessa
B Olga has a valid claim against Odessa, but not against Anatoly
C Olga has valid claims against both Anatoly and Odessa
D Olga has valid claims against both, but her claim against Odessa is limited to the
damage to her vehicle (2 marks)
5.9 Anatoly is a truck driver for Odessa Corporation. While making a delivery in a company
vehicle, Anatoly intentionally crashes into Olga’s car causing damage to Olga’s vehicle and
injuries to Olga.
Which of the following is true?
A Anatoly is liable for the tort, but Odessa has no liability

B Anatoly is liable for the tort and Odessa is also liable but only for the vehicle damage
C Odessa has vicarious liability for the vehicle damage and injuries to Olga
C Olga has valid claims against both Anatoly and Odessa for the damage and injuries
(2 marks)

5.10 Which of the following is NOT a term commonly used in the Civil Code in describing
non-contractual liability?
A Negligence
B Trespass
C Libel
D Immorality (2 marks)
5.11 Which of the following is the definition of negligence?
A Damaging the land or property of another

B Failing in a duty of care to another individual
C Using, selling or transporting defective goods
D Causing reputational damage to another (2 marks)
5.12 Ivan is driving his car one afternoon when he accidentally hits a car driven by Anatoly. As a
result of the accident, traffic is held up for hours and Dmitri, who is driving in a car behind
Ivan and Anatoly, is late for work, causing him to lose his job.
If Dmitri brings a claim against Ivan for damages resulting from the accident and the
loss of his job, what is the most likely outcome?
A Dmitri’s claim will be successful because Ivan’s negligent caused damage to Dmitri
B Ivan will not be liable because his car did not strike Dmitri’s car
C Ivan will not be liable because Dmitri’s damages were not a reasonably foreseeable
result of Ivan’s negligence
D Dmitri’s claim will be successful because Ivan’s conduct which inflicted the
damage was unlawful (2 marks)
5.13 The Civil Code details provisions for redress of which of the following?
(1) Damage to property

(2) Injuries to the life or health of an individual
(3) Injuries inflicted by defective goods, works, or services
A 1 only
B 2 only
C 2 and 3 only
5.14 Olga and Anna are the only partners in a law firm. Olga is charged with professional
malpractice by one of the firm’s clients.
Is the partnership liable for Olga’s malpractice?
A No, because to hold the partnership liable would be to punish Anna for Olga’s
negligence
B No, unless Anna was supervising Olga when the malpractice was committed
C Yes, unless Olga’s representation of the client was not directly connected to the
partnership’s practice
D Yes, unless Olga was acting without Anna’s knowledge (2 marks)

5.15 Dmitri crashes his car into the side of Olga’s house. Dmitri carries an insurance policy that
will cover damages up to 500.000 roubles, but the damage to Olga’s house is 750.000 roubles.
What is Olga’s recourse for the additional 250.000 roubles in damages?
A She may bring a claim against Dmitri only to recover the difference
B She may bring a claim against the insurance company only to recover the difference
C She may bring claims against both the insurance company and Dmitri to recover the
difference
D None; since Dmitri is insured, the amount of the insurance is the extent of his
liability and the extent of the insurance company’s liability (2 marks)
5.16 If Oleg is injured in a car accident that is shown to be the result of Anatoly’s negligent
driving, which of the following types of damages may Oleg NOT collect from Anatoly?
A Medical expenses paid by Oleg for his personal injuries

B Lost wages for any time during which he cannot work due to the injuries
C The cost of a special transport vehicle, if Oleg is forced to purchase one as a result
of the injuries
D Punitive damages for Anatoly’s carelessness (2 marks)
5.17 An ammunition manufacturer uses explosive materials in its process. One night, an explosion
occurs in the warehouse, damaging several buildings nearby.
If no definite cause for the explosion can be determined, what will be the likely result in
a claim brought by the owners of the neighbouring building for the damage resulting
from the explosion?
A The manufacturer will not be liable because no negligence was shown on its part
B The neighbours will succeed with their claim because the manufacturer’s use of
explosives is an activity with increased hazards
C The manufacturer will not be liable because the extent of the damage to
neighbouring buildings was not foreseeable
D The neighbours will only succeed if they prove that measures taken by the
manufacturer to prevent damage were lacking (2 marks)
5.18 A toy manufactured by OOO Toy and sold to Ivan by Sonia in Sonia’s toy shop, had a defect
that caused a piece of the toy to snap off, injuring Ivan’s son. None of the parties had been
aware that the toy was defective.
Against whom may Ivan make a claim for his son’s injuries?
A Only against Sonia, because Sonia sold the toy to Ivan

B Only against OOO Toy because it manufactured the toy
C Against either Sonia or OOO Toy
D Against neither, because neither Sonia nor OOO Toy knew of the defect (2 marks)

5.19 A toy manufactured by OOO Toy and sold to Ivan by Sonia in Sonia’s toy shop, had a defect
that caused a piece of the toy to snap off, injuring Ivan’s son. None of the parties had been
aware that the toy was defective.
What would be the likely result if the injury occurred 11 years after the purchase of the
toy?
A Sonia and OOO Toy would still be liable if the established working life of the toy
was more than 11 years
B Sonia and OOO Toy would still be liable even if the working life of the toy had not
been established
C Sonia and OOO Toy would not be liable, because the Civil Code establishes 10
years as the maximum working life for this product
D Only OOO Toy would be liable, because too much time would have passed between
the sale by Sonia and the injury (2 marks)
5.20 Olga is injured when she collides with a bus while on her bicycle. Olga claims her bicycle
brakes failed. The bus driver claims she was travelling in the wrong direction and tried to slip
between the bus and an on-coming car. Olga brings a claim for damages against the bicycle
manufacturer.
Which of the following would absolve the bicycle manufacturer from liability to Olga?
A The accident was the result of a force majeure

B The drivers of the bus and the other car had a higher duty of care with respect to a
bicyclist, like Olga
C Olga was using her bicycle improperly
D Olga’s accident was not foreseeable (2 marks)
5.21 In cases involving claims for moral damage, which of the following will the court take
into account in setting the amount of compensation?
(1) The degree of the responsible person’s guilt

(2) The nature and degree of the moral suffering
(3) The ability of the responsible party to pay the amount of damages suffered
A All of the above
B 1 and 2 only
C 2 and 3 only (1 mark)
5.22 Which of the following is NOT a category of infliction of moral harm recognised by the
Civil Code?
A Injury to life or health caused by ultra-hazardous activity

B Reputational harm caused by defamation
C Injury to integrity caused by misconduct in law enforcement
D Infliction of emotional distress as a result of terrorist activity (2 marks)

5.23 Which of the following are considered in determining the redress of damage?
(1) Earnings (income) lost by the injured person

(2) Medical expenses
(3) Pensions and benefits received by the damaged person
(4) Costs of retraining
A 1 and 2 only
B 1 and 3 only
C 1, 2 and 4 only
5.24 Which of the following is true about the relationship between a debtor and a creditor?
A For a debtor-creditor relationship to exist there must be a contract between the parties
B Debtor-creditor relationships exist between individuals, not between individuals and
legal entities
C When a person inflicts damage on the property of another, the person causing the
damage is the debtor and the person whose property is damaged acts is the creditor
(1 mark)
5.25 Under a contract for carrying passengers, the carrier is obliged to convey passengers to the
destination point and to convey the passengers’ luggage undamaged.
If an accident occurs, resulting in damage to the passenger’s luggage and injury to the
passenger, which of the following is true?
A The carrier does not bear responsibility for damage to the luggage under the
contract with the passenger
B The carrier bears responsibility for injuring the passenger under rules relating to the
infliction of injury or damage
C The carrier does not bear responsibility for injury to the passenger under the
contract with the passenger
D The carrier bears responsibility for damage to the luggage but no responsibility for
injury to the passenger because the passenger assumed a risk of injury (2 marks)
(46 marks)
MCQs 6 EMPLOYMENT LAW
6.1 Which of the following are covered by labour legislation?
(1) Contractors under civil law contracts

(2) Labour relations arising under labour agreements
(3) Relations under civil law contract recognised as labour agreements
(4) Work of members of an organisation’s board of directors
A 1 and 2
B 1 and 4
C 2 and 3
D 3 and 4 (2 marks)

6.2 Yelena recently started her own business as a sole proprietor. She was given the following
advice by a friend:
(1) As a sole proprietor, she is personally liable for all obligations of her business.
(2) She cannot hire other individuals to work for her.
(3) She is a VAT payer.
Which of the above statements are correct?
A 1 only
B 2 only
C 1 and 3 only
6.3 What is a responsibility of an employer in relation to dismissal?
A To pay six months average salary to a chief executive officer

B To pay three months average salary to an employee dismissed on health grounds
C To pay for any holiday accrued which has not been taken (1 mark)
6.4 When Ekaterina received her new labour agreement she noticed that it does not specify the
period of the agreement.
In relation to employment law, what conclusion can she make about the period of her
labour agreement?
A The period of the agreement is not more than five years

B The labour agreement is not valid because a period is not specified
C The period of the agreement is for ten years
D The labour agreement is recognised as concluded for an indefinite period (2 marks)
6.5 Which of the following are mandatory terms of a labour agreement?
(1) Date of beginning of work

(2) Probation terms and period
(3) Schedule of hours
(4) Confidentiality clause
A 1 and 2
B 1 and 3
C 2 and 3
D 3 and 4 (2 marks)
6.6 Which of the following statements about a fixed term labour agreement is true?
A The burden of proof that an agreement is for a fixed term is on the employer
B Fixed term labour agreements can only be mandatory
C Terms of an agreement don’t have to be in writing
D It does not have to specify the reason for its conclusion (2 marks)
6.7 In relation to mandatory fixed term agreements, which of the following statements is true?
A They are concluded with employees working in the Far North regions
B They are required for individuals under the age of 21
C They are concluded with creative employees of mass media
D They are concluded with individuals hired to temporarily replace an employee
(2 marks)

6.8 On which date does a labour agreement come into effect?
A When it is signed by the employee

B When the employer and employee verbally agree on its terms
C When the employee has access to work and starts working
D When it is signed by the employer and employee (2 marks)
6.9 In relation to a labour agreement, which of the following statements are correct?
(1) If the agreement does not stipulate a start date, the employee can choose a date
(2) A labour agreement which is terminated is deemed not concluded for an employee
(3) Russian law cannot stipulate an effective date of a labour agreement
(4) The employee is obliged to start working on the day set by the labour agreement
A 1 and 2
B 1 and 4
C 2 and 3
D 2 and 4 (2 marks)
6.10 Elise works in a manufacturing plant and has been placed on probation in accordance with her
labour agreement.
What is the maximum period that Elise would be on probation?
A Maximum of three months

B Maximum of six months
C Maximum of one year
D Maximum of eighteen months (2 marks)
6.11 Sergey is the chief executive officer of OOO Automotive and has been placed on probation in
accordance with his labour agreement.
What is the maximum period that Sergey would be on probation?
A Maximum of three months

B Maximum of six months
C At least one year
D At least 18 months (2 marks)
6.12 Which of the following are correct about the employer’s rights if the employee on
probation has poor performance?
(1) Employer cannot dissolve the labour agreement without trade union approval
(2) Employer may dissolve the labour agreement without severance pay
(3) Employer may dissolve the labour agreement before the end of the probation
(4) Employer must notify the employee in writing at least five days before termination
A 1 and 2
B 1 and 4
C 2 and 3
D 3 and 4 (2 marks)

6.13 For which of the following categories of workers is probation NOT allowed?
(1) Expectant mothers

(2) Persons transferred from another job
(3) Mothers with children up to 24 months of age
(4) Persons hired up to 12 months
A 1 and 2
B 1 and 4
C 2 and 3
D 3 and 4 (2 marks)
6.14 In relation to labour books, which of the following is true?
A The labour book must be kept for any employee employed for more than one day
B The employee is responsible for updating the labour book
C Disciplinary sanctions are only recorded in the event of a dismissal
D The labour book is used to track hours worked each week (2 marks)
6.15 Which of the following are grounds for termination under the Labour Code?
(1) Enlistment of an employee to the army

(2) Employee age
(3) Employee divorce
(4) Refusal to transfer to a different position because of a medical condition
A 1 and 2
B 1 and 4
C 2 and 3
D 3 and 4 (2 marks)
6.16 Alena overslept and did not arrive at work on the start date stipulated in her labour agreement.
What are the consequences?
A The labour agreement can be terminated

B She will need to arrive at work on the following day to preserve her agreement
C She will be placed on probation
D She will have to request modification to her start date (2 marks)
6.17 Which of the following statements about the options available at the expiry of a fixed-
duration agreement is true?
A Labour agreement can be cancelled and employee dismissed with 2 day notice
B Renewal of agreement must have same terms as expired agreement
C Fixed duration agreements cannot be replaced with an indefinite term agreement
D Renewal of agreement can have revised terms with mutual consent of parties
(2 marks)
6.18 Misha is unhappy with her current job and wishes to terminate her labour agreement.
Which of the following is the option for her?
A Leave immediately without a risk of breach of contract

B Give two weeks verbal notice
C Leave upon expiry of a two week written notice period
D Provide a written notice with the knowledge that it cannot be withdrawn (2 marks)

6.19 Which of the following is a ground for termination of employment at the employer’s
initiative?
A Employee reaching age of 65

B Extended illness of employee
C Marriage to co-worker
D Breach of confidentiality (2 marks)
6.20 In relation to the termination of labour agreements, which of the following statements
about redundancy are true?
(1) Employer must verbally notify employees at least six months before dismissal
(2) Employer must notify in writing at least six months before dismissal
(3) Employees must first be offered another job available in the same organisation
(4) With no alternative work the employee has a right to one month of severance pay
A 1 and 2
B 1 and 4
C 2 and 3
D 3 and 4 (2 marks)
6.21 In relation to dismissing an employee, which of the following is correct?
A Employees can never be dismissed while on vacation

B Single parent mothers are protected from dismissal
C Criminal sanctions against illegal dismissal include fines (1 mark)
6.22 Alek started work with his new employer on 1 December.
Within how many days must his employer finalise his labour agreement?
A One
B Three
C Ten (1 mark)
6.23 What is the result of a provision in a labour agreement that is to the detriment of an
employee?
A Deemed invalid
B Must be appealed by the employee
C Must be appealed by the trade union (1 mark)
6.24 In relation to the labour agreement, what terms does it contain?
A Express terms only

B Only implied terms from the Labour Code
C Express terms and implied terms (1 mark)
6.25 What is a requirement for amending a labour agreement?
A Terms may be amended in writing only

B Terms cannot be amended once they are established
C Terms can only be amended upon expiry of a fixed duration labour agreement
(1 mark)

6.26 Which of the following is a reason to use a mandatory fixed-term agreement?
A Employee is working in the Far North region

B To perform works directly linked with training
C Employee has a health condition and may only work temporarily (1 mark)
6.27 Kostya is 17 years old and looking for a job.
Which of the following jobs will Kostya NOT be able to conclude?
A Job that may damage his morals

B Job that requires him to work after midnight
C Job that requires him to work with children (1 mark)
6.28 Which of the following is a true statement about the termination of employment of a
chief executive officer (CEO)?
A In bankruptcy, the CEO must be replaced in accordance with rules of bankruptcy

legislation
B CEO is entitled to severance pay if not guilty of misconduct
C Other executive officers can make the decision to terminate a CEO (1 mark)
(47 marks)
MCQs 7 PARTNERSHIPS
7.1 Lev and Vas entered into a partnership to sell the rights to the video game they developed.
Which statement about the partnership is true?
A Lev and Vas will have limited liability

B The partnership is a commercial organisation
C The partnership will not have general contractual capacity (1 mark)
7.2 Which of the following entities have limited liability for obligations?
A Individual entrepreneur
B Full partner in a general partnership
C Investor in a limited partnership (1 mark)
7.3 Which of the following is NOT regarded as a legal entity?
A Limited partnership
B Company
C Simple partnership (1 mark)
7.4 In which type of partnership do partners exclusively have the rights and duties?
A Full partnership
B Simple partnership
C Limited partnership (1 mark)

7.5 Which of the following is a right or obligation of a silent partner?
A Share in partnership profits

B Management of the partnership
C Jointly bear liabilities of the partnership (1 mark)
7.6 Which of the following statements about partnerships are true?
(1) The partners completely lose their rights of ownership to their property when it is
transferred to the partnership
(2) Property transferred by the partners to the partnership is deemed to be owned by the
partnership and the partners
(3) Partners have limited rights in property acquired by the partnership
(4) In exchange for ownership rights to property, partners acquire rights of obligation
A 2 only
B 3 only
C 1 and 4
D 3 and 4 (2 marks)
7.7 In relation to partnership, rights of obligation include which of the following?
A Right to own property

B Right of estate
C Right to limited liability
D Right to receive a share of profits (2 marks)
7.8 Catrina started a business on her own. She has full liability and recently employed three
individuals.
Which of the following describes her form of business?
A Full partnership
B Limited partnership
C Sole proprietor (1 mark)
7.9 Evelina, Ilya and Kora are general partners in a partnership. The partnership borrowed
20.000 roubles from a bank.
In relation to this partnership, which is a correct statement?
A All partners cannot be sued

B The partners do not have to register as individual entrepreneurs
C The partnership must be a limited partnership
D Individual partners can be sued if others are unable to pay (2 marks)

7.10 Which of the following statements about partnerships are correct?
(1) A person may act as a full partner in more than one limited partnership
(2) A full partner in a limited partnership cannot participate in an unlimited partnership
(3) A participant of an unlimited partnership cannot be a full partner in a limited partnership
(4) Unlimited partnership cannot have less than three partners
A 1 and 2
B 1 and 4
C 2 and 3
D 3 and 4 (2 marks)
7.11 What happens when the withdrawal of a partner leaves the partnership with only one
partner?
A The one remaining partner has full liability for all obligations of partnership
B Partnership must be liquidated or reorganised into a limited liability company
C Partnership can continue until a new partner is found
D The one remaining partner immediately becomes a sole proprietor (2 marks)
7.12 In relation to joint capital, which of the following is true?
A The only way a partnership can get more capital is to get a new partner
B Minimum capital for a partnership is fixed by law
C Minimal capital is declared in the partnership agreement
D Each general partner must put in his entire contribution by registration (2 marks)
7.13 Irene and Chenka will be full partners in a limited partnership with five people. Fanya is an
investor in the partnership.
What is a consideration when choosing a name for the partnership?
A The names of all participants must be included in the business name

B Fanya’s name must be included in the business name of the partnership
C If Fanya’s name is included, she immediately becomes a full partner
D There are no restrictions on choosing a business name (2 marks)
7.14 What is the only document required to be found in a partnership?
A Charter
B Participant’s agreement
C Foundation agreement
D Statutory agreement (2 marks)
7.15 Which of the following regards partnerships are correct?
(1) One partner is able to bind the partnership and other partners
(2) A simple partnership agreement creates a legal entity
(3) Only partnership profits can be distributed on a pro rata basis
(4) Partnership profits and losses can be distributed on a pro rata basis
A 1 and 2
B 1 and 4
C 2 and 3
D 2 and 4 (2 marks)

7.16 Which of the following lead to termination of a partnership agreement?
(1) Retirement of one partner

(2) Addition of a partner
(3) Death of any partner
(4) Refusal of a partner to participate
A 1 and 2 only
B 3 and 4 only
C 1, 3 and 4 only
D 1, 2, 3 and 4 (2 marks)
7.17 What happens when a limited partnership is liquidated?
A The limited partners have no rights to investments in liquidation

B In event of failure general and limited partners have full liability for claims
C The limited partners are returned their investments before the general partners
D Any remaining property is distributed between general partners (2 marks)
7.18 In relation to partnership formation, which of the following is true?
A A founding contract for a partnership can be verbal

B A simple partnership is regarded as a juridical person
C The partners of a simple partnership do not have rights and duties
D A limited partnership can become subject to rights and duties (2 marks)
(30 marks)
MCQs 8 LEGAL PERSONALITY AND COMPANY FORMATION
8.1 Where in the Civil Code is the classification of legal entities concerned?
A Under the principles of the civil legislation

B Under commercial and non-profit organisation
C Under the basic provisions on the limited liability company (1 mark)
8.2 What information must be contained in the company register of a limited liability
company (LLC)?
A Shares owned by the company itself

B Shareholder age
C Order of founders’ joint activity on creating the LLC (1 mark)
8.3 Which of the following statements describes the model of legal entity used for state-
owned legal entities?
A It is the same as the model used for partnerships

B The founder remains the owner of property transferred to the legal entity
C The founder has no rights in property acquired by the legal entity
D The model used for state-owned legal entities is also used for unions (2 marks)
8.4 Which of the following are commercial legal entities?
(1) Production co-operatives

(2) Partnerships
(3) Consumption co-operatives
(4) Public organisations

A 1 and 2
B 1 and 4
C 2 and 3
D 3 and 4 (2 marks)
8.5 In relation to non-commercial legal entities, which of the following is true?
A Gained profit can be distributed among participants in the entity

B Unitary enterprises are non-commercial legal entities
C They have the right to carry out entrepreneurial activity under any condition
D They can carry out entrepreneurial activity by meeting certain conditions (2 marks)
8.6 Sergey started a charitable organisation that helps sick children.
Which of the following statements are true?
(1) The charity will have general contractual capacity

(2) Sergey possesses property rights for the charity
(3) The charity will have restricted contractual capacity
(4) After liquidation of the entity, Sergey has no rights to remaining property
A 1 and 2
B 1 and 4
C 2 and 3
D 3 and 4 (2 marks)
8.7 Which statement about companies is true?
A They may only set-up in defined form

B They have restricted contractual capacity
C Gained profit is not distributed among participants
D Participants have unlimited liability (2 marks)
8.8 Which of the following can be described as “public” or “non-public”?
A Limited liability companies

B Joint-stock companies
C Partnerships
D Production co-operatives (2 marks)
8.9 Which of the following are essential characteristics of a public company?
(1) A joint-stock company

(2) Entitlement to place shares by public offering
(3) Charter indicates that the company is public
(4) Corporate name indicates that the company is public
A 1 only
B 1 and 2 only
C 1, 2 and 3 only
D 1, 2, 3 and 4 (2 marks)

8.10 Which of the following measures to help protect minority shareholders are mandatory
requirements for a public company?
(1) A collective management body with at least five members

(2) Freedom to alienate shares without having to obtain any consent
(3) Defining shareholders’ rights non-proportionally to their stakes in the company
A 1 only
B 2 only
C 1 and 2 only
8.11 Which of the following are characteristics of a non-public company?
(1) Unlimited number of shareholders

(2) No more than 75 shareholders
(3) Public offerings are prohibited
(4) Shareholders rights may be disproportionate to their stakes in the company
A 1 and 2
B 1 and 4
C 2 and 3
D 3 and 4 (2 marks)
8.12 The chief executive office of a company had died, but the company continues to exist.
What one of the following terms describes this characteristic of a company?
A Corporate veil
B Unlimited liability
C Insolvency
D Perpetual succession (2 marks)
8.13 Fedor consulted with an advisor to determine whether the legal form of his business
should be a company or partnership.
(1) He was told that legal capacity is dictated by a company’s charter

(2) He was told that his personal assets are protected in either legal form
(3) He was told he would relinquish rights to assets in either legal form
Which of the above is good advice?
A 1 only
B 1 and 3 only
C 2 only
8.14 Who is liable for contracts entered into by companies?
A Owners of the company

B Directors of the company
C The company itself
D Those holding power of attorney (2 marks)

8.15 In relation to limited liability companies, which of the following statements is true?
A Shareholders bear risk of loss to extent of their contributions

B The company bears liability for its shareholder debts
C Shareholders are never liable for company obligations (1 mark)
8.16 Which of the following is in charge of maintaining records of shares and their nominal
value of a company?
A Shareholders
B State Register
C There is no requirement (1 mark)
8.17 Which document must be submitted to set-up a new company?
A Receipt confirming payment of the registration fee

B List of all property that will be owned by the company
C List of identified customers for company (1 mark)
8.18 What is considered the moment of creation for a company?
A The date it submits its application to the State Register

B The date it is entered into the State Register
C The date is begins its business activities (1 mark)
8.19 Which of the following information should be contained in the charter of a limited
liability company?
A Type of company (public or non-public)

B Rights of holders of each category of shares
C Procedure of transferring ownership of shares (1 mark)
8.20 Which of the following sets out the exercise of rights vested in shares?
A Charter
B Shareholder agreement
C Foundation agreement (1 mark)
(32 marks)
MCQs 9 VOLUNTARY REPRESENTATION
9.1 Which of the following statements about representation is true?
A An executor of an estate acting on his own behalf is not regarded as a representative

B A person with authority to make decisions on future transactions is a representative C
Representation describes the execution of any actions on behalf of another (1 mark)
9.2 Which of the following is a characteristic of representation?
A A representative acts on behalf of himself and the representee

B The representative has the flexibility to act outside of his powers
C The representee acquires contractual rights from decisions made by representative
(1 mark)

9.3 Which of the following is a relationship where the agent performs transactions, other
legal actions and actions that do NOT entail legal consequences for the principal?
A Contract of mandate
B Contract of commission
C Power of attorney
D Contract of agency (2 marks)
9.4 In relation to power of attorney, which of the following statements are true?
(1) It is a written authorisation

(2) It must be notarised
(3) Issuance and acceptance of power of attorney is one transaction
A 1 only
B 1 and 2 only
C 1 and 3 only
9.5 For what term may a power of attorney be issued?
A A period not exceeding one year

B A period not exceeding three years
C For any period (1 mark)
9.6 Before undergoing surgery, Vas gave his sister, Natasha, power of attorney over his finances.
The power of attorney did not specify a validity period but was issued on 15 March 2017.
Without a specified validity period, when would the power of attorney expire?
A Without a specified validity time, it is invalid

B 15 March 2018
C 15 March 2020
D Never (2 marks)
9.7 In relation to the power of attorney, which of the following could lead to its termination?
(1) Person who granted power of attorney relocates outside the Russian Federation
(2) Death of the person to whom the power of attorney has been granted
(3) Refusal on the part of the person to whom it has been granted
A 2 only
B 3 only
C 2 and 3 only
9.8 What is the maximum period for which a contract of commission can be concluded?
A One year
B Three years
C Five years
D An indefinite period (2 marks)

9.9 Which of the following terminates a contract of commission?
A Insolvency of the principal

B Death of the principal
C Abandonment by the agent
D Legal incapacity of the of the principal (2 marks)
9.10 In relation to a contract of commission, which of the following statements are true?
(1) An agent may abandon a contract with 15 days prior notification to the principal
(2) The commissioner never has the obligation to bear the liability to the principal
(3) The principal is obliged to pay a commission fee to the commissioner
(4) Commissioner can demand compensation for losses in certain circumstances
A 1 and 2
B 1 and 4
C 2 and 3
D 3 and 4 (2 marks)
9.11 In the case of the insolvency of the agent, what happens to the rights and obligations
committed on behalf of the principal?
A They are voided

B They pass to the principal
C They pass to another agent
D It is the decision of the arbitration court (2 marks)
9.12 Under the contract of mandate, how many parties commit to perform legal actions on
behalf of a principal?
A Only one
B At least two
C At least three (1 mark)
9.13 The rules and representation for a contract of mandate are most similar to which of the
following?
A Contract of agency
B Contract of commission
C Power of attorney
D Partnership (2 marks)
9.14 In relation to a contract of mandate, which of the following is true?
A The principal cannot revoke the mandate

B The principal must compensate for the agent’s costs
C A contract of mandate is only terminated by the death of the principal
D A power of attorney is not necessary (2 marks)
(24 marks)

MCQs 10 CAPITAL AND FINANCING OF COMPANIES
10.1 What is the minimum statutory capital for a non-public company?
A 1.000 roubles
B 10.000 roubles
C 100.000 roubles (1 mark)
10.2 What is the minimum statutory capital for a public company?
A 1.000 roubles
B 10.000 roubles
10.3 Dima has been told the following about joint-stock companies and limited liability
companies:
(1) Both can have different types of shares

(2) There is a minimum statutory capital requirement for both
(3) Owners of a limited liability company are called participants
Which of the above is correct?
A 1 only
B 1 and 2
C 2 and 3
D 3 only (2 marks)
10.4 In relation to the statutory capital of a non-public joint-stock company, which of the
following statements is true?
A 75% of shares are to be paid up within three months after state registration
B Shares not paid up by the deadline do not accrue a dividend
C Property contributed must be evaluated by consent of the founders
D Founders’ shares immediately carry a right to vote (2 marks)
10.5 By when must the minimum amount of statutory capital of a public joint-stock company
be fully paid?
A Prior to registration
B Within three months of operations
C Within six months of operations
D Within one year of operations (2 marks)
10.6 The decision of the general meeting of shareholders taken by a majority of 75% of votes,
unless a greater majority is stipulated by the charter, is required to place which of the
following shares?
A All shares placed by open subscription

B Ordinary shares which constitute more than 25% of ordinary shares already placed
C Preference shares which constitute more than 25% of preference shares already
placed
D Registered securities convertible into ordinary shares, which constitute more than
15% of ordinary shares already placed (2 marks)

10.7 Which of the following may place shares by open subscription?
(1) A limited liability company

(2) A public joint-stock company
(3) A non-public joint-stock company
A 1 only
B 2 only
C 2 and 3 only
10.8 Which of the following, subject to evaluation, may be contributed in payment for shares
in a limited liability company?
(1) A building
(2) Shares in another company
(3) A trademark
(4) A trade receivable
A 1 only
B 1 and 2 only
C 1, 2 and 3 only
D 1, 2, 3 and 4 (2 marks)
10.9 In relation to a non-public company, which of the following statements about the pre-
emptive right to acquire shares are true?
(1) Rights extend to any shares placed by closed subscription without restrictions
(2) A person with pre-emptive rights must exercise those rights
(3) Rights are granted to shareholders pro rata to shares already in their possession
(4) If payment in-kind is allowed, investors with pre-emptive rights can purchase
additional shares with money
A 1 and 2
B 1 and 4
C 2 and 3
D 3 and 4 (2 marks)
10.10 A joint-stock company plans to place additional shares to those enjoying priority rights at a
price of 1.000 roubles.
Within how may days must shareholders with the right be notified?
A 10 days
B 20 days
C 30 days
D 45 days (2 marks)
10.11 A joint-stock company plans to place additional shares to those enjoying priority rights. The
price of the shares will be determined after the termination of the priority rights.
Within how may days must shareholders with the right be notified?
A 10 days
B 20 days
C 30 days
D 45 days (2 marks)

10.12 The statutory capital of a limited liability company has been paid in full.
Which of the following can be used to increase the company’s statutory capital?
(1) The company’s assets

(2) Additional contributions from participants
A 1 only
B 2 only
C Both 1 and 2
D Neither 1 nor 2 (2 marks)
10.13 After two years of trading the net assets of a joint-stock company are less than the statutory
capital.
What must the company do?
A Be reorganised or liquidated
B Offer additional shares to those with pre-emptive rights
C Pay all creditors (1 mark)
10.14 A general meeting of shareholders decides to reduce the par value of the company’s shares.
When must a statement of reorganisation be published?
A Once – within three days

B Twice – within 30 days
C Twice – within 45 days
D Once – within 60 days (2 marks)
10.15 The share capital of a joint-stock company is to be increased by increasing the par value
of shares.
Who must adapt this decision?
A A majority of the board of directors

B The board of directors, unanimously
C A majority of the general meeting of members
D The general meeting, unanimously (2 marks)
10.16 Increasing share capital for the sole purpose of dealing with losses is which of the
following?
A Prohibited in all circumstances

B Allowed if approved by the board of directors
C Allowed if stipulated in the charter
D Permitted by the Civil Code (2 marks)
10.17 Which of the following statements about the reserve fund of a joint-stock company are
true?
(1) It cannot be less than 5% of the statutory capital

(2) It can be used for redemption of loan capital
(3) It can be sued to purchase own shares
(4) It can be used for payment of dividends

A 1 only
B 1 and 2 only
C 1, 2 and 3 only
D 1, 2, 3 and 4 (2 marks)
10.18 Which of the following statements about the net assets of a joint-stock company is true?
A Net assets can be less than minimum size statutory capital without consequences
B Net assets are increased by borrowed funds to be paid back
C The amount of net assets may differ from the value of property owned (1 mark)
10.19 What is the maximum number of participants in a limited liability company?
A 30
B 50
C 75 (1 mark)
10.20 Alisa is a participant in a limited liability company.
Which of the following rights does she have?
A To have access to the company’s books and records

B To make changes to the charter
C To increase the statutory capital (1 mark)
10.21 What is the maximum par value of preference shares in a joint-stock company in
relation to its statutory capital?
A 10%
B 20%
C 25% (1 mark)
10.22 Which of the following statements about shares is true?
A Preference shares can be converted into bonds or other securities

B There can be different categories of ordinary shares
C Each category of preference shares have the same par value (1 mark)
10.23 Which of the following refers to the exercise of the special right of the Russian
Federation or a subject of the Russian federation?
A Golden share
B Pre-emptive right
C Preference share (1 mark)
10.24 Which of the following statements about the acquisition of more than 30% of the total
number of ordinary or preference shares for a joint-stock company is true?
A Acquisition of more than 30% by one person is not permitted

B A public offer to acquire must be submitted to the owners
C There is only a voluntary offer to acquire shares (1 mark)
(38 marks)

MCQs 11 COMPANY MANAGEMENT AND ADMINISTRATION
11.1 Which of the following may be described as the “supreme body” of commercial
organisations?
A Board of directors
B Supervisory council
C General meeting of shareholders (1 mark)
11.2 Joint-stock companies may be public or non-public.
Which joint-stock companies are required to have a board of directors?
A Neither public nor private companies

B Only public companies
C Both public and private companies (1 mark)
11.3 Which of the following terms describes a transaction that is NOT within the terms of
reference of a company’s charter?
A Intra vires
B Ultra vires
C Void (1 mark)
11.4 For what period is a member of a board of directors appointed?
A One year
B Two years
C Five years (1 mark)
11.5 Which of the following statements about members of the executive body of a company
are true?
(1) A limited liability company can be a member for a joint-stock company

(2) Agreements concluded with members are labour contracts
A 1 only
B 2 only
C Both 1 and 2
11.6 A director can do which of the following?
A Act on behalf of the company with a power of attorney

B Sign all documents on behalf of the company
C Establish remuneration of the executive body (1 mark)
11.7 When a company incurs a loss through the fault of a member of the board of directors,
who may file a suit against that member?
A Any participant if it is a limited liability company

B Any shareholder if it is a joint-stock company
C A suit cannot be filed against an individual member (1 mark)

11.8 What is the maximum term of a fixed-term labour contract under the Labour Code?
A One year
B Two years
C Three years
D Five years (2 marks)
11.9 Which of the following are interested persons if they are involved in a transaction with a
joint-stock company?
(1) Any shareholder of the company

(2) Shareholders possessing at least 10% of the voting shares
(3) Members of the board of directors
(4) Persons who can give instructions which bind the company
A 1 and 2
B 1 and 4
C 2 and 3
D 3 and 4 (2 marks)
11.10 Which of the following is a transaction in which there is an interest?
(1) Acquisition and redemption of shares previously issued by the company

(2) A transaction between the company and a member of the board of directors
(3) A transaction between the company and two sisters who each own 10% of the
company’s shares
A 1 only
B 1 and 2 only
C 2 and 3 only
D 3 only (2 marks)
11.11 In relation to approval of interested party transactions where there are 1.000 or more
holders of voting shares in the company, which of the following is true?
A The decision is made by board of independent directors

B The decision is made by general director
C The decision is made by executive management
D Interested party transactions are not allowed (2 marks)
11.12 Which of the following are correct about interested party transactions?
(1) They are prohibited when there are 1.000 or more holders of voting shares
(2) Approval is needed by the general meeting for placement of new shares comprising
at least 5% of issued shares
(3) General meeting must approve transactions where all directors are interested parties
(4) The charter may place restrictions on interested party transactions
A 1 only
B 2 and 4
C 2 and 3
D 3 and 4 (2 marks)

11.13 PAO Premium Electronics is considering an acquisitions of PAO Cellular, whose value is 20%
more than the book value of the assets of PAO Premium Electronics on it last reporting date.
Which of the following statements about the transaction is true?
A It is a major transaction
B It is not a major transaction
C It is a transaction in which there is an interest
D It must be approved by the board of directors unanimously (2 marks)
11.14 PAO Green Builders is considering an acquisitions of PAO Blue Builders, whose value is 25%
more than the book value of the assets of Green Builders on it last reporting date.
Which of the following statements are correct?
(1) It must be approved by the board of directors unanimously

(2) A three-quarter majority of holders of voting shares must approve
(3) It must be approved by majority of board of directors
(4) It is a major transaction
A 1 and 2
B 1 and 4
C 2 and 3
D 3 and 4 (2 marks)
11.15 Iosif is a director on the board of directors of OOO Ignite.
Which of the following rights does he have as a board member?
(1) To receive information about the company’s business

(2) To review accounting documentation
(3) To challenge transactions that may be harmful to the company
(4) To initiate a claim against officers for personal financial loss caused by their actions
A 1 only
B 1 and 2 only
C 1, 2 and 3 only
D 1, 2, 3 and 4 (2 marks)
11.16 An internal audit commission is mandatory for a limited liability company with more
than how many participants?
A 5
B 10
C 15
D 20 (2 marks)
11.17 JT Global is the external auditor of:
(1) OOO Alpha, a limited liability company

(2) OOO Beta, a non-public joint-stock company
(3) PAO Gamma, a public joint-stock company
For which of these audit clients may JT Global also act as the internal audit
commission?

A None of them
B 1 only
C 1 and 2 only
D All three (2 marks)
11.18 Which of the following are rights of the internal audit commission?
(1) Approve financial statements

(2) Approve positions of executive management
(3) Call an extraordinary general meeting
(4) Not to be independent of the company
A 1 and 2
B 1 and 4
C 2 and 3
D 3 and 4 (2 marks)
11.19 An obligatory audit is required for which of the following?
(1) Public joint-stock companies

(2) Non-public joint-stock companies
(3) Limited liability companies
(4) Banks
A 1 only
B 1 and 4 only
C 1, 2 and 4 only
D 1, 2, 3 and 4 (2 marks)
11.20 The external auditor has primary responsibility to which of the following?
A Employees
B Shareholders
C Board of directors
D Internal audit commission (2 marks)
(34 marks)
MCQs 12 COMPANY MEETINGS
12.1 Maarav is a shareholder in a company.
A He cannot attend an extraordinary general meeting

B He can vote on the appointment of the internal audit commission
C He represents the company’s interest (1 mark)
12.2 Which of the following is the supreme management body of a joint-stock company?
A The executive management

B The board of directors
C The general meeting of shareholders (1 mark)

12.3 A company has a financial year end of 31 December 2017.
Which of the following would be an acceptable date for the company to hold its annual
general meeting?
A 31 January 2018
B 31 March 2018
C 31 July 2018 (1 mark)
12.4 Alexei owns 15% of the shares of OOO Mittens. Dimitri owns 9% of the shares of OOO
Mittens.
Who is able to call an extraordinary general meeting of OOO Mittens?
A Alexei
B Neither Alexei or Dimitri
C Both Alexei and Dimitri acting individually
D Alexei and Dimitri if acting together (2 marks)
12.5 For which of the following reasons may a request for an extraordinary general meeting
be refused by a board of directors?
A The internal audit commission does not approve the request

B The procedure for filing the request has not been observed
C The meeting has been requested for a date that is not within a specified time limit
(1 mark)
12.6 In relation to joint-stock companies, which body is entirely responsible for preparing an
extraordinary meeting?
A Company’s executive body

B Board of directors
C Internal audit commission (1 mark)
12.7 In relation to a general meeting of a joint-stock company, by what means can a

shareholder exercise his right of participation?
A Only in person
B Only through a representative
C Both in person and through a representative (1 mark)
12.8 Who sets the date on which the list of shareholders entitled to participate in a general
meeting will be compiled according to the register?
B Executive management
C Internal audit commission
D External auditor (2 marks)
12.9 Viktor holds 0.5% of the shares of OOO Table. Regina holds 2% of the shares of OOO
Table. Regina’s spouse, Leonid, is a member of the board of directors, but not a shareholder,
of OOO Table.
Who may inspect the list of shareholders entitled to participate in the general meeting?

A Viktor, Regina and Leonid

B Viktor and Regina only
C Regina and Leonid only
D Regina only (2 marks)
12.10 Which form of voting allows for a shareholder to receive a ballot in advance and then
either send a completed ballot or vote in person?
A Absentee voting
B Ballot voting
C Mixed voting
D Voting in presence of shareholders (2 marks)
12.11 In relation to the general meeting of shareholders, when may postal voting be adopted?
A For any general meetings

B For annual general meetings only
C For extraordinary general meetings only
D It is not permitted (2 marks)
12.12 In which of the following ways can shareholders be informed of a general meeting?
(1) Written notice without acknowledged receipt

(2) Registered mail
(3) E-mail
(4) Publication in printed mass media
A 1 and 2
B 1 and 3
C 2 and 3
D 2 and 4 (2 marks)
12.13 The agenda for the general meeting of OOO Concrete contains an issue relating to the
reorganisation of its operations. The board of directors would like to hold the general meeting
on 31 March 2018.
What is the latest date by which shareholders should be informed of the general
meeting?
A 20 February 2018
B 1 March 2018
C 11 March 2018
D 15 March 2018 (2 marks)
12.14 A joint-stock company has 250 shareholders.
How many persons must be on the counting (tabulation) commission?
A Not less than two

B Not less than three
C Not less than five
D There is no minimum (2 marks)

12.15 OOO Pupsik has 600 shareholders holding voting shares.
Who may perform the functions of the tabulation commission for OOO Pupsik?
A Internal audit commission

B Board of directors
C Company’s registrar
12.16 For which of the following is cumulative voting allowed?
A Appointment of external auditor

B Approval of annual financial accounting reports
C Payments of dividends
D Electing members to the board of directors (2 marks)
12.17 What is the minimum aggregate of voting share must take part in a postal vote for a
decision to be recognised as valid?
A 20%
B 25%
C 50%
D 75% (2 marks)
12.18 OOO Transportation is a limited liability company that is planning to hold its general meeting
on 31 August 2017.
By which date must participants of the limited liability company be notified of the
general meeting?
A 21 June 2017
B 30 June 2017
C 1 August 2017
D 15 August 2017 (2 marks)
12.19 In relation to a limited liability company, minutes of the general meeting must be sent to
participants within how many days of their preparation?
A 10 days
B 15 days
C 20 days
D 30 days (2 marks)
12.20 In relation to the board of directors of a public company, which of the following
statements are correct?
(1) After serving one elected term, a director cannot be elected for another term
(2) A board director can be a shareholder
(3) The board of directors may not be less than five members
(4) Minutes of the board of directors meeting are drawn up within 10 days of meeting
A 1 and 3 only
B 2 and 3 only
C 2, 3 and 4 only
D 1, 2, 3 and 4 (2 marks)

12.21 Which of the following are exclusive powers of the general meeting of shareholders of a
joint-stock company?
(1) Appointment of the board of the directors

(2) Adopting the company’s annual financial statements
(3) Approval of the agenda of the general meeting
(4) Approval of a purchase transaction with a value that is 30% of the value of the
company’s assets
A 1 and 2 only
B 1 and 4 only
C 2, 3 and 4 only
D 1, 2, 3 and 4 (2 marks)
(36 marks)
MCQs 13 INSOLVENCY LAW
13.1 In which type of bankruptcy is an organisation deemed insolvent by arbitration court

ruling?
A Compulsory liquidation only

B Voluntary liquidation only
C Both compulsory liquidation and voluntary liquidation (1 mark)
13.2 When does a debtor’s petition to an arbitration court to be declared bankrupt give rise
to spurious bankruptcy?
A When the debtor is fully able to meet the creditors’ claims

B When the debtor has been unable to meet the creditors’ claims for three months
C When the debtor has been unable to meet the creditors’ claims for six months
(1 mark)
13.3 In relation to bankruptcy of legal entities, creditors’ claims must amount to how much
in the case of an individual entrepreneur?
A 1.000 roubles
B 10.000 roubles
13.4 In relation to bankruptcy of legal entities, creditors’ claims must amount to how much
in the case of a legal entity?
A 1.000 roubles
B 10.000 roubles
13.5 In identifying symptoms of bankruptcy, which of the following are taken into account?
A Liabilities on royalty payments

B Liabilities for fines
C Liabilities for rents (1 mark)

13.6 In the case of voluntary liquidation of an insolvent company, who acts on behalf of the
legal entity?
B External auditor
C Liquidation commission (1 mark)
13.7 For a limited liability company, who decides on the appointment of the liquidation
commission?
A Participants
B Founders
C Board of directors (1 mark)
13.8 For a joint-stock company, who decides on the appointment of the liquidation
commission?
B Executive management
C Shareholders
13.9 OOO Flounder made a declaration of bankruptcy and liquidation in the newspaper on 31
January 2018.
What is the FIRST deadline for submission of claims?
A 15 February 2018
B 1 March 2018
C 15 March 2018
D 31 July 2018 (2 marks)
13.10 Which of the following statements about the distribution of an insolvent entity’s assets is
true?
A The external auditor must produce a liquidation balance

B If an entity is insolvent, its assets are liquidated by public sale
C After settlement to creditors the first priority is pro rata shares to statutory capital
D The internal audit commission must produce a liquidation balance (2 marks)
13.11 Which one of the following can apply to the arbitration court for bankruptcy
adjudication?
(1) Creditor
(2) Shareholder
(3) Prosecutor
(4) Debtor
A 1 only
B 2 only
C 2, 3 and 4

13.12 In relation to company insolvency, which of the following events results in the dismissal
of the company’s managerial bodies?
(1) Introduction of observation

(2) Appointment of an interim manager
(3) Introduction of external manager
(4) Appointment of a receiver
A 1 and 2
B 2 and 3
C 3 and 4
D 1 and 4 (2 marks)
13.13 All actions concerning an insolvent debtor are taken on behalf of the creditors by which
of the following?
A Arbitration manager
B The receiver
C Liquidation commission
D Creditor’s committee (2 marks)
13.14 In relation to company insolvency, which of the following convenes the creditors’
meeting?
A Arbitration manager
B Creditor’s committee
C Liquidation commission
D Shareholders (2 marks)
13.15 In relation to company insolvency, what are minimum and maximum numbers of
members on the creditors’ committee?
Minimum Maximum
A 5 10
B 3 11
C 5 15
D 3 12 (2 marks)
13.16 What is the minimum total number of creditors that may form a creditors’ committee?
A 10
B 25
C 50
D 75 (2 marks)
13.17 In relation to company insolvency, which of the following is appointed by the arbitration
court until an external manager is appointed?
A Interim manager
B Creditor committee
C Receiver
D General director (2 marks)

13.18 In relation to company insolvency, which of the following are powers of the external
manager?
(1) To dispose of debtor’s property that is valued at over 15% of total assets book value
(2) To review creditors’ claims and makes objections to them
(3) To take steps to recover debts owed to the debtor
(4) To secure the debtor’s property under his jurisdiction
A 1 and 2 only
B 1 and 4 only
C 2, 3 and 4
D 1, 2, 3 and 4 (2 marks)
13.19 Which of the following is first in the order of execution in bankruptcy proceedings?
A Settlement with the creditors

B Selling the debtor’s assets
C Entering the liquidation in the Unified State Register of Legal Entities
D Appointing receiver (2 marks)
13.20 What, generally, is the term of bankruptcy proceedings?
A Three months
B Six months
C One year
D Two years (2 marks)
13.21 In relation to company insolvency, by what process are creditors’ claims settled for a
lesser amount than what is owed to them?
A Arbitration
B Composition
C Observation
D Rehabilitation (2 marks)
13.22 In relation to company insolvency, which of the following are possible outcomes of the
observation process?
(1) External management

(2) Financial rehabilitation
(3) Interim management
(4) Liquidation
A 1, 2 and 3
B 1, 2 and 4
C 1, 3 and 4
13.23 Which of the following payables has the HIGHEST priority claim against an insolvent
company?
A A balance on an unsecured bank overdraft

B A loan secured by pledged property
C Dividends owed to holders of preference shares
D Employees’ wages earned during bankruptcy proceedings (2 marks)

13.24 A bankruptcy petition was accepted against OOO Transport on 30 September 2017.
Which of the following transactions entered into by OOO Transport may be treated as
null and void?
A A sale of shares in PAO Invest on 31 March 2017 concluded on the stock exchange
B Repayment of a loan to a director on 15 August 2016
C Sale of goods to a major customer at a 20% discount on 30 June 2017
D Repayment of a bank loan on 2 February 2017 (2 marks)
13.25 In relation to company insolvency, at which of the following stages may composition be
approved?
(1) Observation procedure

(2) External management
(3) Bankruptcy proceedings
A 1 only
B 1 and 2 only
C 1 and 3 only
(43 marks)
MCQs 14 CORPORATE FRAUDULENT AND CRIMINAL BEHAVIOUR
14.1 Which of the following describes those people who receive confidential information from
an internal source?
A Insiders
B Market abusers
C Corporate offenders (1 mark)
14.2 In relation to insider trading, which of the following uses of inside information are
prohibited?
(1) Dealing at one’s own expense

(2) Dealing at the expense of a third party
(3) Disclosure to federal authorities
(4) Recommending a third person to make deals
A 1 and 2 only
B 1, 2 and 3 only
C 1, 2 and 4 only
D 1, 2, 3 and 4 (2 marks)
14.3 Natasha has been accused of insider dealing on information she received from a friend, who is
an employee of the company.
Which of the following may be a defence?
A She thought the information received was already public

B She did not know the friend would be considered an insider
C She acted on the instructions of a third party
D She was unaware of insider trading restrictions (2 marks)

14.4 Which of the following describes a transaction that is accomplished using inside
information is true?
A It is legal and valid

B It is legal but invalid
C It is illegal but valid
D It is illegal and invalid (2 marks)
14.5 Leo is employed by OOO Asset Management. One of his clients, Konstantin, is a director of
PAO Dominate. Leo is instructed by Konstantin to sell Konstantin’s shares in PAO
Dominate.
Who may be liable for insider dealing?
A Only Konstantin
B Only Leo
C Both Konstantin and Leo
D Neither Konstantin nor Leo (2 marks)
14.6 Tanya, a shareholder of PAO Spectrum, wants to sell her shares at a gain and posts an untrue
message to social media hoping that it will increase the share price.
Which of the following describes Tanya’s behaviour?
A Misuse of information
B Misleading statements
C Insider abuse
D Market distortion (2 marks)
14.7 Which of the following best describes improper conduct which manipulates the
marketplace to the detriment of other investors?
A Misuse of information
B Misleading statements and impressions
C Market distortion (1 mark)
14.8 The directors of a public company have been found guilty of manipulating the price of the
company’s shares.
Which of the following sanctions may be imposed by the Central Bank of the Russian
Federation?
(1) Administrative liability

(2) Criminal liability
(3) Suspension of trading
A 1 and 2 only
B 1 and 3 only
C 2 and 3 only

14.9 Misha sells illegal weapons and reports the income through a small restaurant that he owns.
Which of the following describes this activity?
A Insider dealing
B Money laundering
C Tax evasion
D Market abuse (2 marks)
14.10 In relation to money laundering, which of the following are regarded as criminal
property?
(1) Items bought in a market from an unlicensed vendor

(2) Winnings from an unknown foreign sponsor
(3) Cost savings achieved through failure to comply with a regulatory requirement
(4) Proceeds of tax evasion
A 1 and 2
B 1 and 4
C 2 and 3
D 3 and 4 (2 marks)
14.11 Which of the following describes the offence of making a disclosure that is likely to
prejudice an investigation into money laundering, drug trafficking, or terrorism?
A Placement
B Integration
C Tipping off
D Layering (2 marks)
14.12 Due diligence procedures and inspections into suspicious customer transactions are
preventative measures for banks against which of the following?
A Money laundering
B Bribery
C Insider dealing
D Market abuse (2 marks)
14.13 “Making large-scale financial transactions and other deals in monetary funds acquired by a
person as a result of his/her having committed an offence for the purpose of maintaining the
facade that he/she rightfully possesses, uses and disposes of the cited monetary funds.”
This extract from the Criminal Code defines which of the following crimes?
A Bribery
B Fraud
C Money laundering
D Ungrounded enrichment (2 marks)

14.14 Which of the following penalties can be imposed on a company found guilty of bribery?
(1) Imprisonment
(2) A fine
(3) Deprivation of holding certain job positions
(4) Confiscation of the bribe
A 1 and 2
B 1 and 4
C 2 and 3
D 2 and 4 (2 marks)
14.15 In relation to bribery, which of the following statements is true?
A The offence only applies to giving bribes to public officials

B Non-monetary bribes are not offences under Russian law
C Acts of bribery committed outside Russia are not offences under Russian law
D A company that fails to take measure aimed at preventing bribery and corruption is
committing a bribery offence (2 marks)
14.16 Which of the following statements are true according to the Criminal Code?
(1) No gifts are allowed to state officials

(2) No gifts are allowed between commercial organisations
(3) Corporate hospitality is not permitted
(4) An individual who is guilty of bribery can never be absolved of criminal liability
A 1 only
B 1 and 2 only
C 1, 2 and 3 only
D 1, 2, 3 and 4 (2 marks)
14.17 Ivan is hosting a dinner party at his home and has invited several people, some but not all of
whom are public officials. All the guests are served the same meal and the food and drink,
although appetising, are not considered to be extravagant.
If Ivan is charged with bribing his guests, what will be the likely outcome of the case?
A Ivan will be convicted because the guests were public officials

B Ivan will be convicted because he served all the guests the same meal
C Ivan will be acquitted because he served all guests the same meal that would not be
regarded as extravagant
D Ivan will be acquitted because he had both public and non-public officials in
attendance at the party (2 marks)

14.18 Nina, a director of OOO XYZ, asked Oleg, an employee, to speak to the contracting officer of
one of XYZ’s clients to determine if the contracting officer “liked the ballet.” If the answer
was yes, Oleg was to offer the contracting officer Nina’s tickets to the Bolshoi telling him that
Nina could not use them and did not want them to go to waste.
If Nina is charged with bribery and later acquitted of that charge, which of the following
could lead to an acquittal?
A Nina did not make the offer personally

B Nina and the contracting officer were old friends and the contracting officer knew
that Nina was simply playing a joke on Oleg
C The tickets cannot be regarded as a bribe because they are not cash
D Neither Nina nor Oleg knew if the contracting officer liked ballet (2 marks)
14.19 In relation to bribery, on which of the following do sanctions depend?
(1) The amount of the bribe

(2) Whether the person giving it acted alone or conspired with others
(3) Whether it was given to commit a lawful or unlawful act
A 1 and 2 only
B 1 and 3 only
C 2 and 3 only
D 1 2 and 3 (2 marks)
14.20 Oleg, a banker, has become aware of a pattern in which one of his banking customers has
been making cash deposits into a variety of accounts. The pattern seems to indicate that the
customer could be engaged in money laundering.
If Oleg does not report his suspicions to proper authorities and is later charged with
money laundering, what is the likely outcome of the case?
A Oleg will be convicted, because as a member of a regulated industry he has a duty

to report suspicious activity if he becomes aware of it
B Oleg will be convicted, because bank officers are strictly liable for the misdeeds of
their customers
C Oleg will not be convicted, because he was not directly involved in the money
laundering activities
D Oleg will not be convicted because confidentiality rules required him not to disclose
his customer’s activities to the authorities (2 marks)
(38 marks)

Question 1 STUDENT PETROV
Petrov is 15 years old and a student of a vocational college. He performed the following legal actions:
 Spent his student grant for study materials (sum total 200 roubles);
 Published an article based on labs conducted in the college in a newspaper and received
author’s fee;
 Purchased a personal computer for money that he took from his parents whom he did not
inform about the planned purchase.
Required:
(a) Explain which of the above actions Petrov require the approval of his parents (or other
legal representatives). (3 marks)
(b) Explain the conditions under which Petrov can work under a labour contract. (3 marks)
(6 marks)
Question 2 MRS KLUSHKINA
Mrs Klushkina was invited to teach in a University situated in one of the European countries. She is a
citizen of the Russian Federation and has some property in Moscow that she would like to dispose of.
She has proposed the following:
(1) To transfer her car as a gift to her 12 year old nephew, Sergey;
(2) To sell her apartment to her 15 year old nephew, Peter;
(3) To transfer her bicycle to her five year old niece, Elena.
Required:
(a) State whether each of the proposed transactions can be concluded including any
conditions necessary to make them valid. (4 marks)
(b) State how Mrs Klushkina could empower her sister to manage her property. (2 marks)
(6 marks)
Question 3 ANNA
Anna is 80 years old and in declining health. She has decided that she wishes to settle her financial
affairs now.
Anna’s son is Alexei. He is married and has four children, Katerina, Lilia, Mikhail and Oleg, aged 18,
16, seven and four years respectively. Anna has decided to make provision directly for her
grandchildren by transferring funds to them.
Anna proposes that her main residence will be transferred to Alexei on her death. Other transfers of her
assets are to be made immediately. Anna wishes to set up bank deposits for the four grandchildren,
opened with an initial deposit of 60.000 roubles for each grandchild. Her wish is that the grandchildren
should take responsibility for financial matters at an early age and she would like them to be able to
make transactions if possible.
Anna now finds it increasingly difficult to deal with her own financial affairs. She would like her
oldest grandchild Katerina to take responsibility for her requirements, always acting under her
instructions.

Required:
(a) Explain the extent to which Anna’s grandchildren will be permitted to carry out
transactions on their own behalf. (4 marks)
(b) Explain the actions that Anna should take to enable Katerina to act on her behalf.
(2 marks)
(6 marks)
Question 4 ROSA AND DIMITRI
Rosa and Dimitri are the parents of two children.
Their daughter Anna is 17 years old and has asked her parents for permission to marry her boyfriend
Alexei. Anna’s next birthday is in 11 months’ time.
Their son Peter is 21 years old. He has had numerous personal problems, including convictions for
theft. His various addictions have also led him to steal from his family, causing considerable financial
difficulties for them.
Required:
(a) Explain the legal implications of Rosa and Dimitri’s decision to allow Anna to marry in
relation to Anna’s legal capacity. (3 marks)
(b) Explain the extent to which the provisions of the Civil Code can be invoked by Rosa and
Dimitri in order to protect themselves against Peter’s personal problems. (3 marks)
(6 marks)
Question 5 OOO BOOK
OOO Book is preparing to participate in an international book convention at a major exhibition venue.
To attract visitors to its exhibition stand, it has entered into a contract with Igor, an author, to attend the
exhibition, meet customers and sign copies of his three international best-selling books.
Less than 24 hours before the start of the convention, Igor telephones OOO Book stating that he cannot
attend due to unforeseen circumstances but he has arranged for another world famous author to come in
his place.
The management of OOO Book regards Igor’s action totally unacceptable as it does not consider the
replacement author to be sufficiently popular to attract visitors to the exhibition stand. As Igor was
paid 50% of the fee in advance, OOO Book is refusing to make the outstanding payment and is
demanding the advance back from Igor. OOO Book intends to reclaim from Igor the cost of the
exhibition stand on the grounds that without Igor’s personal presence the exhibition would be a waste
of time and resources.
Required:
(a) State the extent to which Igor is obliged to provide his services personally and whether
he has a right to engage an alternative author to fulfil the contract. (3 marks)
(b) Explain the legal claims that OOO Book can make against Igor. (3 marks)
(6 marks)

Question 6 OOO PICTURE
OOO Picture is a dealer in works of art. It acquired three paintings signed by a famous artist and
decided to make these available for sale.
The company sent letters to Nikolai, Peter and Svetlana stating the following:
“OOO Picture is prepared to offer you an exclusive bargain. You have the opportunity to purchase a
signed painting (full description given) by the famous artist Chaikin for 500.000 roubles. In order to
secure your purchase please reply, enclosing full payment, by 13.00 hours on 1 February 2018.”
Nikolai replied and sent full payment for the painting, but his letter did not reach OOO Picture until 3
February 2018. Peter’s response was to send 450.000 roubles with a letter stating that, as a valued
customer, he expected a discount of 10%. Svetlana did not reply, but the general director of OOO
Picture was certain that as an enthusiastic art collector she would wish to accept the offer and sent her a
painting with an invoice for 500.000 roubles.
Required:
(a) Explain whether OOO Picture’s letters to the three clients were offers. (2 marks)
(b) Explain whether contracts have been concluded with Nikolai, Peter and Svetlana.
(4 marks)
(6 marks)
Question 7 OOO GROW
OOO Grow is a rapidly developing company that manufactures and retails sports and leisure goods. In
order to achieve its performance targets for the next two years, OOO Grow has to raise new capital.
Vladimir is the general director of OOO Grow. He has approached Loan Bank for funding. The bank
will only provide loan facilities if OOO Grow is prepared to grant a legal mortgage over its head office
building, or alternatively if Vladimir’s wealthy father will give a personal guarantee to support the
lending contract.
Required:
(a) Explain the nature of the two types of security sought by Loan Bank. (4 marks)
(b) State the potential risks and consequences of these types of security for the parties
involved. (2 marks)
(6 marks)

Question 8 OOO FESTIVAL
OOO Festival organised a day of traditional folk music to take place on a public holiday. It entered into
a contract with a popular folk music group, Loxfest, to play at the festival as the main attraction. As the
group was in strong demand, OOO Festival paid 50% of the group’s fee in advance to secure the
booking. It entered into a further contract with OOO Sweep to remove litter and clean the venue after
the event had finished.
One day before the event, Loxfest contacted OOO Festival to inform it that the group’s most important
musician had been taken ill suddenly, but a replacement group had been engaged to take the group’s
place.
Due to an administrative error, OOO Sweep found that they had insufficient workers to perform the
cleaning duties after the event, but hired another cleaning company to carry out this work.
Required:
(a) State TWO ways in which Loxfest may avoid liability for having withdrawn from the
event. (2 marks)
(b) Explain whether OOO Festival can claim a refund of the 50% deposit paid to Loxfest.
(2 marks)
(c) Explain the right of OOO Sweep to engage a replacement cleaning company. (2 marks)
(6 marks)
Question 9 EKATERINA, LEONID AND NIKOLAI
Ivan is an antiques dealer. He imported two rare statues, created by the same sculptor, and placed an
advertisement in a specialist magazine offering them for sale at a price of 1 million roubles each.
Ekaterina replied to the advertisement immediately by post, agreeing to pay 1 million roubles for one
statue. However, she then had doubts about the purchase and sent a fax on the same day to say that she
had changed her mind.
On the same day, Leonid replied by post, confirming that he would be prepared to pay 800.000 roubles
for one statue.
Having been away on a business trip, Ivan arrived at his office and read the letters and faxes received.
He sent faxes to both customers confirming that he would supply the statues immediately. In the fax to
Ekaterina he stated that her fax could not cancel the deal as she had accepted his offer.
On the same morning, Nikolai visited Ivan and offered to purchase both statues for 1.5 million roubles
each. Ivan sold the statues to Nikolai immediately.
Required:
(a) Explain whether Ivan’s advertisement was an offer capable of bringing a contract into
effect. (2 marks)
(b) Explain whether or not Ekaterina, Leonid and Nikolai have entered into legally binding
contracts. (4 marks)
(6 marks)

Question 10 OOO LEARNFAST
OOO Learnfast publishes study materials for professional students. It entered into contracts with Anna
and Yevgeni under which they would produce study texts, with each text to comprise 12 chapters of
approximately equal length.
Shortly after beginning to write her study text, Anna discovered that the work was too demanding. She
wrote to OOO Learnfast to explain this, enclosing the three chapters she had managed to complete,
together with her invoice for one-quarter of the fee.
Three months after entering into the contract with Yevgeni, OOO Learnfast was advised by the relevant
professional body that the subject on which Yevgeni was writing his study text would be withdrawn
within a year. OOO Learnfast wrote to Yevgeni explaining that his study text would no longer be
required. By this time, Yevgeni had written three chapters of the study text. OOO Learnfast is
prepared to pay Yevgeni one-quarter of the fee specified in the contract.
The contracts between OOO Learnfast and the two writers made no provision for these events.
Required:
(a) Explain the consequences of Anna’s withdrawal from her contract with OOO Learnfast.
(3 marks)
(b) Explain the consequences of OOO Learnfast’s withdrawal from its contract with
Yevgeni. (3 marks)
(6 marks)
Question 11 OOO CLOTHES
Three months before her wedding, Rosa ordered a wedding dress from OOO Clothes and paid for it in
full. She specified that delivery had to be made by 20 April, to make sure that the dress would be
delivered well in advance of 26 April, her wedding date.
On 20 April OOO Clothes informed Rosa that her dress could not be delivered until 22 April. Though
disappointed, Rosa agreed to the late delivery.
OOO Clothes failed to deliver Rosa’s dress by 22 April, so she decided to purchase a dress from OOO
Rags instead.
On the same day, she told OOO Clothes that the original dress was no longer required. However, OOO
Clothes delivered the dress later the same day, informing Rosa that no refund would be made.
Required:
(a) Explain the obligations of OOO Clothes in respect of the discharge of the contract.
(3 marks)
(b) Explain the rights and obligations of Rosa in respect of the wedding dress. (3 marks)
(6 marks)

Question 12 OOO SWEET
Svetlana is the purchasing manager for OOO Sweet, a retailer of fine chocolates.
Svetlana wrote to OOO Choc, a chocolate wholesale company, requesting 100 boxes of Swiss
chocolates at 1.000 roubles per box, the price displayed on the OOO Choc website. The website was
non-interactive and did not facilitate online ordering.
One week later, Svetlana received a reply to her order stating that the website had out-of-date
information on prices.
The letter from OOO Choc included an up-to-date summary price list, with no reference to terms of
business, and stated that the goods would be despatched with an invoice for the correct amount of 1.200
roubles per box. The next day, OOO Sweet received 100 boxes of the chocolates together with an
invoice for 1.200 roubles per box.
Svetlana replied stating that OOO Sweet would insist on paying the original price displayed on the
website at the time of the original order.
Required:
(a) Discuss the extent to which information provided on OOO Choc’s website constitutes an
offer that is capable of acceptance to form a legally binding contract. (3 marks)
(b) Identify whether each of the subsequent communications and actions taken by Svetlana
and OOO Choc may be regarded as an offer, counter-offer or acceptance. (3 marks)
(6 marks)
Question 13 PETER
Peter is an individual entrepreneur. His business is moderately successful, but he has recently
experienced temporary cash flow difficulties and has failed to meet the last two monthly repayments
due on a mortgage.
Peter entered into the mortgage contract six years ago. The total sum outstanding on the mortgage is
approximately 25% of the value of the property which secures the contract.
The finance company has written to Peter stating that as he has missed two repayments, the whole of
the debt is now due immediately. The finance company explains that as the owner of the property it
can now sell it at once, together with any belongings which are in it if he does not remove them. The
letter states that failure to repay the loan will result in the sale of the property to the first buyer who is
prepared to offer any price in excess of the outstanding loan, and Peter will lose everything.
Required:
(a) Explain the extent to which the finance company can enforce its proposed actions.
(4 marks)
(b) Discuss the extent of Peter’s loss if the property is eventually sold. (2 marks)
(6 marks)

Question 14 ALEXEI AND BORIS
Olga is an art dealer. She wanted to sell two prints of a painting, signed by the artist, and wrote to two
customers, Alexei and Boris, in the hope that each would buy one print. Her letter stated that only one
print would be available per customer for a price of 200.000 roubles, and that the offer would be open
until 30 July, by which time full payment would have to be made. The letter included a full description
of the prints for sale.
Alexei’s reply reached Olga by 26 July, but stated that he was not willing to buy a print, as he could
purchase an identical print for 150.000 roubles from a different art dealer. However, this intended
purchase did not materialise, so he wrote again to accept Olga’s offer. This letter reached Olga on 29
July.
Boris replied to Olga’s letter immediately and his response reached her on 28 July. Boris stated that he
was prepared to pay the full 200.000 roubles per print but only on the condition that two prints be made
available to him.
Required:
(a) State whether Olga’s letters to Alexei and Boris were offers. (2 marks)
(b) Explain the extent to which the replies by Alexei and Boris brought binding contracts
into effect. (4 marks)
(6 marks)
Question 15 ALEXANDER
Alexander, an individual entrepreneur, works as a business consultant. While driving home from work
a commercial vehicle, driven by Igor, ignored a stop sign and collided with Alexander’s car.
Alexander’s took his car to OOO Carfix, to make repairs to the bodywork and steering. Immediately
after collecting the car, Alexander was driving to the airport in order to fly to Paris on business when
the steering on his car failed. His air ticket was restricted to the specific flight that he consequently
missed, so he had to pay again.
Alexander has now been informed that Igor was uninsured. Igor also denies having passed through a
stop sign.
Alexander has had to pay 33.000 roubles for damage to the bodywork of his car and 20.000 roubles for
the repairs to his steering. He also had to pay 15.500 roubles for a new air ticket.
As a result of these incidents, Alexander is pursuing legal action against Igor and against OOO Carfix.
Required:
(a) Explain in which court Alexander’s action against Igor will take place. (2 marks)
(b) State the obligations of Igor, Igor’s employer and OOO Carfix arising from the
incidents. (4 marks)
(6 marks)

Question 16 OOO FOOD
OOO Food operates several shops that sell fresh, processed and frozen foods to retail shoppers. Having
taken a delivery of frozen foods from a manufacturer, the goods were placed in temperature-controlled
display units in the shop.
The display units were supplied by the frozen food manufacturer, who also provided documentation on
how the units were to be used. Sasha, an employee in one of the shops, accidentally set the temperature
of the frozen food storage units incorrectly. As a result, several customers complained that members of
their families had become unwell after consuming frozen food purchased in the shop. Some customers
have stated that they will take legal action to recover medical costs and lost wages due to absence from
work. Sasha claims that he was not given training on the use of the display units. OOO Food claims
that the documentation supplied with the display units does not clearly indicate correct storage
temperatures.
Required:
(a) State the tests applied by the courts in determining whether a non-contractual
obligation has arisen. (2 marks)
(b) Discuss the potential liability of the frozen food manufacturer, OOO Food and Sasha for
injury caused to the customers. (4 marks)
(6 marks)
Question 17 OOO CONSULT
OOO Consult offers business advisory services. The company decided to make major improvements to
the reception area of its main office and entered into a contract with OOO Fix to carry out the necessary
work.
In order to install new lighting, employees of OOO Fix had to dig a hole in the area where customers
wait for their appointments. During the course of this work, Anna, a customer of OOO Consult,
suffered injury after tripping on bricks that had been removed by the workers and left on the floor.
Anna subsequently had to take one month’s sick leave and had to pay for medical care.
Required:
(a) Explain whether a non-contractual obligation has arisen between OOO Consult and
Anna. (2 marks)
(b) Explain the potential obligations of OOO Fix and OOO Consult that may arise from the
injury to Anna, and whether these obligations may be dependent on Anna’s own
conduct. (4 marks)
(6 marks)

Question 18 PAO TRADE
Alexander is the chief executive officer of PAO Trade. While driving from a business meeting to his
company’s head office, he lost control of his company car. The car collided with a roadside vegetable
stall before hitting the shop front of a restaurant, causing considerable damage.
The owner of the vegetable stall, Mihail, claimed that the accident destroyed all his inventory, valued at
50.000 roubles. Alexander quickly wrote, signed and dated a note acknowledging that PAO Trade
would pay 50.000 roubles to Mihail, which was countersigned by Mihail. Alexander agreed with the
restaurant owner that any claim should be submitted to PAO Trade in writing.
Four days later, PAO Trade received a letter from Mihail claiming that the damaged inventory was
worth 75.000 roubles and that he would be claiming this sum from the company. The company also
received a letter from the restaurant owner claiming 100.000 roubles for the damage to the front of the
building, 50.000 roubles to replace furniture destroyed in the accident and 600.000 roubles for business
that would be lost in the next three months while the restaurant was being repaired.
Required:
(a) Discuss the liabilities of PAO Trade and Alexander personally in respect of the claim
made by Mihail. (4 marks)
(b) Explain the extent of PAO Trade’s liability in respect of the claims by the restaurant
owner. (2 marks)
(6 marks)
Question 19 OOO VISION
OOO Vision, a consultancy company, organised a conference in Moscow for 200 delegates. The main
speaker was Anna, a professor from St Petersburg, who was to make her presentation on the final
afternoon.
On the day of her presentation, Anna visited some colleagues, leaving her conference notes and laptop
computer at the hotel where she was staying.
When Anna returned to the hotel shortly before her presentation was due to start, the hotel manager
informed her that Veronika, a cleaner, had accidentally dropped Anna’s laptop while cleaning Anna’s
room. Anna found that her laptop did not work. As a result, Anna had to speak from her notes without
the supporting audio-visual materials on her laptop. The presentation was not well received by the
delegates, who had come to hear about Anna’s research, much of which had to be omitted.
OOO Vision received many complaints and some delegates demanded a refund of the conference fee.
OOO Vision responded that a full set of notes, including all the information omitted from the
presentation, would be available to the delegates within two weeks.
Required:
(a) Explain the potential liability of Veronika and the hotel for the damage to the laptop.
(4 marks)
(b) Explain the potential liability of OOO Vision to the delegates who attended the
conference. (2 marks)
(6 marks)

Question 20 OOO TEACH
OOO Teach is a training organisation with its main office in Moscow and six training centres in other
cities in Russia. In the last year the company has encountered cash flow difficulties and Sergei, the
managing director, has formulated an action plan to improve the situation.
Sergei intends to close the least profitable centre and sell the premises and equipment. This will mean
that the 12 staff employed in that centre will lose their jobs. They are each owed two months’ salary
but have all agreed to delay receiving these payments to help the company overcome its current
difficulties.
Sergei writes to the 12 staff members to inform them that they can collect the salaries owed to them but
that they will be asked to sign a declaration giving up their rights to redundancy pay.
The other training centres may be economically viable but some of the full-time trainers will have to be
replaced with independent lecturers, paid on a daily basis. Sergei feels that he can retain some of the
full-time lecturers but only on a part-time basis and for a much reduced salary.
Required:
(a) State the rights of the employees of the least profitable training centre in relation to
redundancy pay. (2 marks)
(b) Explain the legal implications of the declaration giving up their rights to redundancy
pay.
(2 marks)
(c) State how Sergei can change the terms of the labour agreements of the existing full-time
lecturers. (2 marks)
(6 marks)
Question 21 ANDREI AND NIKOLAI
Andrei and Nikolai have worked in partnership, selling and installing bathroom fittings, for three years.
Under a simple written agreement they share all profits equally.
Andrei recently discovered that Nikolai had been accepting business for cash payment without
declaring this income to Andrei.
Nikolai has always dealt with pricing new work and Andrei believes that work is accepted for
inadequate margins.
Andrei writes to Nikolai that he intends to dissolve the partnership with immediate effect, even though
a large project installing bathrooms in a hotel is incomplete. A big argument follows and Andrei walks
out.
Two months later, Andrei writes to Nikolai demanding payment for his work on the hotel project.
Nikolai replies that he will not pay Andrei anything because labourers had to be hired to complete the
work and the cost of the project escalated as a result. Nikolai also sends Andrei an invoice for half the
cost of the materials used in the project.
Andrei wishes to ensure that he has broken off relationships with the partnership completely in order to
avoid any obligations arising from the former arrangement.

Required:
(a) Explain the rights and obligations of Andrei and Nikolai that arise from these events.
(4 marks)
(b) Explain how Andrei can avoid further obligations arising from the former partnership.
(2 marks)
(6 marks)
Question 22 ROSA AND ALEXEI
Rosa and Alexei are partners in a successful unlimited partnership. Rosa is highly ambitious and
wishes to pursue rapid growth, but Alexei does not want to take unnecessary risks and is satisfied with
the business as it is currently structured.
Rosa has been taking decisions that exceed her authority under the partnership agreement. She recently
ordered expensive new IT equipment. Alexei is angry as he considers the equipment to be far too
sophisticated for the needs of the business in the foreseeable future. Rosa argues that the business
needs to invest heavily to build on its success.
The partners meet to resolve their differences. Alexei demands that the IT equipment, which is now
installed and ready for use with new software, be returned to the supplier. The supplier of the
equipment has submitted its invoice and this is due for payment immediately. Rosa refuses to agree to
return the equipment.
Required:
(a) Explain whether Alexei can demand that the IT equipment be returned to the supplier.
(2 marks)
(b) Explain what Alexei must do if he wishes to withdraw from the partnership. (2 marks)
(c) Explain whether Alexei can take any action against Rosa for breaking the terms of the
partnership agreement. (2 marks)
(6 marks)
Question 23 ALEXEI, IULIA AND LEONID
Alexei, Iulia and Leonid are partners in a commandite partnership. Alexei is the investing partner,
having contributed capital of 500.000 roubles to the business under the partnership agreement. Iulia
and Leonid are general partners. The partnership agreement states that all business will be carried out
within the city boundaries of Moscow and that any transaction valued in excess of 750.000 roubles
must be sanctioned by both general partners.
Iulia has agreed to purchase raw materials from a company in Ekaterinburg in the name of the
partnership for 1.000.000 roubles and has signed a contract with the seller to confirm this. On
discovering the transaction, Leonid refused to sanction the payment. Iulia immediately resigned from
the partnership in protest at Leonid’s action.
Required:
(a) Explain whether the supplier of the raw materials is able to enforce the contract against
the partnership. (3 marks)

(b) In the event that the partnership is dissolved before the matter is resolved, explain the
potential personal liabilities of the partners for the transaction that Iulia has carried
out. (3 marks)
(6 marks)
Question 24 HELENA, ROSA AND YURI
Helena, Rosa and Yuri are partners in an unlimited partnership that provides training courses. Their
partnership agreement states that each partner may make deals with third parties on the partnership’s
behalf, but that any transaction valued in excess of 500.000 roubles must be sanctioned by all partners.
The agreement further specifies that any partner’s resignation will be subject to a notice period of three
months.
Without consulting the other partners, Rosa withdrew 700.000 roubles from the partnership bank
account in order to purchase a training software package from OOO Train, a regular supplier to the
partnership. Rosa also admitted to using the partnership premises and teaching resources on a private
basis in order to increase her personal income. She refused to provide details but offered to make a
payment of 100.000 roubles in respect of this privately commissioned business.
Required:
(a) Explain the actions that Helena and Yuri can take against Rosa. (2 marks)
(b) Explain whether OOO Train is obliged to accept a return of the training software
package and refund the partnership with the price paid. (2 marks)
(c) Explain whether Helena and Yuri will be able to make a claim against the bank for
permitting the withdrawal of 700.000 roubles made by Rosa. (2 marks)
(6 marks)
Question 25 BORIS, MARIA AND OLEG
Boris and Maria are general partners in a limited (commandite) partnership. Oleg is the only investing
partner. Oleg’s capital contribution was one million roubles. The partnership agreement confines the
business of the partnership to buying and selling furniture. Any transaction in excess of 500.000
roubles must be sanctioned by both of the general partners.
In dealing with his regular suppliers, Boris was offered an attractive contract subject to a minimum
value of 750.000 roubles. Boris entered into a contract to purchase furniture from this supplier,
committing the partnership to expenditure of 750.000 roubles.
Although usually not actively involved in the business, Oleg entered into a contract on behalf of the
partnership with a supplier of electrical fittings for the home, as he considered this to be an excellent
diversification that would increase the potential profitability of the business.
Required:
(a) State the rights of Boris, Maria and Oleg to act on behalf of the partnership. (2 marks)
(b) Explain the partners’ liabilities that arise from the contract to purchase furniture.
(2 marks)
(c) Explain whether the contract to purchase electrical fittings are binding on the
partnership. (2 marks)
(6 marks)

Question 26 ANNA, OLEG, PETER, ROSA AND VIKTORIA
Anna, Oleg, Peter, Rosa and Viktoria are partners working together in a general partnership. The
business has been operating profitably for two years. However, there have been arguments between the
partners about the amount of work each contributes to the business.
At an informal meeting attended by Anna, Oleg, Rosa and Viktoria, it was suggested that Peter had
been putting much less effort into the business than the other partners. Anna suggested that steps be
taken to dismiss Peter from the partnership. Oleg and Rosa agreed with this proposal, but Viktoria was
opposed to this, arguing that Peter contributed valuable ideas to the business. They agreed to discuss
the matter in the near future.
A few days after the meeting, Anna died in an accident. Anna’s daughter Svetlana, her legal heir,
subsequently made it clear that she wished to take over Anna’s position in the partnership. None of the
surviving partners wished to work with Svetlana, who had no relevant business experience.
Required:
(a) Explain whether Peter may be dismissed from the partnership. (2 marks)
(b) Explain how the partners may otherwise resolve their disagreement about the proposal
to dismiss Peter. (2 marks)
(c) Explain whether the partners can prevent Svetlana from becoming a partner. (2 marks)
(6 marks)
Question 27 ANATOLY, BOGDANA & VALERIYA
Anatoly, Bogdana and Valeriya are partners in an unlimited partnership. Under the terms of their
formal agreement, the partnership’s business is confined to selling antiques. Their agreement permits
all partners to operate their business account at the bank.
In October 2017, Anatoly withdrew 500.000 roubles from the partnership account. He informed the
bank that this was to buy some antique items that had suddenly become available, but used the funds to
purchase a family holiday. In November 2017, Bogdana withdrew 750.000 roubles and used the funds
to purchase modern kitchen equipment that she intended to sell from the shop.
Having encountered a sharp downturn in trade, the partnership is unable to meet its accounts payable
totalling 1 million roubles and the bank has refused to extend its line of credit.
Required:
(a) State the liabilities of Anatoly and Bogdana under partnership law. (4 marks)
(b) Explain the liabilities of the partners for the partnership’s inability to meet its debts.
(2 marks)
(6 marks)

Question 28 NATASHA AND NIKITA
Natasha and Nikita have decided to start a business. They intend to provide highly specialised back
office support services to internet-based businesses.
Rosa, Natasha’s mother, is wealthy and is prepared to help them financially, although she has no
understanding of the actual business that they propose to start and is reluctant to get involved directly.
She has informed Natasha and Nikita that she will help them to start the business but expects a return
on her investment. She has also stated that she will not commit herself to support them indefinitely.
Nikita has only a small amount of money to invest and no assets, but has a higher level of technical
competence than Natasha.
Required:
Explain the advantages of setting up the business as:
(a) a commandite partnership; and (3 marks)

(b) a limited liability company. (3 marks)
(6 marks)
Question 29 ROSA AND SERGEI
Rosa and Sergei are partners in an unlimited partnership. They work as graphic design artists.
While working on a major project for their most important customer, Rosa and Sergei had an argument,
which resulted in Rosa leaving their workplace. Despite numerous attempts, Sergei was unable to
contact Rosa for several days. Sergei then received a letter from Rosa stating that she would not return
to work and would bring the partnership to an end immediately. She added that she was not prepared to
continue working on the major project and that Sergei would have to get somebody else to help him.
Her letter also stated that she would not be held responsible for any expenditure by the partnership.
Anxious not to lose the goodwill of the partnership’s most important customer, Sergei continued to
work on the project but had to engage the services of Maria to ensure that the work could be finished on
time. This cost considerably more than the planned expenditure on the project.
Required:
(a) Explain whether Rosa can terminate her position as a partner without incurring further
obligations. (3 marks)
(b) Explain the extent to which Sergei may make any claims against Rosa in respect of the
partnership’s ongoing project. (3 marks)
(6 marks)
Question 30 OOO INVESTOR
OOO Investor in 2015 contributed to the statutory capital of OOO Levadia 30.000 roubles together with
four new laptop computers, which amounted to 20% of the statutory capital.
In 2018 OOO Investor decided to withdraw from OOO Levadia and claimed that the company return its
contribution including its property.
The charter of OOO Levadia, which was amended in December 2016, expressly states that withdrawal
of a participant is allowed.

Required:
(a) Explain how OOO Investor may withdraw from OOO Levadia. (3 marks)
(b) Explain who has the right of ownership for the property contributed to the statutory
capital and whether OOO Investor may receive back the laptop computers. (3 marks)
(6 marks)
Question 31 SVEN, TRUDI, URI AND VIKTOR
Sven, Trudi, Uri and Viktor are business colleagues who have been running a successful business in
Scandinavia for several years. Their company operates a chain of retail outlets that sell premium teas
and coffees, with high quality, healthy lunches and dinners. They now wish to introduce their business
model to large cities in Russia.
All four colleagues have agreed that they do not wish to expose their personal assets to risk but are
prepared to make substantial personal investments of capital. Sven and Trudi favour the flexibility
offered by the partnership form of business but, as the business has the potential to grow very rapidly,
they foresee a need for external capital. Uri and Viktor are highly ambitious and see their business as
eventually becoming a major recognised brand throughout Europe.
They all agree that new investors will be needed eventually but will wish to retain control of the
business when this becomes necessary.
Required:
(a) Explain the suitability of a partnership for the new business in Russia. (2 marks)
(b) State the legal characteristics of ONE alternative business form for the new business and
the relevance of these characteristics to the investors. (4 marks)
(6 marks)
Question 32 NATASHA AND MARIA
Natasha is an experienced producer of drama and her plays have been highly successful in major cities
and towns in recent years. She has decided to embark on a highly ambitious production that will
require a substantial investment.
Despite her impressive record, Natasha’s usual sponsors have been unwilling to commit themselves to
financing her new proposal, considering it to be too risky.
To develop this project further, Natasha met with Maria, who had indicated that she may be prepared to
provide finance. Maria is moderately wealthy but wishes to limit her financial exposure to the risks
presented by Natasha’s proposal. Although she has not ruled out collaborations in the future, Maria is
unsure whether her commitment will extend beyond this particular project. Other than providing
finance and taking a reasonable financial return, Maria is not willing to get involved in the project itself.
Required:
(a) Discuss the advantages and disadvantages of Natasha taking on the new production as
an individual entrepreneur. (2 marks)
(b) Discuss the advantages and disadvantages of the alternative forms of partnership that
could be adopted by Natasha and Maria. (4 marks)
(6 marks)

Question 33 OOO HOLIDAY
OOO Holiday was formed in 2015 by Agata, Bogdan, David, Eva and Filipp to provide travel agency
services. They took equal shares in the company under a shareholders’ agreement. The agreement also
stated that if they should leave the company, they would not set up a business in competition with OOO
Holiday within one year. The charter included discretionary pre-emption rights for the remaining
shareholders in the event of withdrawal but did not include restrictions on alienation of shares.
After only 18 months there were serious disagreements between the shareholders. Agata and David
thought that the company should concentrate on beach holidays. The others believed that focusing on
exclusive holidays for high net worth customers would be more profitable.
Agata and David announced their decision to leave the company. They wrote to Bogdan, Eva and Filipp
stating their wishes to withdraw their share of the charter capital and pursue other business interests.
Before receiving any response from their colleagues, Agata and David took steps to form a closed
company limited by shares to offer a full range of holiday services.
Required:
(a) State the legal and implications of the request submitted by Agata and David to
withdraw from the company. (3 marks)
(b) Explain the potential consequences to Agata and David of their decision to form a new
company in competition with OOO Holiday. (3 marks)
(6 marks)
Question 34 MR CHAIKIN
Mr Chaikin is the only participant and general director of OOO ABC, a limited liability company. He
issued the following power of attorney which was duly signed, sealed and dated 3 October 2017:
“Hereby OOO ABC [all requisites indicated] represented by its general director Mr Chaikin [all
requisites indicated] empowers Mr Boiko [all requisites indicated] to represent OOO ABC in relations
with all individuals and legal entities for the purposes of receiving goods due to OOO ABC according
to the contracts concluded.”
Mr Chaikin gave this same instruction, orally, to Mr Boiko adding “please do your best to establish
relations and conclude contracts with other producers of the same type of goods”.
On 25 April 2018, he concluded a contract to purchase goods in the name of OOO ABC with OOO Y
under which OOO ABC was obliged to make prepayment for the goods.
On 14 May 2017, Mr Chaikin sold his entire share capital of OOO ABC to Mr Ivanov.
Required:
(a) Explain whether Mr Boiko had the right to conclude the contract with OOO Y and who
bears responsibility if the prepayment is not made. (3 marks)
(b) Explain whether the following directly cease on the sale of Mr Chaikin’s share capital to
Mr Ivanov:
(i) Mr Chaikin’s powers as general director; (2 marks)

(ii) the validity of power of attorney issued in favour of Mr Boiko. (1 mark)
(6 marks)

Question 35 NIKITA
Nikita, an individual entrepreneur, specialises in producing educational resources for accountancy

students. She has produced a package of study manuals and computer-based training software for sale
to ACCA students.
Nikita has entered into a commission agreement with OOO CAET to sell 4.000 manuals and 6.000
software packages through an appropriate buyer or to sell the products in the market place. She has
specified the minimum sales prices as 1.000 roubles per manual and 2.000 roubles per software
package. OOO CAET will receive 10.000 roubles for its services.
OOO CAET has entered into a contract for the sale of the manuals at a price of 1,250 roubles per
manual. Sales of software packages are slow, so OOO CAET enters into a contract with OOO TEAC
on the same terms as the original commission agreement. OOO TEAC subsequently sells the software
for 1,500 per package.
After three months, Nikita has not received payment for the manuals.
Required:
(a) Under the contract of commission, state who is responsible for the quality of the
manuals sold and who can enforce the terms of the contract. (2 marks)
(b) Explain who is liable for the shortfall in revenue on the sale of the software. (2 marks)
(c) Explain the extent of OOO CAET’s liability to Nikita for the non-payment of monies
due for the manuals. (2 marks)
(6 marks)
Question 36 OOO TRADE
OOO Trade is an importer and distributor of foodstuffs. It has entered into a contract of commission
with Alexei through which Alexei will sell 100 cases of caviar and 100 cases of wild mushrooms. The
contract stipulates that the caviar and mushrooms will be sold for no less than 5.000 roubles and 2.000
roubles per case, respectively. The agreed commission fee is 25.000 roubles.
Alexei soon found a buyer prepared to pay 7.000 roubles per case of caviar. However, he had difficulty
finding a buyer for the mushrooms and decided to sell them in the general market place for 1.500
roubles per case.
Subsequently, the buyer of the caviar complained that the produce was of inferior quality and stated that
he was considering legal action.
Required:
(a) Explain the obligations of the parties to these transactions to one another for the monies
received for the caviar and mushrooms. (4 marks)
(b) Explain the obligations of the parties for the quality of the caviar. (2 marks)
(6 marks)

Question 37 OOO VENDOR
OOO Vendor decided to sell inventory in order to make space available for new product lines in its
warehouse. It appointed Alexander under a contract of commission to sell 500 cases of chocolates and
500 cases of potato snacks. The contract specified minimum prices for each product as 5.000 roubles
for each case of chocolates and 2.000 roubles each case of potato snacks.
Alexander sold all the cases of chocolates to Rosa for 6.000 roubles per case. However, he could not
find a buyer prepared to pay the minimum price for the potato snacks and eventually decided to sell
them for only 1.500 roubles per case.
Subsequently, Rosa formally complained that the chocolates were of inferior quality and demanded
compensation.
Required:
(a) Explain the obligations of OOO Vendor and Alexander to one another under the
contract of commission. (4 marks)
(b) State the potential liability of OOO Vendor and/or Alexander to Rosa for the inferior
quality of the chocolates. (2 marks)
(6 marks)
Question 38 PAO X
PAO X has 1.000.000 roubles share capital made up of 1.000 shares (800 ordinary shares; 100
preference cumulative shares and 100 preference shares which make no reference to a cumulative
character) with nominal (face) value of 1.000 roubles each. All the preference shares provided for an
annual dividend equal to 10% of their nominal value.
In March 2018, when the financial results of the year 2017 were finalised, the board of directors
prepared for the general meeting of shareholders.
According to the balance sheet the profit after tax for the year was 100.000 roubles. The board of
directors thought that it would be useful to leave 50.000 roubles in the company for reinvestment and to
distribute the other 50.000 roubles as a dividend between the shareholders. No dividends had been paid
for 2015 and 2016.
Required:
(a) If the board of directors’ suggestion of a dividend distribution of 50.000 roubles was
adopted, state the dividend payment due to the holder of each of the three classes of
shares. (3 marks)
(b) Explain the situations in which the law prohibits the payment of a dividend. (3 marks)
(6 marks)

Question 39 OOO MUSICMASTER
Five individuals decided to form a new company, OOO Musicmaster, to retail televisions, DVD players
and computer games consoles. Each of four of the shareholders paid cash for 15% of the shares.
Natasha contributed several premises in return for the remaining 40% and immediately became the
person most involved in day-to-day decision making.
Natasha soon realised that her colleagues did not share her ambitions for the company. They are
reluctant to consider her initiatives for expansion. She is concerned that they want to operate the
business as a “virtual” company. This would mean working from smaller premises, selling off retail
outlets and trading on the internet rather than on a face-to-face basis. Her colleagues have already
decided to sell the main premises contributed by Natasha.
Required:
(a) State how the assets contributed by Natasha in return for shares should have been
appraised. (2 marks)
(b) Explain to what extent Natasha can insist that the premises that she contributed be used
for her initiatives for expansion. (2 marks)
(c) State what action Natasha can take to prevent the sale of premises proposed by the other
shareholders. (2 marks)
(6 marks)
Question 40 PAO VOLATILE
OOO Volatile was established in 2009, manufacturing soft drinks, snack foods and ice cream. The
company funded its activities by issuing ordinary shares and preference shares and long-term loan
capital. The company expanded quickly and management decided to diversify into the markets for
healthy breakfast foods and vitamin supplements.
In 2012, the company transformed into a public joint-stock company, trading as PAO Volatile. By
2014 it suffered a severe downturn in demand and reported losses in three consecutive years. New
management was introduced in 2016 and by 2017 the company reported a substantial profit.
PAO Volatile has now decided to sell its profitable breakfast foods business in order to concentrate on
what it considers to be its core business.
Required:
(a) State how the fluctuating trading performance would have affected the income of the
holders of PAO Volatile’s ordinary shares, preference shares and loan capital. (3 marks)
(b) State THREE circumstances in which the ordinary shareholders of PAO Volatile would
be able to redeem their investments, assuming the company remains a going concern.
(3 marks)
(6 marks)

Question 41 PAO SPORTCLUB
PAO Sportclub is a high profile sports and leisure company that owns a professional football club. The
club has enjoyed considerable success in the last three seasons. Revenues from spectator attendances
have increased and sales of merchandise have become highly profitable. Konstantin is the club’s major
shareholder. He has injected new capital in recent years, but he now has to decide how to fund
ambitious and costly expansion plans for the stadium and sports facilities. His preferred approach is to
issue new shares and he feels that the club’s supporters would be prepared to invest. However,
Konstantin does not want to reduce his personal influence over the company. Marina, the company’s
finance director, has suggested issuing bonds to borrow capital.
Required:
Explain the legal rights and obligations that will be created by funding PAO Sportclub’s future
plans:
(a) by issuing new shares; and (3 marks)

(b) by issuing bonds. (3 marks)
(6 marks)
Question 42 OOO SNACK
OOO Snack operates a popular chain of coffee shops in a large city. It has grown rapidly and is looking
for additional finance to achieve further expansion.
The three main shareholders have approached Vera, a wealthy entrepreneur, to invest in the company.
Vera has been impressed by the company and its vision, but is only willing to invest subject to certain
conditions:
(1) she wants a minimum equity stake in the company of 10%;

(2) she wants to be guaranteed a minimum annual dividend of 10%, which she notes from the
most recent financial accounts and projections would be “easily affordable”.
The main shareholders have agreed to transfer 10% of the total shares to Vera by decreasing their own
shareholdings.
Required:
(a) State the implications of Vera acquiring a 10% equity stake for future decisions and
actions proposed by the shareholders. (2 marks)
(b) Explain the potential consequences of guaranteeing Vera a minimum income of 10%.
(2 marks)
(c) State two ways in which Vera could be guaranteed a return of 10%. (2 marks)
(6 marks)

Question 43 PAO EDUCATE
PAO Educate has training centres in several major Russian cities. The company was founded more
than 25 years ago by Svetlana and Igor. Today, the business is mainly controlled by their three
children, Alexander, Maria and Yevgeni, who each own 20% of the voting shares. Although retired
from active participation in the company, Svetlana and Igor retain 6% of the voting shares. The
remaining shares are held by over 2.000 private investors.
Recently the children have discussed the company’s future. Alexander would like to see diversification
into overseas language schools, corporate training videos and online distance learning products. Maria
strongly disagrees, believing that the company should concentrate on providing excellent service within
the constraints of its existing business model. Yevgeni has expressed no strong views, but is inclined to
favour Alexander’s vision of the future.
Alexander has agreed to purchase Yevgeni’s shares and has further persuaded some of the private
investors holding a further 11% of the shares to sell them to him.
Required:
(a) Explain Alexander’s obligations if he acquires Yevgeni’s shares and those held by the
other investors. (4 marks)
(b) State what actions Maria, Svetlana and Igor could take to limit the power of Alexander
to control the company. (2 marks)
(6 marks)
Question 44 PAO MIX
Anton is the general director of PAO Mix. The board of directors has instructed him to formulate a
plan to address severe cash flow problems arising from adverse trading conditions. Anton proposes two
courses of action.
First, PAO Mix should sell a significant asset, its training centre. As a quick sale is necessary it will not
be possible to sell it at a full market value. Preliminary enquiries have shown little interest from
potential buyers, but Anton knows that a company in which his brother is a major shareholder would
consider the purchase at a substantial discount.
Second, applying the proceeds from this sale to meet immediate cash flow requirements could result in
a significant reduction in the company’s net assets. Therefore, Anton has agreed in principle that
Vladimir, a wealthy individual and current creditor of PAO Mix, will inject cash in return for an equity
stake, if any reduction in net assets affects the company’s minimum statutory capital requirements.
The proposals have been criticised by several shareholders, who feel that they will not safeguard the
company’s future in anything but the short term.
Required:
(a) Explain the legal safeguards that protect the shareholders in connection with the
proposed sale of the training centre. (4 marks)
(b) State the legal implications of the proposed terms of the cash injection. (2 marks)
(6 marks)

Question 45 PAO ZVEZDA
PAO Zvezda, concluded with OOO Technoproject a contract of mandate on placing additional shares of
the company (underwriting). Shares to an amount exceeding 2% of previously placed ordinary shares
of the issuer were purchased by a contract of sale by OOO Ensk.
The general director of OOO Ensk is a member of the board of directors of PAO Zvezda.
A shareholder of PAO Zvezda filed a claim to the arbitration court to recognise the contract of sale void
due to infringement by an interested person of requirements set by the “Law on Joint Stock
Companies”.
The defendants – the issuer, the agent and the purchaser – rejected the claim and stated that the issuer
was not the party to the deal of purchase and-sale of shares, which was concluded by the agent and the
purchaser.
Required:
(a) Explain who the parties to the deal are according to contract of sale of shares of PAO
Zvezda. (2 marks)
(b) Describe how a transaction in which there is interest should be concluded. (2 marks)
(c) State the consequence of non-observance of the approval process and whether a
shareholder has the right to file a claim to arbitration court. (2 marks)
(6 marks)
Question 46 PAO TRUCKING
PAO Trucking operates a fleet of heavy goods vehicles (HGVs) delivering goods throughout Russia
and Eastern Europe. It is owned by 1,200 shareholders. The majority of the shares are held by Peter
and Rosa, who each own 25%, and Anton and Dmitris, who hold 40% between them.
Peter blames the company’s falling profits and recurring cash flow difficulties on maintaining
expensive head office premises in Moscow and the costs of HGV maintenance, repair and replacement.
Peter and Rosa have met to formulate an action plan that involves the sale of the Moscow premises and
head office relocation to leased premises outside of Moscow. They also propose to sell a large
proportion of the HGVs to a willing buyer and lease vehicles instead.
Anton and Dmitris are outraged by the proposals. They argue that the real estate is an appreciating
asset and that Peter and Rosa will sell it for a price substantially below its market value. Anton also
believes that Peter is only prepared to sell the HGVs because Peter’s brother is a major shareholder in
the company that is willing to buy them.
Required:
(a) Explain the procedures necessary to conclude a sale of the head office premises.
(3 marks)
(b) Explain the factors that will determine whether the proposal to sell the HGVs will be a
transaction in which there is an interest and how it should be concluded. (3 marks)
(6 marks)

Question 47 PAO OFFICE
PAO Office is a large company that sells office supplies to businesses in large cities and towns.
Recently it has become less reliant on sales through retail shops and has concentrated on alternative
sales channels, such as the internet and direct mailing. Two consequences of this have been an increase
in the disposals of shops and an increase in acquisitions of land for centralised warehousing.
At the most recent general meeting, several shareholders raised their concerns that PAO Office was
buying and selling land for speculative purposes. They believe that the directors are making an
unacceptable number of deals in real estate that would expose the company to unacceptable levels of
risk. They also pointed out that the company’s charter specifically confines its activities to selling
office supplies. The views of these shareholders are supported by the fact that a significant proportion
of the company’s income had been generated by transactions in real estate.
Required:
(a) Explain the actions that may be taken by the shareholders who object to the increasing
involvement of PAO Office in dealing in real estate. (4 marks)
(b) State the consequences to PAO Office and its directors , if specific transactions are
proved to be inconsistent with the provisions of the charter. (2 marks)
(6 marks)
Question 48 PAO HOPEFUL
The directors of PAO Hopeful have approached Yuri, a successful businessman, to become the
company’s new general director. The company has struggled to achieve growth in recent years and
Yuri has a good track record in reviving the economic fortunes of other major companies.
Yuri is prepared to accept the position subject to several conditions.
(1) The directors of PAO Hopeful must give him absolute power to carry out any transaction on
behalf of the company without power of attorney, so that the company can respond quickly to
urgent business needs.
(2) He must have the authority to take decisions on the future composition of the board of
directors as well as the capital structure of the company.
(3) He must be allowed to serve on the board of directors for a minimum term of five years,
during which he will be guaranteed a specified minimum return on any shares he holds in the
company.
Required:
(a) State the extent to which the directors can give Yuri power to enter into transactions on
behalf of PAO Hopeful. (2 marks)
(b) Explain whether Yuri can determine the composition of the board of directors and the
capital structure of PAO Hopeful. (2 marks)
(c) Discuss whether Yuriy can be guaranteed a specified minimum return for five years.
(2 marks)
(6 marks)

Question 49 OOO SPORT
In 2015, OOO Sport, a retailer of sports clothes and equipment, ran into serious financial difficulties.
Under pressure from suppliers, the board of directors met to consider the company’s cash flow
problems. It decided that the company’s range of suppliers must be broadened in order to reduce the
costs of goods sold and increase gross profits. Dmitriy, the chief executive officer, was given authority
by the board to take the necessary steps to bring about this change.
Dmitriy entered into a contract with OOO Shirt, a new supplier, to buy football shirts to sell to
supporters of popular Russian and international football teams. However, as many football clubs
regularly change the design of their shirts, and the purchases were made when many clubs were doing
so, OOO Sport quickly discovered that much of the new inventory could not be sold. Potential
customers preferred to wait to buy new designs.
Two years later OOO Sport’s creditors petitioned the Arbitrazh Court for the bankruptcy of the
company. During the bankruptcy process, it was discovered that Dmitriy’s brother-in-law had owned a
28% stake in OOO Shirt for many years.
Required:
(a) State Dmitriy’s authority to enter into the contract with OOO Shirt and his
accountability for the purchase. (2 marks)
(b) Explain the legality of the transaction between OOO Sport and OOO Shirt. (2 marks)
(c) State the grounds on which the transaction may be determined to be invalid during
bankruptcy proceedings. (2 marks)
(6 marks)
Question 50 PAO CLOTHES
PAO Clothes, a fashion retailer, has 300 shops in various cities and towns. The company is highly
successful and has grown rapidly, with total assets of 3.500 million roubles.
The directors have agreed that PAO Clothes will pay 2.000 million roubles to acquire stores currently
owned by PAO Garb, a competitor. However, it will be necessary for PAO Clothes to increase its
gearing significantly in order to complete the transaction.
The directors of PAO Clothes have also decided to rationalise the company’s supply chain by entering
into a five-year contract with PAO Fabric, which will become the sole supplier of cotton and denim
products.
Some shareholders have become aware of these initiatives and have written to the company expressing
their concerns that the proposals are extremely risky. They feel that the acquisition of stores from PAO
Garb is sufficiently important to be referred to a shareholders’ meeting. It has also been asserted by a
prominent shareholder that several of the directors of PAO Clothes have shares in PAO Fabric.
Required:
(a) Explain the legality of the agreement to acquire stores from PAO Garb. (3 marks)
(b) State the extent to which those responsible for the management of PAO Clothes may be
held liable if the change in supplier policy brings eventual harm to the company.
(3 marks)
(6 marks)

Question 51 A, B, C AND D
The share capital of a public joint-stock company amounts to 10 million roubles and is divided into
10.000 ordinary shares. The shareholdings are as follows:
A – 4.000 shares
B – 2.000 shares
C – 2.700 shares
D – 1.300 shares
A general meeting of the shareholders was convened. The agenda of the meeting called for a vote on
two resolutions; on the annual dividend payment and the future reorganisation of the company.
Only Shareholders A and B were present at the meeting; Shareholders C and D did not attend.
Shareholder A voted “for” both resolutions; Shareholder B – voted “against” both resolutions.
Required:
(a) Explain whether the general meeting was empowered to vote on the two resolutions.
(4 marks)
(b) State whether the decisions on the following were legally adopted:
(i) on dividend payments;

(ii) on reorganisation of the company. (2 marks)
(6 marks)
Question 52 OOO SIGNET
A general meeting of the shareholders of OOO Signet was held to approve a major transaction.
The charter capital of the company is divided into 100 ordinary shares between five shareholders as
follows:
A – 45 shares
B – 25 shares
C – 10 shares
D – 12 shares
E – 8 shares
Shareholders A, B and C voted “for” conclusion of the transaction, Shareholder D voted “against”.
Shareholder E did not attend the meeting.
Shareholders C, D and E are now considering submitting applications to redeem their shares.
Required:
(a) Explain the validity of the decision of the general meeting to conclude the major
transaction. (3 marks)
(b) Explain which shareholders have the right to demand redemption of their shares and to
whom and by when their applications must be submitted. (3 marks)
(6 marks)

Question 53 PAO CAET
The Annual General Meeting of PAO CAET is to be held in six months’ time. The board of directors is
particularly anxious to ensure that the process of convening and holding the meeting runs smoothly.
Last year, several influential shareholders made it clear that they were dissatisfied with the organisation
and administration of the meeting and that they expect significant improvements in the future.
The directors are also aware that some shareholders are becoming impatient with the progress of the
company and feel that its financial performance should be much better. The shareholders are also
dissatisfied with the level of dividends recommended by the board of directors.
One of the dissatisfied shareholders has formally requested details of how he can convene a formal
meeting of shareholders.
Required:
(a) State the legal provisions that apply to cumulative voting and comment on how this may
influence the exercise of power and authority of PAO CAET. (3 marks)
(b) Explain the factors that will determine whether or not the dissatisfied shareholder can
convene a meeting. (3 marks)
(6 marks)
Question 54 MIKHAIL
OOO ABC operates in the highly competitive field of ladies’ fashion goods and accessories. Mikhail
has been employed as the general director for the last two years on a fixed term contract which due to
expire in three years’ time. He also owns 15% of the company’s ordinary shares.
One day, Olga, the finance director is looking for a document in Mikhail’s office and sees a business
card on his desk. The card is that of the President of OOO XYZ, which is OOO ABC’s main
competitor. Olga then finds correspondence with the President of OOO XYZ that includes confidential
information about OOO ABC’s sales and performance and a commentary on future business strategy.
Olga reports her findings to another director, who confronts Mikhail on the matter. Mikhail responds
that the President is a personal friend and that they merely share ideas about the industry and that
networking is a normal business practice. When challenged, Mikhail acknowledges that he holds
shares in OOO XYZ.
Required:
(a) Explain the grounds on which the board of directors can dismiss Mikhail. (2 marks)
(b) Explain whether the company can remove Mikhail as a shareholder. (2 marks)
(c) Explain Mikhail’s rights, if any, as a shareholder if he is dismissed as a director.

(2 marks)
(6 marks)

Question 55 ALEXANDER
Alexander has been the general director of OOO JKL for three months. His fixed-term contract is for
two years and he owns 12% of the company’s shares.
The internal auditor recently informed the board of directors that he has come across records of on-
going discussions between Alexander and key executives of OOO PQR, the company’s main
competitor. These records include sensitive information on OOO JKL’s sales performance and
marketing plans which have clearly been discussed with executives OOO PQR.
When the board of directors asked Alexander to explain his actions, he replied that it is common
business practice to interact with other influential people in the industry for the mutual benefits of their
companies.
The board of directors is not satisfied with Alexander’s response and are considering his future position
in the company, as well as any action that they may take to remedy any losses suffered by the company
as a result of his actions.
Required:
(a) Explain the potential actions that may be instigated by OOO JKL against Alexander.
(3 marks)
(b) Explain the actions that Alexander may take to defend his position. (3 marks)
(6 marks)
Question 56 PAO RELAX
PAO Relax operates a chain of hotels and leisure centres in several Russian cities. Last year, the
newly-appointed chief executive officer, Tamara, persuaded the board of directors to diversify the
business into health clubs despite opposition from some shareholders.
The diversification has been a disaster. The health clubs have insufficient business to cover the costs of
running them. PAO Relax is faced with the prospect of closing them down or selling this part of the
business at a huge loss.
A group of shareholders that collectively holds 8% of the ordinary shares believes that the initiative has
caused irreparable damage to the company. The shareholders have been backed by three directors who
opposed the initiative but were out-voted by the other seven directors. The opposing directors believe
that their colleagues who supported Tamara’s proposals made no real effort to understand the market.
They can also provide documentary evidence that the decisions taken were based on incomplete and
inaccurate information.
Required:
(a) Explain the actions that the shareholders who own 8% of the shares in PAO Relax could
take to address their concerns. (3 marks)
(b) Explain the potential accountability of Tamara and the other directors of PAO Relax for
the losses sustained by the company. (3 marks)
(6 marks)

Question 57 OOO PERITUUS
OOO Perituus is going through bankruptcy proceedings. The company’s property consists of part of a
municipal kindergarten building, a warehouse building and 730.000 roubles in a bank account.
The claims of the creditors of the company include the following:
Employees (100 individuals) working under an employment contract – 1.200 roubles monthly
has not been paid for three months;
Taxes payable – 20.000 roubles;
Indebtedness:
Loan from bank X – 2.500.000 roubles;
Loan from bank Z (secured by mortgage of the warehouse) – 1.000.000 roubles;
Other creditors (goods provided) – 1.750.000 roubles
Required:
(a) Explain what constitutes the bankruptcy estate of OOO Perituus. (2 marks)
(b) Explain the procedure for the sale of the warehouse. (2 marks)
(c) State the turn of satisfaction of the claims of the creditors of OOO Perituus. (2 marks)
(6 marks)
Question 58 PAO KRAITEPLOENERGO
In 2018, PAO KraiTeploEnergo, filed a claim against OOO KTC to the arbitration court, to recover a
debt for heat energy consumed amounting to 3 million roubles.
While considering the case, the arbitration court found out that in 2017 a bankruptcy adjudication was
initiated with respect to OOO KTC, with PAO KraiTeploEnergo being a creditor. In October 2017 the
arbitration court approved the composition signed between the debtor and the creditors during the
observation procedure and terminated the proceedings. According to the composition, the debt of OOO
KTC to PAO KraiTeploEnergo amounted to 150.000 roubles.
Filing the claim in 2018, PAO KraiTeploEnergo referred to the fact that the arrears stated in the
composition did not include the debt for heating a number of premises. Therefore, the right to recover
all arrears should be protected by means other than bankruptcy adjudication.
Required:
(a) Explain what is meant by “composition” in bankruptcy adjudication procedures.

(3 marks)
(b) Explain whether the claim of PAO KraiTeploEnergo can be considered as a separate
claim not related to bankruptcy adjudication. (3 marks)
(6 marks)

Question 59 PAO FAIL
PAO Fail is insolvent and its assets are about to be liquidated to satisfy its outstanding obligations. Its
obligations include:
accounts payable to trade suppliers;
a large monetary claim awarded by the court to a contractor for personal injury sustained due
to the fault of PAO Fail;
unsecured loans to a bank;
loan capital due to bond holders; and
share capital.
The liquidation process has been complex and time consuming, and therefore substantial liquidator’s
fees and costs also have to be paid.
The company’s assets have been depleted and the liquidation process has only realised the value of
inventory and a small amount of accounts receivable. However, the liquidator has discovered that one
month before the insolvency procedure commenced, the company repaid a substantial bank loan that
was secured by the personal guarantees of the directors.
Required:
(a) Explain the order in which the obligations will be met from the realised assets of PAO
Fail. (4 marks)
(b) Explain what action, if any, the liquidator can take in relation to the repayment of the
loan. (2 marks)
(6 marks)
Question 60 OOO FLOP
A bankruptcy petition was granted by the court against OOO Flop in November 2017. Detailed
investigations of the company’s affairs carried out by the external manager have revealed two
suspicious transactions.
In December 2015, the board of directors sanctioned the sale of a warehouse for 5 million roubles. The
title of the warehouse was transferred to a company whose managing director married the finance
director of OOO Flop in August 2016. According to experts consulted by the external manager, the
estimated market value of the warehouse at the time was 8 million roubles.
In October 2017, the company repaid a loan of 2.500.000 roubles in full. This loan was supported by
the personal guarantee of a member of the board of directors of OOO Flop.
Required:
(a) Explain the potential consequences of the sale of the warehouse. (4 marks)
(b) State the implication of the repayment of the loan by OOO Flop for the creditors’
claims. (2 marks)
(6 marks)

Question 61 ARTEM
Artem, a Russian national, has been living abroad for the last three years. Having returned to Moscow
he plans to buy a plot of land being auctioned by OOO Novie Doma. He knows the company’s
managing director and offers him, personally, 1.000.000 roubles cash to arrange that the plot be sold to
him privately, not by auction. The director declines the offer and when the plot goes to auction Artem
is outbid by another buyer.
Required:
(a) State whether criminal or civil action, or both, can be taken in relation to bribery.
(2 marks)
(b) Explain whether any criminal offences relating to bribery have been committed by
Artem. (2 marks)
(c) Explain the liabilities of the managing director if he had accepted the offer and
arranged for a private sale. (2 marks)
(6 marks)
Question 62 ANNA AND NIKITA
Anna is the executive responsible for information technology in PAO Target. Her senior colleagues
asked her to participate in confidential discussions regarding the compatibility of the company’s
information systems with those of a competitor. Representatives of both companies attended the
meeting and, from the discussions that took place, it was obvious that the companies had entered into
merger negotiations. Anna then purchased shares in both companies in anticipation of making a future
capital gain.
Niko inherited a large sum of money from his father. He invested this in the shares of his employer,
which is a company listed on the stock exchange, bidding up its share price. Immediately after doing
so, he sold the shares for a large profit.
Required:
(a) Explain why Anna’s behaviour will expose her to criminal charges for insider dealing.
(3 marks)
(b) Explain what criminal charges, if any, may be brought against Niko. (3 marks)
(6 marks)

Question 63 IOSIF
Iosif is an accountant and one of his clients, Jet, runs an illegal operation as well as some other
legitimate businesses. Jet approached Ian for advice regarding how he should deal with the gains he
makes from the illegal operation.
Iosif suggested that Jet should use his legally made money to buy the local football club, Kickers, with
the intention of passing his gains from the illegal operation through its accounts.
Iosif reasoned that it would be easy to mingle the illegal money with the football club’s legitimate
receipts.
Jet accepted the proposal, bought the club, appointed Ian as its finance director and together they passed
the illegal money through the football club. Leo, the long-term team manager of Kickers, has noticed
the increase in the club’s income, but is concerned that the extra money is going to Jet as the owner,
and not being used to finance the club.
Required:
(a) State the TWO criminal offences associated with money laundering other than money
laundering. (2 marks)
(b) Explain the liabilities of Ian and Jim under money laundering legislation. (4 marks)
(6 marks)

MCQs 1 SOURCES OF LAW
Item Answer Justification
1.1 B The Russian legal system is a civil system as the law is derived primarily from
specific codes. A common law system, such as in the UK, derives its law primarily
from judicial decisions.
1.2 A Sources of Russian law include: universally accepted principles and provisions of
international law; international treaties of the Russian Federation; regulatory legal
acts; and treaties of the Russian Federation with its subjects. Russia rejects legal
precedent as a source of law.
1.3 D An international treaty takes precedent over the law of the Russian Federation if the
treaty has been ratified by the State Duma and Federation Council.
1.4 A The Russian legal system is a civil system, which means the law is derived
primarily from specific codes. Public, not private, law regulates relations between a
citizen and society. Constitutional, administrative, financial and penal (criminal)
law and branches of procedural law are a part of these relations.
Private law regulates relations between subjects of the law on the bases of their
mutual obligations. These relations include civil, labour, family and other branches
of the law.
Tutorial note: A common law system, such as in the UK, derives its law primarily
from judicial decisions.
1.5 C The Constitution of the Russian Federation serves as a bill guaranteeing the human
rights of Russian citizens. The Constitution is the supreme regulatory legal act
holding the highest juridical power, superiority and direct action on Russian
territory.
Tutorial note: Regulations of international treaties hold precedence over the law
of the Russian Federation that is subordinate to the Constitution.
1.6 B Federal laws are regulatory legal acts adopted by the supreme representative body
(the Federal Assembly) and possess the highest juridical power. Laws and decrees
of the subjects of the Federation are subordinate to federal laws, as are acts (as
opposed to laws) of the government of the Russian Federation and regulatory acts of
federal bodies of the executive power.
1.7 B Accomplishment (use) of the law is the active realisation by subjects (citizens,
organisations, state bodies) of opportunities included in the law. Forbidding
provisions and prohibitions are part of the observance form of law implementation.
Enforcement of laws is its own form of implementation; it is not part of
accomplishment.
1.8 D A special form of law realisation is its enforcement. The peculiarity of this form is
that it is executed by the competent bodies and may spread to an indefinite number
of persons.
1.9 A Compulsory military service is an example of execution of laws, which involves the
carrying out of obligatory provisions. Law enforcement is required when
implementation of the law is impossible without the interference of the State, its
bodies or officials.

1.10 B A law lacuna is the absence of a necessary provision for the resolution of an issue
that should be regulated by law.
1.11 C A law lacuna is the absence of a necessary provision for the resolution of an issue
that should be regulated by law. The principal way to eliminate the law lacuna is
through application of analogy of law (i.e. application of a provision of law
regulating similar relations). Also, at the very highest level, the President is
empowered to issue a decree to eliminate the law lacuna.
Tutorial note: Analogies take place in Russian law-enforcement practice, but are
prohibited in the administrative and penal laws.
1.12 C The Constitution is the supreme regulatory legal act. Decrees of the President may
not contradict the Constitution. The Constitution is the foundation on which the
legal system is based. It sets out the basic features of the constitutional system, the
framework through which laws are created including the “organs” of government
and provides for amendment to the Constitution and defines the scope and limits of
constitutional law.
1.13 D Legislative bodies of the subjects of the Federation may submit draft laws, but the
subjects themselves may not.
1.14 B A simple majority is all that is required for initial passage.
1.15 A Two-thirds of the Deputies of the State Duma and of the members of the Federal
Council are required to override a veto by the President.
1.16 C Providing for the coordinated functioning and interaction of bodies of state power is
a legitimate function of a Presidential decree.
1.17 A Acts of the Government are deemed obligatory on the entire territory of the Russian
Federation and the President may abolish government acts that contradict the
Constitution. The President may also, however, abolish government acts that
contradict a Presidential Decree. Finally, acts of the Government of the Russian
Federation are subordinate to law and even subordinate to decrees.
1.18 A Acts intended to apply to citizens generally and not merely to the inner workings of
the issuing ministry must be published.
1.19 B Public referendum is not used to settle a conflict of laws.
1.20 D The treaty prevails.
1.21 A The Constitution is considered superior to an international law, so amending the

Constitution is the most correct choice among those given. The President may not
alter the Constitution by decree. C is an incorrect statement of law. Although D is
a possible course of action, A is the more certain way to achieve a binding treaty.
1.22 B Interstate and inter-governmental are categories of treaties. Supranational is not.
1.23 C This is a “vertical” conflict of law and, in such an instance, the law issued by the
higher body prevails. The President may have the power to issue a decree but is not
required to do so.

1.24 A The President has the power to overrule both acts by Presidential decree.
Otherwise, the later of the two acts will prevail. Neither legal act will apply if they
violate a treaty.
1.25 A It does not matter that the new legislation was passed after the treaty was ratified
and a Presidential decree would not affect the outcome one way or another.
MCQs 2 COURT STRUCTURE
2.1 B Crown courts are not found in the Russian judicial system.
2.2 A Constitutional cases are in the jurisdiction of the Constitutional Court, not the courts
of general jurisdiction.
2.3 A Courts of general jurisdiction consider all disputes except those in the jurisdiction of
the Constitutional Court and the arbitration courts.
2.4 B Major level courts are the district (city, municipal) courts. According to the
established rule these are courts of first instance with respect to the majority of
cases being considered (including civil, criminal and administrative matters). Thus,
they do not hear appeals. The city courts of Moscow and Saint-Petersburg are
medium level courts. The Constitutional Court has jurisdiction over constitutional
cases.
2.5 D Medium level courts are the supreme courts of the republics of the RF, regional
courts, city courts of the cities of Moscow and Saint-Petersburg and courts of
autonomous districts and regions. In general, they are deemed to be courts of
second instance (courts of appeal). That is, they consider appeals of lawsuit
participants and check compliance with law and the validity of sentences and other
court rulings not yet enacted. However, these courts have a dual function as they
may also act as courts of first instance when considering specific categories of cases
particularly dangerous for society.
2.6 B The Supreme Court acts as a court of first instance with respect to criminal (penal)
cases of extra complexity and any civil cases. This court may consider appeals and
contests of court rulings not yet enacted (either in the course of planned supervision
or in the event of the discovery of new case circumstances).
2.7 D Economic disputes over entrepreneurial activity are initially heard in federal
arbitration courts of subjects of the Russian Federation. Arbitration courts of
federal districts act as courts of cassation or annulment.
2.8 C Because the case does not concern entrepreneurial activity, the arbitration court will
not have jurisdiction and the case will be heard by a major level court of general
jurisdiction (unless it involves constitutional claims).
Tutorial note: A regional court is at the medium level in the hierarchy of courts of
general jurisdiction. Although these may act as courts of first instance (when
considering specific categories of cases particularly dangerous for society), in
general they are deemed to be courts of second instance (courts of appeal).
2.9 C Arbitration courts do not consider disputes in which the parties are not
entrepreneurs.

2.10 D Arbitration courts deal with economic disputes related to entrepreneurial activity.
Arbitration courts do not consider disputes that, although related to economic
relations, pertain to the penal sphere of legislation. The ministry’s ban is more
penal in nature, so even though the issue relates to economics, the matter would be
outside the jurisdiction of the arbitration court.
2.11 B Arbitration courts deal with economic disputes related to entrepreneurial activity. The
cases in (3) and (4) do not involve adjudications related to entrepreneurial activity
and would be properly brought before a court of general jurisdiction.
2.12 A The initial level of arbitration courts, unlike courts of general jurisdiction, is not
district courts but courts of subjects of the Russian Federation. According to the
general rule, these courts (of which there are more than 80) are deemed to be courts
of first instance in consideration of economic disputes.
2.13 C Because the parties are entrepreneurs, the case would be heard by an arbitration
court in Saint Petersburg, which is where the defendant is located.
2.14 C Where the defendant’s residential location is unknown the jurisdiction is either a
court at the location of the defendant’s property or a court at the defendant’s last
known location.
Tutorial note: The rule of alternative jurisdiction also covers contract disputes:
these disputes are ruled either at the location of the defendant or at the location of
execution of the contract (if the contract stipulates such a location).
2.15 A Parties may determine a court’s jurisdiction upon their mutual consent stipulated in
an appropriate contract (except for jurisdiction over disputes on real estate).
Because Alexei and Neda’s partnership agreement stipulates the court, that
agreement will govern.
2.16 C A citizen may properly bring a claim before the Constitutional Court alleging that a
federal law has infringed his constitutional rights. Citizens may file their claims to
the Constitutional Court if their constitutional rights and liberties were infringed by
a law enforced or to be enforced (not by actions of other citizens). Regulatory legal
acts that infringe constitutional rights must be appealed to courts of general
jurisdiction.
2.17 B Mikhail has not alleged a violation of his constitutional rights. In order to be heard
by the Constitutional Court, a claim must allege violation of a constitutional right or
liberty.
Tutorial note: Citizens and groups of citizens, including legal entities and public
organisations, may file claims in the Constitutional Court.
2.18 D The law appealed against has to be (or is to be) enforced in a particular legal case
already considered (or being considered) by a court or other juridical body.
2.19 C Under the rules of jurisdiction, an arbitration court cannot properly hear a case that
does not involve entrepreneurial activity, so the elements of C must be true if the
arbitration court is to accept the appeal in this case.
2.20 B According to the Constitution of the Russian Federation justice is administered by

the courts alone and judicial power is exercised by means of constitutional, civil,
administrative and criminal proceedings. Trial by a jury applies only in cases fixed
by the justice of federal law.

2.21 C Judicial precedent is applied in common law jurisdictions. The Russian legal
system is a civil law (codified) system that does not rely on judicial precedent. The
other three items are all roles fulfilled by a judge.
2.22 B Trial by a jury applies only in cases fixed by the justice of federal law.
2.23 A The judge determines the sentence or penalty.
MCQs 3 CONSTITUTIONAL RIGHTS
3.1 C The club is not a legal entity because it has no property of its own and no defined
structure. Therefore it does not have the right to bring a claim in this case. That
right belongs only to the individual owner of the doll.
3.2 A The relationship between government regulatory agencies and the President is not a
subject covered by the Civil Code. The other three subjects are specifically
addressed by the Code.
3.3 C This is the definition of entrepreneurial activity found in the Civil Code. The Civil
Code emphasises that civil legislation also regulates relations between persons that
perform entrepreneurial activity.
3.4 C Both legal entities (such as companies) and individual citizens are required to
register as entrepreneurs in order to engage in entrepreneurial activity.
3.5 B Generally debtors may be exempt from failure to discharge obligations if it is not
their fault. However, debtors who fail to meet their debts (or meet them duly) while
performing entrepreneurial activity bear responsibility regardless of their fault.
Disputes regarding entrepreneurial activity are heard by the Arbitration Court.
3.6 C Participation in entrepreneurial activity is regulated and is not a right and is limited
under Russian law. Passive capacity is the capacity to possess civil (property) rights
and to bear duties. All citizens, from birth till death equally possess civil passive
capacity.
3.7 B A minor (child under 16) has no active capacity but can own and inherit property
but cannot dispose of property without someone else’s approval.
3.8 D Active capacity is the capacity to execute property rights and property obligations
by one’s own actions. A person attains full active capacity on reaching the age of
18 . Active capacity can be gained before reaching 18 years of age (emancipation)
by (i) working under a labour contract or engaged in entrepreneurial activity with
parental consent or court approval (ii) marriage.
3.9 C Children from 14 to 18 years old have only partial active capacity, but their rights
are more extensive than those of younger children. They have rights to manage
their salary and student grants independently, deposit funds in banks and dispose of
these funds, be a member of a co-operative (from the age of 16) and exercise rights
of an author or inventor.
3.10 B A legal entity is an organisation, that owns property and that is responsible for its
obligations with regards to that property. That organisation may also, on its own
behalf, acquire and execute property rights and non-property rights, bear obligations
and be the plaintiff and the defendant in court.

3.11 A Possessing its own property is the essential characteristic of a legal entity. An
organisation may or may not be required to register.
3.12 D The second major characteristic of a legal entity incorporated in its definition is its
responsibility for property. The third characteristic of a legal entity is its ability to
act in the civil matters on its own behalf (e.g. in concluding contracts). Finally, the
fourth characteristic, not mentioned in the Civil Code directly, but implied by it, is
usually called “organisational unity” in that a legal entity possesses a corresponding
stable structure.
3.13 A In general, the company is viewed and treated as a separate entity from its
shareholders and officers. Those individuals are not directly liable for the debts or
obligations of the company.
3.14 C In general, just as the officers and shareholders of a corporation are not liable for the
debts of the corporation, the corporation is not liable for the debts of its
shareholders and officers.
MCQs 4 CONTRACT LAW
4.1 C In the majority of cases only parties to a contract can enforce its provisions. This
concept is described as “privity.”
4.2 A In assessing the amount of damages, consideration will also be given to whether the
injured person could have mitigated his loss. The court has the right to reduce an
award of damages caused by the fault of the creditor.
4.3 D A contract requires four basic elements: (1) an agreement of terms between parties
(formed by an “offer” and an “acceptance”); (2) promises of parties supported by
some consideration; (3) capacity of parties to enter into a contract and free consent;
and (4) a legal purpose. Contracts may be written or oral.
4.4 B The contract is regarded as concluded if the parties have agreed on all its essential
terms in a proper form set for similar kinds of contract (consensual contract).
Consideration is an essential element of a contract, but does not affect when the
contract is regarded as concluded. Only certain contracts require notarisation.
4.5 C The following terms are recognised to be essential: the object (i.e. subject matter) of
the contract; the terms defined as essential by the law or in other legal acts (e.g.
according to the Civil Code an essential term of contracts of retail trading is the
price for the goods); and all the other terms by which agreement is to be reached.
4.6 B A dispositive norm is a default term that is applied unless the parties agree to the
contrary. A dispositive norm is discretionary as the parties may either exclude its
application or introduce a term that deviates from that norm. If parties do not agree
to either of these actions, the contract term, by default, is regulated by the
dispositive norm.
4.7 A A contract may be concluded according to the general procedure established by the
Civil Code; compulsorily; or by a tender. Expiry is lapse of time and, as such, it
may terminate an offer but does not conclude (form) a contract.

4.8 B An offer is the proposal to conclude a contract. It must be addressed to one or to

several specific persons, be sufficiently comprehensive, express intention to
conclude the contract and contain essential terms of the contract. It cannot be so
general as to prompt a response from an unlimited number of persons.
Advertisements addressed to an indefinite number of persons, merely supply

information and are an “invitation to treat”.
4.9 C The offer, received by the addressee, cannot be revoked (i.e. withdrawn) during the
time set for its acceptance, unless otherwise stipulated in the offer itself or if it
follows from the substance of the proposal.
Tutorial note: The person forwarding the offer is committed to it from the moment
of its receipt by the addressee, not from the moment the offer is sent. If the
addressee receives notification about the recall of the offer before (or
simultaneously with) the offer, the offer is regarded as not received.
4.10 B A public offer is a proposal that contains all the essential terms of the contract;
displays the will of the person, who is making the proposal, to conclude the contract
on those terms with any responding person and is binding only for commercial legal
entities (not individual citizens). It can be accepted by any responding person; there
is no restriction to commercial entities.
4.11 C Only a person or entity to whom the offer is directed may accept it. That may
include more than one person or entity, but it must be one to whom the offer was
specifically directed.
4.12 A In the majority of cases only parties to a contract can enforce its provisions. This
concept is described as “privity.” Silence or inaction generally cannot be regarded
as acceptance. Thus, a party is not bound by receipt of an offer that states “if I do
not hear from you, I consider the offer accepted”.
Tutorial note: Silence can be a valid acceptance if it follows from law, customs of
the business, or the former business relations between the parties.
4.13 B An answer, indicating the consent to conclude the contract on the terms other than
those indicated in the offer, cannot be regarded as the acceptance. Such an answer
is actually a refusal of the offer and forms a new offer (counter offer) instead. Since
Boris’s answer contained a different price term from the offer, it was a rejection of
Aleksandra’s offer.
4.14 A In general, an offer may be terminated at any time prior to acceptance. Once an
offer has been terminated it cannot be accepted. Despite the time specified in the
offer, an offer is terminated by rejection (including by counter offer) or the death of
an individual or liquidation of a legal entity.
4.15 D An offer is irrevocable during the period established for its acceptance. An offer
may be terminated at any time prior to acceptance. The offer is irrevocable when
the offeree begins performance, not when performance is complete. An offer may
be open for any length of time. If no time is specified in the offer or by law, the
offer may be accepted for a reasonable time.
4.16 D The contract may be concluded in any of the following forms: written form (simple
or notarial); orally; by concluding actions (when the behaviour of the person clearly
testifies to his will to conclude the contract, such as by the purchase of goods); by
silence (only in cases stipulated by the law or an agreement between the parties).

4.17 B The simple written form is compulsory for contracts of legal entities between
themselves and with citizens; and contracts between citizens to the sum of at least
10 times exceeding the minimum monthly pay.
4.18 C Minimum monthly pay is set by the government of the Russian Federation. It is an
amount that nobody actually receives as pay. Rather, it is a yardstick for certain
calculations and is revised upwards periodically. One of its uses is to specify
multiples to set certain fines, sanctions and penalties.
4.19 D The notarial written form is compulsory in cases, pointed out by law (e.g. transfer of
a share in an LLC) and in cases, stipulated by the parties’ agreement, even if this
form is not required for the given kinds of contract by law.
4.20 A The non-observance of the notarial form of the contract entails its invalidity. Such a
contract is regarded as null and void. By contrast, non-observance of the simple
written form of the contract merely deprives the parties of the right to refer to the
testimony for confirmation of the terms.
4.21 D A contract for which no written form has been stipulated by the law or the
agreement between the parties may be concluded orally. Unless otherwise ruled by
the agreement, all contracts executed at once may be concluded orally, except
contracts requiring notarisation and those recognised as invalid if concluded other
than in the simple written form. Thus, a contract concluded orally remains valid
even if a simple written form is required, provided that the law does not render the
contract invalid for improper form (e.g. foreign economic contracts).
4.22 A When checking the discharge of a contractual obligation it is necessary to ascertain

whether the action was performed and in what way (the character of its discharge).
The Civil Code differentiates between failure to discharge obligations and failure to
discharge obligations properly.
4.23 B The contractual obligation is regarded as discharged by a proper person if that

person is: the debtor or one of the joint debtors; a third person, provided the debtor
does not have a legal duty to discharge the obligation in person; or a third person
who may lose his right to the property of the debtor (e.g. the right of a lease or
mortgage) if the creditor seizes (“levies execution on”) it and, at his own expense,
satisfies the creditor’s claim without obtaining the debtor’s consent.
4.24 C A proper place of discharge may be defined by law, the contract or follows from the
customs of business (or the substance of the obligation). If the place of discharge is
not defined, the place for transferring a land plot, building, structure, or other
immovable property is the location of the property.
4.25 D The debtor is obliged to recompense to the creditor the losses, caused by the non-
discharge or the improper discharge of the obligations. The losses must be defined
as the damage de facto plus “profit loss”.
4.26 C Discharge in advance of the deadline is generally permitted, unless otherwise

stipulated by the law, other legal acts, or the terms of the obligation.
4.27 A Pecuniary obligations must be expressed in roubles.
Tutorial note: The obligation may stipulate that it is payable in roubles equivalent
(e.g. to a stated amount of foreign currency). In that case, the amount liable to
payment in roubles is defined in conformity with the official exchange rate of the
corresponding currency on the day of the payment, unless a different exchange rate
or another day has been established by the law or the parties’ agreement.

4.28 D There are four generic ways in which a contract may be terminated: discharge,
agreement, cancellation and breach. A concluding action refers to a manner of offer
acceptance and pledge is a form of security.
4.29 C A contract may be cancelled when it is impossible to fulfil the obligations included
in it (e.g. on death of a natural person or liquidation of a legal entity that is party to
the contract).
4.30 B Breach occurs when one party fails to meet the obligations of the agreement and can
result in termination of a contract. The other party usually has the right to pursue
financial or other redress (for financial loss or inconvenience).
Privity concerns the parties to the contract. Consideration is the value supporting
the contract, and novation is the replacement of one contract with another.
4.31 A The consequences of trying to recover reimbursement of loss from a debtor with
insufficient funds may be avoided by “obligation security means”. The Civil Code
allows for obligations to be secured by various means, such as forfeit, pledge,
withholding, retention of property, surety, bank guarantee and earnest money.
Discharge, damages and consideration are not methods of obligation security.
4.32 B A forfeit (fine, penalty) is a sum of money which the debtor is obliged to pay to the
creditor in case of his non-discharge (or improper discharge) of his obligation (i.e.
breach). A forfeit agreement must be written form, irrespective of the form of the
principal agreement.
Not all forfeits are contract forfeits. Depending on the document that provides for a
forfeit, it may be either a contract forfeit or a legal forfeit (i.e. stipulated by law).
The court has the right to reduce a penalty that is disproportionate to the
consequences of violating the principal agreement (i.e. heavily punitive) but not
increase or decrease the forfeit stipulated in the contract.
4.33 A A pledge is a means of securing an obligation so that the creditor (the pledgee) has
priority in the property pledged. In the case of the debtor’s non-discharge of this
obligation the debt would be paid off from the sale of the pledged property.
4.34 B The subject matter of the pledge may be tangible assets (e.g. immovable property or
inventory) or intangibles (e.g. rights to intellectual property or know-how) but
excluding property prohibited by law (e.g. weapons, drugs) and property rights
inseparably linked with the creditor’s personality (in particular, claims for alimony
and for compensation for harm inflicted to life or health).
4.35 C The pledger bears the risks of accidental loss or damage of the pledged property,
unless otherwise stipulated in the contract of pledge.
The pledgee is liable for the full or partial loss or damage to the object of pledge,
transferred to him, that occurs through his fault (intention or imprudence) or in the
course of entrepreneurial activity (unless caused by force-majeure).
4.36 C A surety is one who guarantees the performance of another. The surety is obliged to
a creditor for the discharge of the obligation of another in full or in part. A contract
for surety must be legalised in written form or it is invalid. Here, the promise was
over the phone. Thus, the contract for surety is invalid and Catryn is not bound.

4.37 A The principal pays to the guarantor a reward for the issue of the bank guarantee.
There is no time limit on the guarantee other than the term fixed in the guarantee.
The bank guarantee may not be revoked by the guarantor, unless otherwise
stipulated in it.
4.38 B If Boris is the party liable for the non-discharge of the contract, he is obliged to
compensate Selianka’s loss with the offset of the amount of earnest money unless
otherwise stipulated by the contract. If a buyer backs out for a reason not covered
by any contract contingency, the buyer forfeits all of his earnest money. If the
responsibility for the non-performance of the contract lies with the recipient of the
earnest money, he is obliged to pay to the other party double the amount of the
earnest money.
Tutorial note: The earnest money is accounted as the part of the principal
obligation and, in this part, secures its execution. It is not in addition to the
purchase price.
MCQs 5 NON-CONTRACTUAL OBLIGATIONS
5.1 B Olga had a duty to warn Anatoly about the defect because she was aware of it at the
time she made the gift. Her failure to do so makes her liable for Anatoly’s injuries.
5.2 A A person is not at fault, if according to the nature of the obligation and conditions of
commerce, he took all possible measures for the performance of the obligation.
Motive is generally immaterial.
5.3 D Redress (i.e. relief) is usually full monetary compensation (i.e. the creditor receives
the redress both for the loss incurred and for “profit loss”). A person who has
caused damage is released from the redress of damage, if he proves that damage
was not caused through his fault or if the damage has been caused at the request or
with the consent of the damaged person.
5.4 A A tort is a civil wrong. Tort generally refers to private (as opposed to public) and
civil (as opposed to criminal) offences for which law may provide monetary
compensation (i.e. damages) as a remedy. Some torts, such as assault and battery,
are also crimes and can be prosecuted both as a tort and as a crime by the
authorities. A tort creates a non-contractual liability.
5.5 D Tortious liability arises under offences with the four following conditions
simultaneously present: (1) the event of damage; (2) unlawful conduct of the person
who inflicted the damage; (3) causation between the event and the unlawful
conduct; and (4) fault, whether intentional or negligent (imprudent), of the person
inflicting the damage.
5.6 A Although motive is usually immaterial in determining tortious liability, some torts
would require proof of motive as an element of the tort, as in a case of malicious
prosecution. Motive is not an issue in cases of negligence and, although intentional
torts require proof of an intention to perform the tortious act, they do not require
that damaged party to demonstrate any motive for the tort.
5.7 B Injunction is a remedy available only where monetary damages would be

insufficient as a remedy. And although some torts can be prosecuted as crimes,
those prosecutions and penalties would be part of a separate proceeding.

5.8 C An employer is vicariously liable for the tortious acts of an employee if those acts
were performed in the course of the employee’s duties. That liability would extend
to all of Olga’s damages.
5.9 A Anatoly has committed a tort (a civil wrong) and is therefore liable. Odessa will
not be vicariously liable because the deliberate act of the truck driver was clearly
not one that should be performed by an employee.
Tutorial note: In this case the truck driver will be personally liable under civil and
criminal law for having deliberately caused harm. If the crash had been the result
of the truck driver’s negligence in performing his employment duties, Odessa would
be vicariously liable.
5.10 D Unless an action specifically calls into question the morals of the damaged party (e.g.
a libellous accusation), immorality is not commonly a factor in tortious liability.
5.11 B Negligence is a failure in a duty of care to another individual. Damaging land or

property is trespass. Causing reputational damage is defamation. And although a
person could be liable for using, selling or transporting defective goods, it would
first have to be shown that he had a duty of care with respect to the goods.
5.12 C One element in determining whether non-contractual liability has arisen is the
foreseeability of damages. Here, although Ivan could have easily foreseen the
damage done to Anatoly’s vehicle, he could not have foreseen that his actions would
result in the loss of Dmitri’s job. Stated differently, the causal link between Ivan’s
actions and Dmitri’s damages is not direct enough for tortious liability to arise.
5.13 D The Civil Code includes provisions detailing redress for all these situations and for
others as well.
5.14 C Under the Civil Code, a partnership is generally liable for the acts of its partners in
the conduct of the partnership’s business. Unless Olga was acting so far beyond the
scope of the business that the malpractice could not be said to relate to the
partnership, the partnership will be liable. Anna’s knowledge of Olga’s malpractice
would be irrelevant.
5.15 A The insurance company’s duty is limited to the amount of the policy, but the fact
that he had insurance does not excuse Dmitri from paying the difference between
the insurance policy limit and the full amount of damages.
5.16 D Damages would be limited to compensation for Oleg’s actual losses and to actual
costs incurred as a result of the accident.
5.17 B Under the Civil Code, because the damage involved hazardous materials, the burden
would be on the manufacturer to prove that the incident occurred by reason of force
majeure or as a result of actions of the damaged parties. As there is no evidence of
either here, the neighbours’ claim should succeed.
5.18 C In a case involving defective merchandise, the injured party may claim against either
the seller or the manufacturer. That neither was aware of the defect is irrelevant.
5.19 A Under the Civil Code, if the defect causes an injury within the product’s established
working life, then the seller and manufacturer remain liable. The Code states that if
the working life has not been established, then the injury would have to occur
within 10 years after production, but the Code does not set 10 years as the
maximum working life for a product.

5.20 C If the manufacturer is not found liable, it will be because Olga was not using the
product in the manner prescribed. There is no evidence of force majeure in this set
of facts. The duty of care owed by the other drivers is irrelevant to the
manufacturer’s liability for a product defect, as is the foreseeability of the damage
she suffered.
5.21 B In defining the amount of compensation of moral damage the court takes into account:
the degree of the responsible person’s guilt (where relevant) and other significant
circumstances; and the nature and degree of physical and moral suffering,
depending on the particular circumstances of the victim. The ability of the
responsible party to pay is not taken into account is setting damages.
5.22 D The Civil Code recognises the infliction of moral harm under three categories:
injury to life or health caused by ultra-hazardous activity; reputational harm (caused
by defamation); and injury to integrity caused by misconduct in law enforcement
(e.g. illegal conviction). In these cases moral damage is compensated regardless of
guilt. The Code does not include terrorism or its effects as a specific category of
moral harm.
5.23 C The following are subject to compensation: earnings (but not pensions or benefits)
that have been lost by the injured person; expenses incurred by damage to his
health, including the expenses on medical treatment, additional nutrition and
medicines (if the injured person does not have the right to receive them free of
charge); purchase of special transport vehicles; and the costs of retraining. All three
issues are addressed specifically in the Civil Code.
5.24 C Obligations between a debtor (the party who is obliged) and a creditor (the party
who has the right to claim the discharge of the obligation) can arise between persons
and entities who do not have contracts with one another.
Obligations that arise in tort (e.g. due to infliction of damage) are not contractual.
5.25 B Under contract law and under general rules governing the infliction of injury or
damage, the carrier is liable to the passenger both for the personal injuries and for
damage to the luggage.
MCQs 6 EMPLOYMENT LAW
6.1 C Contractors under civil law contracts (unless such contracts are recognised as labour
agreements with recourse to court) are outside the scope of labour legislation. The
work of board of directors is also outside the scope of labour legislation.
6.2 C As well as being self-employed, a sole proprietor can employ other individuals. An
individual entrepreneur can therefore be an employer.
6.3 C An employer is obliged to pay for any holiday accrued which has not been taken.
6.4 D A labour agreement is recognised as concluded for an indefinite period if the

duration period is not specified in the agreement.
6.5 B Probation terms and confidentiality clause are optional conditions that may be
included in a labour agreement.

6.6 A Fixed term labour agreements can be mandatory or concluded by agreement. The
term of the agreement must be in writing. A fixed term agreement must also specify
the reason for its conclusion.
6.7 D Mandatory fixed term agreements are concluded with persons employed to
substitute a temporarily absent employee such as an employee on maternity leave.
The other statements listed are correct for non-mandatory fixed term agreements.
6.8 C A labour agreement comes into effect on the day the employee de facto gets access
to work and starts working.
6.9 D If a labour agreement does not stipulate a specific start day, the employee must
begin working the next day after the agreement comes into force. Also, a labour
agreement can come into effect on the day stipulated by Russian law.
6.10 A Generally, a probation period may not exceed three months.
6.11 B Heads of legal entities, their deputies, heads of branch offices and chief accountants
may be placed on probation for up to six months.
6.12 C With poor performance by the employee, the employer may dissolve the labour
agreement before the end of the probation without approval of the trade union. An
employer must notify the employee in writing at least three days before a
termination.
6.13 A Probation may not be established for mothers with children up to 18 months of age
and persons hired for up to two months.
6.14 C The labour book must be kept for any employee who is employed for more than five
days. Employers are responsible for keeping labour books. The labour book is not
used to track hours worked per week.
6.15 B An employee’s age and marital status are not grounds for termination.
6.16 A The agreement may be terminated if the employee does not start working on the
date the labour agreement comes into force.
6.17 D A labour agreement can be cancelled and an employee dismissed with a three day
written notice. Renewal of agreement for a definite term can have the same or
revised terms. Also, a fixed duration agreement can be subrogated with an
indefinite term labour agreement.
6.18 C If an employee leaves without giving the appropriate period of notice it is by

breach. An employee should provide an employer with a two week’s written notice.
The employee has the right to withdraw a notice at any time within the two week
notice period.
6.19 D The only item listed above that represents grounds for termination is breach of
confidentiality.
6.20 D The employer must notify, in writing, each employee at least two months before the
dismissals.
6.21 C Criminal sanctions against illegal dismissal include fines and mandatory community
service.

6.22 B An employer is obliged to conclude an agreement within three days of the

employee’s commencement of work.
6.23 A Any provision in a labour agreement that is to the detriment of an employee in

comparison with his position under the Labour Code is invalid.
6.24 C As for any legal contract, the labour agreement contains both express terms (i.e.
incorporated in the agreement) and implied terms (i.e. incorporate by an external
source such as the Labour Code).
6.25 A Terms in labour agreement may be amended in writing only, upon approval of the
parties.
6.26 B A mandatory fixed-term agreement is used to perform works which are directly
linked with training.
6.27 A Persons under 18 years of age cannot conclude jobs that may damage their health or
morals.
6.28 B If dissolution of the agreement is not due to misconduct of the CEO, the CEO is
entitled to a severance pay set in the labour agreement.
MCQs 7 PARTNERSHIPS
7.1 B A partnership is a commercial organisation and all commercial organisations

possess general contractual capacity.
7.2 C An investor in a limited partnership has limited liability for obligations.
7.3 C A simple partnership is not a legal entity.
7.4 B Since a simple partnership does not have a juridical personality of its own only its
partners have rights and duties.
7.5 A Silent partners usually share in partnership profits.
7.6 C Property transferred by the partners to the partnership is deemed to be owned by the
partnership and not the partners. Partners do not have rights in property acquired by
the partnership.
7.7 D Rights of obligation include the right to participate in the management of the
partnership and the right to receive a share of profits, etc.
7.8 C An individual entrepreneur has full liability. The business would not be a
partnership because there are not two or more persons that formed the organisation.
7.9 D All partners can be sued. Physical persons in full partnership must be registered as
individual entrepreneurs. Partners in a limited partnership would not have joint and
several liability.
7.10 C A person may act as a full partner in only one limited partnership. Also, an
unlimited partnership is to have not less than two partners.

7.11 B The partnership must be liquidated or reorganised into a limited liability company
when the withdrawal of a partner leaves the partnership with only one partner.
7.12 C The minimum amount of aggregate capital is not fixed by law but declared in the
partnership agreement.
7.13 C If the name of an investor is included in the business name of a limited partnership,
that investor becomes its full partner.
7.14 D The statutory agreement is the only document required to be found in a partnership.
7.15 B The acts of a partner in carrying out activities in the usual way of business bind the
partnership and his partners. Partnership profits and losses can be distributed on a
pro rata basis. A simple partnership agreement does not create a legal entity.
7.16 B Retirement of one partner and the addition of a partner do not lead to the
termination of a partnership agreement.
7.17 C The limited partners are returned their investments before the general partners. Any
remaining property is distributed between all partners in proportion to their
investment in the joint capital.
7.18 D A limited partnership is regarded as a juridical person and can become subject of
rights and duties.
MCQs 8 LEGAL PERSONALITY AND COMPANY FORMATION
8.1 B Classification of legal entities is considered in the Civil Code under: (1) concept of
juridical persons and (2) commercial and non-profit organisations.
8.2 A The company register of an LLC must have information on the shares owned by the
company itself.
8.3 B In the model of legal entity used for state-owned legal entities, the founder remains
the owner of property transferred to the legal entity.
8.4 A Production co-operatives and partnerships are commercial legal entities.

Consumption co-operatives and public organisations are non-commercial.
8.5 D Non-commercial organisations may carry out entrepreneurial activity, provided that
(1) it serves to achieve the organisation’s goals and (2) it is performed in a way that
is appropriate for achieving these goals.
8.6 D The charity will have restricted contractual capacity and, after liquidation of an
entity using the third model legal entity classification, the founder does not acquire
any rights for the property left.
8.7 A The major form of commercial organisation is the company. Companies may only
be set-up in a strictly defined form (e.g. as a J-SC or an LLC). Companies have
general contractual capacity and profits are distributed among participants.
Shareholders do not bear liability with their property, except for special cases.
8.8 B Also called “companies limited by shares”, these may be public (“PAO”) or non-
public (“OOО”) companies.

8.9 D A company that does not meet all these characteristics is non-public.
8.10 C A public company must establish a collective management body with at least five
members. Shareholders must have freedom to dispose of their shares without any
consent. These requirements cannot be varied by the company’s charter. Only a
non-public company can define shareholders’ rights non-proportionally to their
share holdings.
8.11 D The number of shareholders is no more than 50. The regulation of non-public
companies is less stringent than for public companies. A non-public company can,
for example, define shareholders rights non-proportionally to their stakes in the
company (art. 66, Civil Code).
Tutorial note: Such rights must be expressly provided in the charter or a corporate
agreement and formally recorded in the Unified State Register of Legal Entities.
8.12 D Perpetual succession is the term used to indicate that legal existence of a company
survives its owners and management.
8.13 B Companies are treated as having a separate personality. This separate personality
forms the basis of limited liability of shareholders. In the partnership or company
form, Fedor does relinquish rights to property.
8.14 C Companies are liable for contracts they enter into.
8.15 A Shareholders bear the risk of losses related to the company’s activity to the extent of
their contributions. A company does not bear liability for its shareholders’ debts.
8.16 B The State Register maintains records of shares and their nominal value.
8.17 A A receipt confirming payment of the applicable state registration fee must be
submitted to the tax service when setting-up a new legal entity.
8.18 B An entity is deemed to legally exist when it is entered in the State Register.
8.19 C The charter of an LLC should contain the procedure of transferring ownership of
participatory shares. It is a J-SC that can be public or non-public. Also a charter for
a J-SC would have rights of holders of each category of shares.
8.20 B The shareholder agreement is an agreement on the exercise of rights vested in

shares and/or on the peculiarities of the exercise of rights to shares.

MCQs 9 VOLUNTARY REPRESENTATION
9.1 A Persons operating in the interest of other persons, but on their own behalf (e.g. trade
agents, interim managers of a bankrupt’s estate, executors of a will, etc) are deemed
not to be representatives.
9.2 C Actions of the representative, within its powers, are deemed to be actions of the
representee and, therefore, the representee acquires contractual rights and
obligations under a transaction concluded by the representative.
9.3 D The contract of agency represents an arrangement where the agent performs
transactions, other legal actions and actions that do not entail legal consequences for
the principal.
9.4 A A power of attorney is a written authorisation. Certification by a notary is required

only in some particular cases. Issuance and acceptance of a power of attorney are
two unilateral transactions.
9.5 C A power of attorney may be issued for any period.
9.6 B If the validity time of the power of attorney is not indicated, it keeps its force for
one year from the date of its issuance.
Tutorial note: It is invalid if its date of issuance is not indicated.
9.7 C Refusal on the part of the person to whom the power of attorney has been granted
leads to the termination of the power of attorney. Also, death of either party.
9.8 D A contract of commission may be concluded for an indefinite period if there is no

reference to its validity term.
9.9 C A contract of commission is also terminated by insolvency of the agent, death of the
agent, or legal incapacity of the agent.
9.10 D An agent may abandon a contract with 30 days prior notification to the principal.
The commissioner has the right to demand compensation for losses caused by
revocation of the commission instruction.
9.11 B In the case of insolvency of the agent, the rights and obligations committed on
behalf of the principal pass to the principal.
9.12 A Under the contract of mandate, one party undertakes to perform certain legal actions
on behalf of the other party and at expense of the principal.
9.13 C A contract of mandate is also called a contract of representation. Rules concerning

contracts of mandate are closely connected to rules on representation and power of
attorney.
9.14 B The principal and the agent have the right to abandon the mandate at any time. A
contract of mandate is terminated by death of the principal or of the agent and the
principal is obliged to compensate for the agent’s costs.

MCQs 10 CAPITAL AND FINANCING OF COMPANIES
10.1 B The minimum statutory capital for a non-public company is 10.000 roubles.
10.2 C The minimum statutory capital for a public company is 100.000 roubles.
10.3 C Owners of an LLC are called participants; owners of a J-SC are called shareholders.
Only a J-SC can have different types of shares. Both J-SCs and LLCs have
minimum statutory capital requirements.
10.4 B A is not true as it is 50% of shares that are to be paid up within three months after
state registration. C is not true in relation to statutory capital as this must be paid in
cash. D is not true as founders’ shares do not carry a right to vote until they are paid
up in full (unless otherwise stipulated by the charter).
10.5 D For a public company, the minimum amount of statutory capital is not less than
100.000 roubles. The minimum payment prior to registration is three quarters, with
the remainder (i.e. fully paid) within the first year of activity.
10.6 B The decision of the general meeting of shareholders, taken by the majority of ¾ of
votes, unless a greater majority is stipulated by the charter, is required to place all
shares placed by closed subscription, ordinary shares which constitute more than
25% of ordinary shares already placed, and registered securities convertible into
ordinary shares, which constitute more than 25% of ordinary shares already placed.
10.7 B Placement of shares by open subscription (i.e. a public offer) may be conducted
only by a public J-SC.
10.8 C (1), (2) and (3) are examples of a tangible asset, a security and intellectual property
right, respectively. Trade receivables are an example of an asset that cannot be
contributed (the charter may impose additional restrictions).
Tutorial note: Only minimum statutory capital is required to be paid in cash.
10.9 D The pre-emptive right to acquire additional shares and securities convertible into
shares is granted to shareholders on a pro rata basis to the number of shares of that
particular category (type) in their possession. Pre-emptive rights only extend to
shares placed by closed subscription, when the shareholder voted against or did not
vote on the issue.
10.10 D Notice must be provided within 45 days.
10.11 B Notice must be provided within 20 days.
10.12 C When statutory capital is increased from the company’s assets the par value of all
participants’ shares is increased proportionately (without changing the size of their
share). Additional contributions may be made by participants (and third parties,
unless prohibited by the charter).
10.13 A If the capital falls to below the minimum limits, the company has to be reorganised
(into a legal form that requires less charter capital) or wound up (i.e. liquidated).
10.14 B The statement of reorganisation must be published twice in a 30-day period in a

print periodical on state registration data.

10.15 C Increasing the par value of shares is only effected at the expense of the company’s
property. The decision is made by a simple majority of members in general meeting.
10.16 A Increasing share capital for the sole purpose of dealing with losses is prohibited.
10.17 C The size of the reserve fund is fixed in the charter but it cannot be less than 5% of
the statutory capital. It is used strictly for covering losses and redemption of loan
capital (bonds) and purchase of own shares (in the absence of other means).
10.18 C The amount of net assets may differ from the value of the property owned.
10.19 B The number of participants in a limited liability company cannot exceed 50.
10.20 A As a participant, Alisa has the right to receive information about the company’s
operations and have access to its books and records.
10.21 C The aggregate value of preference shares cannot exceed 25% of the statutory
capital.
10.22 C Preference shares cannot be converted into bonds (loan capital) or securities of other
types. Ordinary shares do not have different categories. Each category of
preference shares must have the same par value.
10.23 A A golden share means the exercise of the special right of the Russian Federation, a
subject of the Russian Federation or a municipal formation to participate in the
management of the company under privatisation.
10.24 B A person intending to acquire more than 30% of the total number of ordinary or
preference shares of a public J-SC must forward a public offer to acquire them
(voluntary offer). There is also an obligatory offer for the acquisition of shares
(when 30% have been acquired).
MCQs 11 COMPANY MANAGEMENT AND ADMINISTRATION
11.1 C The board of directors is a collective management (executive) body. (The

supervisory board or council is another name for the board of directors.)
11.2 B Non-public companies require some form on management body but not a board of
directors (collective executive body). A public company must have a collective
management body with a minimum of five members.
11.3 B Transactions that are not within the terms of reference of the charter are ultra vires.
(Transactions within the terms of reference are intra vires.)
11.4 A Members of the board of directors, who may determine the term of powers of the
executive body, are elected for one year only.
11.5 B Members of administration may only be natural persons and agreements concluded
with them are labour contracts.
Tutorial note: A sole executive body does not have to be a physical person – but
this question was about members (i.e. more than one) of the executive body.

11.6 B The director acts on behalf of the company without a power of attorney in
accordance with decisions of the executive board and signs all documents on behalf
of the company.
11.7 A When a company incurs a loss through the fault of management, any participant in
an LLC may file an action against member(s) of the managerial body. In a J-SC,
shareholder(s) must hold in aggregate no less than 1% of issued ordinary shares in
order to file a suit.
11.8 D The Labour Code allows the conclusion of fixed-term labour contracts for up to five
years.
11.9 D Interested persons include board members and those who can give instructions
which bind the company. Only shareholders who (together with affiliated persons)
possess at least 20% of the voting shares may be deemed interested.
11.10 C Interested persons include members of the board of directors. Persons who are
regarded as interested also include shareholders possessing (together with affiliated
persons) at least 20% of the voting shares. So the two sisters who collectively own
20% of the company would be considered interested persons.
11.11 A The due process to approve interested party transactions is a decision made by the
majority votes of independent directors.
11.12 D The general meeting must give approval to transactions in which placing new shares
comprises at least 2% of issued shares. Interested party transactions when there are
1.000 or more holders are not prohibited, but the company must follow “due
process” to approve them.
11.13 B This is not a major transaction as a major transaction is a transaction (or several
related transactions) dealing with the acquisition of property whose value is 25% or
more than the book value of the company’s assets as of the last reporting date.
11.14 B This transaction is considered a major transaction and would be required to be

approved by the board of directors unanimously.
11.15 C The Civil Code (art. 65) gives these rights to members of a board of directors of all
J-SCs to strengthen and clarify their powers and protect the company’s interests. A
director may also initiate damage claims against officers whose actions have caused
harm but only on the company’s behalf.
11.16 C An LLC must establish an internal audit commission if there are more than 15
participants.
11.17 B An external auditor may also perform functions of an audit commission for an LLC
(subject to the company’s charter).
11.18 D It is the general meeting that approves financial statements but the internal audit
commission that issues an opinion on financial statements. The internal audit
commission can call an extraordinary general meeting but does not approve
positions of executive management.
11.19 C An obligatory audit is required for all J-SCs (regardless of the number of
shareholders and the size of statutory capital) and banks.
11.20 B The external auditor has primary responsibility to the shareholders.

MCQs 12 COMPANY MEETINGS
12.1 B Shareholders can attend an extraordinary general meeting and can vote on the
appointment of the internal audit commission. A shareholder cannot represent the
company’s interest.
12.2 C The general meeting is the supreme management body of a J-SC.
12.3 B An AGM is mandatory and must be held not earlier than two months and not later
than six months after the end of the financial year.
12.4 A An extraordinary general meeting of shareholders is held on the basis of a request of

shareholders having no less than 10% of voting shares.
12.5 B The board of directors may refuse a request to convene an extraordinary general
meeting if (1) the procedure for submitting the request has been violated; (2) the
person submitting the request does not have the right (e.g. minimum shares) to
request it; (3) none of the agenda items are within the general meeting’s
competence; and (4) an agenda item does not comply with the law.
12.6 B The entire responsibility for preparing an extraordinary meeting is borne by the
board of directors of a joint-stock company.
Tutorial note: But by the executive body for a limited liability company.
12.7 C A shareholder may participate in person or through a representative. A

representative acts in accordance with his powers based on federal law or written
power of attorney.
12.8 A The board of directors sets the date on which the list of shareholders entitled to
participate in a general meeting will be compiled according to the register.
12.9 C Shareholders possessing no less than 1% of votes may inspect the list of shareholders
entitled to participate in a general meeting. Thus Regina, but not Viktor, may inspect
the list. Leonid, as a member of the board of directors, has the right to review internal
documentation (art. 66, Civil Code) and so may also review the list.
Tutorial note: Although he cannot inspect the list Viktor has the right to be
informed of his inclusion on the list.
12.10 C For mixed voting, the shareholder receives a ballot beforehand and may either send
a filled in ballot or vote in person.
12.11 C Postal (absentee) voting is only possible for extraordinary general meetings.
Tutorial note: General meetings concerning the election of directors and auditors
(for example) cannot be held by postal voting (i.e. without holding a meeting). Thus
postal voting cannot be used for an AGM.
12.12 D Shareholders are informed by the board of directors of the scheduled meetings by:
registered mail, written notice (with acknowledged receipt), publication in printed
mass media, or additional information in other mass media.
12.13 B If the agenda contains an issue of reorganisation the latest date by which
shareholders should be informed of the general meeting is 1 March 2018.

12.14 B The tabulation (counting) commission is set-up with no less than three members.
12.15 C In a company with the number of holders of voting shares exceeding 500, the
functions of the tabulation commission may be carried out by the company’s
registrar.
12.16 D Companies elect the members of the board of directors only by cumulative voting.
Tutorial note: This type of voting gives to its holder the number of votes equal to
the number of members of the board of directors. The shareholder may use all
votes in favour of one candidate or allocate its votes between several candidates.
Candidates with the most votes are deemed to be elected.
12.17 C A decision taken by postal (absentee) vote is recognised as valid, providing that
shareholders who own on aggregate no less than 50% of voting shares have taken
part in voting.
12.18 C The body or persons in charge of convening the general meeting must notify every
participant about it, not less than 30 days before the event.
12.19 A Copies of minutes must be sent to participants within 10 days of their preparation
for an LLC.
12.20 B After serving one term, a director may be elected for another term. Also a director
may or may not be a shareholder. It is correct that the board may not be less than
five members. The minutes of the meeting are drawn up within three days of the
board of directors meeting.
12.21 A Exclusive powers of the general meeting cannot be transferred to the board of
directors. They relate to matters that affect the concern the company as a whole
(e.g. the charter, company liquidation, the board of directors, annual financial
statements and auditors). The exclusive competence of the board of directors
concerns general management (e.g. convening general meetings, appointing the
company registrar). The major transaction (item (4)) is not within the exclusive
competence of either the general meeting or the board. It may be approved by the
board (unanimously) or a simple majority of the general meeting.
MCQs 13 INSOLVENCY LAW
13.1 A The type of bankruptcy in which an organisation is deemed insolvent by arbitration

court ruling is compulsory. In a voluntary liquidation an organisation is deemed
insolvent by the creditors.
13.2 A Spurious bankruptcy means that the debtor files a petition to an arbitration court to
be declared bankrupt when it is fully able to meet the creditor’s claims.
13.3 B A criteria for bankruptcy is that creditors’ claims must amount to at least 10.000
roubles in the case of an individual entrepreneur.
13.4 C A criteria for bankruptcy is that creditors’ claims must amount to at least 100.000
roubles in the case of a legal entity and the court has ruled on these claims.
13.5 C Liabilities on royalty payments and fines are not taken into account when
considering the symptoms of bankruptcy.

13.6 C In case of voluntary liquidation of an insolvent company, a liquidation commission

acts on behalf of the legal entity.
13.7 B For an LLC, the founders decide on the appointment of the liquidation commission.
13.8 C For a J-SC, the shareholders appoint the liquidation commission.
13.9 D The deadline for submission of claims must not be less than two months from the
publication date.
13.10 B If an entity is insolvent its assets must be liquidated by public sale. After settlement
to creditors, the first priority is to pay distributed but unpaid profit shares. If this is
not possible, then distributed but unpaid profit shares are paid on a pro rata basis.
13.11 D Application to arbitration court for bankruptcy adjudication can be made by a

creditor, prosecutor, tax bodies and other authorised bodies and by the debtor.
13.12 C Management is dismissed as at the date of introduction of external management and

administration is entrusted to an external manager. When bankruptcy proceedings
are initiated the managerial bodies are dismissed and the court-appointed receiver
carries out the bankruptcy proceedings.
Tutorial note: Introduction of observation does not require management’s

dismissal. Appointment of an interim manager does not automatically result in
dismissal. (The interim manager may petition the court to dismiss management on
relevant grounds.)
13.13 D All actions concerning the debtor are taken on behalf of the creditors by a creditors’
meeting and creditors’ committee.
13.14 A The creditors’ meeting is convened by the arbitration manager.
13.15 B The creditors’ committee may not be less than three or more than eleven.
13.16 C The creditor’s committee may be formed if the total number of creditors amounts to
at least 50.
13.17 A An interim manager is appointed by the arbitration court and operates until an
external manager or received is appointed.
13.18 C An external manager can only dispose of debtor’s property that is less than 10% of
total assets book value.
13.19 D Appointing the receiver is the first order of execution in bankruptcy procedures.
13.20 C The term of bankruptcy proceedings is not over a year.
Tutorial note: The proceedings may be prolonged for another six months, further
prolongation is possible, but may be appealed against.
13.21 B Composition is an amicable settlement in which the creditors agree, in return for
some financial consideration, to the discharge of their claims on receipt of a lesser
amount than is owed on their claims.
13.22 B The four possible outcomes of observation are financial rehabilitation, external
management, liquidation and composition. Interim management is part of the
observation process.

13.23 D Obligations incurred after the court accepted the insolvency application (“current
payments” rank above the other terms.
Tutorial note: Severance pay, however, ranks after creditors whose rights are
secured with pledges. Creditors with secured claims are entitled to the majority of
the proceeds from the sale of pledged property.
13.24 B Repayment of the loan within three years of the bankruptcy notice will be assumed
to have harmful intent (as a director is “deemed interested”). Such a “suspicious
transaction” may be deemed null and void.
Tutorial note: Transactions concluded on a stock exchange or in the ordinary

course of business cannot be challenged. Repayment of a bank loan within six
months prior to acceptance of the bankruptcy notice could be challenged as a
“preferential transaction” if another condition is met (e.g. it changed the priority of
creditors’ claims). However, the repayment falls outside the six month period.
13.25 D Settlement with creditors can be approved at any stage.
MCQs 14 CORPORATE FRAUDULENT AND CRIMINAL BEHAVIOUR
14.1 A Insiders can best be described as people who know they have inside information
from an inside source.
14.2 C Disclosure to a third person is generally prohibited. Corporate insiders are required
to make certain discloses to the Central Bank but not to other “state” insiders.
14.3 A An individual accused of insider dealing may be able to put forward the general
defence that he had reasonable grounds to believe that the information was already
public (i.e. did not know that it was inside information).
Tutorial note: Only professional participants in a securities market are not

accountable for transactions concluded on the instructions of a third party.
14.4 C A transaction that is accomplished using inside information is not deemed invalid
(even though it is illegal).
14.5 A As a professional participant in a securities market Leo is not accountable for the
transaction.
14.6 B Misleading statements (and impressions) involve making information available that
is likely to give a false or misleading impression about the supply or demand, or
price or value of an investment.
14.7 C Market distortion is improper conduct which manipulates the marketplace to the
detriment of investors. It can involve: (1) Interference with the normal process of
supply and demand of shares or (2) Improper interference with the price of shares
by manipulation of their price to a distorted level.
14.8 B The Central Bank cannot impose criminal liability. It would have to transfer its
findings to law enforcement authorities for criminal prosecution.
Tutorial note: Administrative liability is only imposed if no criminal liability

arises. Thus these are mutually exclusive in any particular case.

14.9 B Money laundering is defined as the process by which criminals attempt to conceal
the true origin and ownership of the proceeds of their criminal activity.
14.10 D Criminal property includes: (1) the proceeds of tax evasion, (2) a benefit obtained
through bribery and corruption, (3) income received through the operation of a
criminal cartel, and (4) cost savings arising from a failure to comply with a
regulatory requirement, where that failure is a criminal offence.
14.11 C Tipping off is the offence when disclosure is made which is likely to prejudice an
investigation into money laundering, drug trafficking, or terrorism.
14.12 A These are preventative measures for banks against money laundering.
14.13 C It should be clear that this is a description of money laundering.
Tutorial note: See also the December 2014 exam MCQ 28.
14.14 D Imprisonment can only be imposed on an individual. Deprivation of holding certain

job positions is an additional sanction against individuals. The other penalties can
be imposed on companies.
14.15 D Companies are required to take anti-bribery and corruption measures.
Tutorial note: Bribery is a much wider offence than giving bribes to public
officials. It includes, for example, accepting bribes and commercial bribery.
Bribery does not have to be monetary; “payment” can include the transfer of
securities or property or the rendering of services. Some acts of bribery committed
outside Russia are offences under Russia’s Criminal Code (e.g. if committed by a
foreign subsidiary or a Russian company).
14.16 A Gifts are not allowed to state officials under the Criminal Code.
Tutorial note: Gifts between commercial organisations (e.g. in celebration of

International Women’s Day) are permitted (but may not exceed 3.000 roubles).
Similarly, some corporate hospitality is allowed (e.g. as a normal practice of
establishing cordial relations). However, hospitality aimed at receiving illegal
advantage from the persons being hosted would be caught by the legislation. An
individual found guilty of a bribery offence may be absolved from criminal liability
(e.g. if he actively contributed to its prevention and informed the authorities about it).
14.17 C The mere fact that the guests were public officials does not make the meal a bribe.
Serving all the guests the same thing is relevant, but only if the meal itself is not
extravagant. Reasonable and proportionate hospitality does not constitute bribery
under the Criminal Code.
14.18 B A bribe can be almost anything of value; it need not be cash. The offer of
something of perceived value would still constitute bribery even if it were, in fact,
of little or no value to the offeree.
14.19 D Sanctions depend on all three factors.
14.20 A As a member of a regulated sector, Oleg had a duty to report his suspicions. Had he
not been aware of the activity, no such duty would have arisen. His direct
involvement is not required for conviction under these circumstances and no
confidentiality rules require Oleg to keep the illegal activity secret from the
authorities.

Answer 1 STUDENT PETROV
(a) Parental approval
Minors from 14 to 18 years old can effect certain deals with the written consent of their legal
representative: parents, adopters or guardian. The consent may be given before or after the
deal is effected.
Petrov could effect the following on his own:
 Buy study materials, since minors from 14 to 18 years old may dispose of their
salary, grants or other income without the approval (consent) of their parents,
adopters or guardian;
 Receive an author’s fee for the published article, since minors from 14 to 18 years
old may exercise author’s rights to a work of science, literature or art, to an
invention or to another legally-protected result of their intellectual activity without
the approval (consent) of their parents, adopters or guardian. This includes the
receipt of the author’s fee.
Since the purchase of computer (due to its price) may not be regarded as disposal of a
student’s grant, salary or petty everyday deal, Petrov could not effect it without the consent of
his parents.
(c) Labour contracts and minors
According to effective labour legislation, a person becomes a subject of labour relations at the
age of 16. Before that age minors may be employed only with certain restrictions. In
particular, minors older than 14 years studying at schools or colleges may be employed to
perform work in their spare time with the consent of their legal representatives (parents,
adopters or guardian).
As employees, minors up to 18 years old have equal rights with adults, and besides – with
respect to work protection, working time, leaves and some other labour conditions enjoy
privileges set by the Labour Code of the Russian Federation.
Minors younger than 18 years old may not be employed for hard or hazardous work (e.g.
mining). They may neither work night shifts, over-time or at the weekends.
Thus, Petrov may enter into a labour agreement providing all the above-mentioned privileges
are observed.
Answer 2 MRS KLUSHKINA
(a) Proposed transactions
Gift of car
It is possible to transfer the car to the boy of 12 years old. A minor of 6 to 14 years old may
accept the gift himself.
Sale of apartment
It is possible to transfer the apartment to the boy of 15 years old. The underage person may
accept the gift himself, but this transfer of immovable property needs state registration. The
deed of accepting the gift must be concluded in the minor’s name by his parents by the minor
with a written consent (approval) of his parents. The contract must be made in writing and
registered with state authorities.

Gift of bicycle
The bicycle may be transferred to the girl of five years old but all the transactions in favour of a
minor under six years old must be concluded by her parents. In order to make the gift valid no
special form is to be observed, the bicycle must be physically accepted by the child’s parents.
(b) Empowering
The best way to empower an individual to exercise any actions and/or deeds in the name of
another individual is to issue a power of attorney. This power of attorney must directly
provide for the actions/deeds that the individual is empowered to exercise.
Tutorial note: Russian legislation also provides for trust management as means of
management of another person’s property, but trust management is not appropriate in the
described situation because only legal entities may be trust managers.
Answer 3 ANNA
(a) Personal capacity
Tutorial note: The relevant provisions of the Civil Code relate to the personal capacity of the
individuals involved. All citizens of the Russian Federation have passive capacity which
confers general civil rights. However, the active capacity of natural persons is determined in
most instances with reference to their age. Active capacity related to the extent to which each
individual can act on his own behalf, enjoy rights or incur obligations.
The “trigger” dates for increasing levels of active capacity are six, 14 and 18 years of age.
A child under six years of age has no active capacity. Therefore, as Oleg is only four years
old, he has no active capacity. In practice, there is no problem in setting money aside for him
(or indeed for him to legally own the money) but he will not be able to make transactions on
his own behalf for the time being.
Mikhail is seven years old and so enjoys partial active capacity. He also can acquire property
and carry out everyday transactions of nominal value. He can accept the gift from his
grandmother and become a legal owner of the money. Although he has a limited ability to
enter into transactions, it is probable that an adult would have to carry out transactions on his
behalf with the bank.
The oldest two grandchildren are both over 14 years of age. They are entitled to manage their
funds to a greater extent, including deposits, transfers and withdrawals at the bank.
It should be noted also that should any of the children marry after reaching 16 years of age,
this confers full active capacity.
(d) Actions to be taken
Anna could execute a general power of attorney to enable Katerina to act on her behalf. This
is a legal document that creates an arrangement of voluntary representation.
It is possible to establish a permanent arrangement through an irrevocable power of attorney

(which is effective until its expiration date). However, the power of attorney must
specifically state that it is irrevocable and be notarised.
The power of attorney would entitle Katerina to carry out any transactions on behalf of her
grandmother.

Answer 4 ROSA AND DIMITRI
Tutorial note: The Civil Code sets down detailed and prescriptive rules in relation to legal capacity.
All citizens have a right to civil passive capacity from birth until death (art. 17). This confers only
basic rights (e.g. the right to a name and the right to own property). Active capacity may be limited by
statute or by decisions of the courts (e.g. a very young person may own a piece of land but may be able
to do little with it except with the consent of others). The extent of the individual’s active capacity is
determined mainly with reference to the age of the citizen. There are specific provisions for those
between 6 and 14 years of age and those between 14 and 18 years of age (art. 26). Further provisions
of the Civil Code dictate how an adult’s legal capacity can be affected by circumstances confronting
the individual or the individual’s family.
(a) Legal implications of decision
Anna is currently 17 years old and therefore enjoys partial active capacity under the
provisions of the Civil Code (art. 17). She may manage her own income if applicable, make
transactions through financial institutions in her own right (unless prevented from doing so by
the terms and conditions of the relevant institution) and exercise certain rights (e.g. those of
an author or inventor). She can also bear liability for inflicting injuries on others. Some
transactions may be carried out with the prior approval of her parents. Therefore, if Rosa and
Dimitri deny her permission to marry, she will continue to have partial active capacity for the
next 11 months, after which she will attain full active capacity.
One of the Civil Code’s exceptions to the rules relating to partial active capacity is on
marriage before the age of 18 years (art. 21(2)). If Rosa and Dimitri permit the marriage, this
will automatically mean that she attains full active capacity on the change in her civil status.
She will then acquire all the rights of an adult citizen.
(b) Invoking provisions of the Civil Code
Tutorial note: Peter is an adult and as such already has full active capacity. However, his
lifestyle suggests that he is causing harm and financial difficulties for his family. In such
cases, the Civil Code enables active capacity to be withdrawn.
Rosa and Dimitri can apply to the court to restrict Peter’s capacity. The outcome of this is
that his affairs will be placed in the hands of a trustee. The Civil Code specifies cases in
which such an appointment would be appropriate, of which addiction is one such instance
(art. 31 and 33).
Even though his affairs will be supervised by a trustee, Peter will still be able to receive an
income and execute deals of a limited value, but for significant transactions he will need the
consent of the trustee.
The appointment of a trustee by the court does not restrict Peter’s accountabilities under the
law. He continues to be responsible for his actions, including any damage caused to others.
The court is able to set aside the trusteeship should Peter’s circumstances change in the future,
in which case he would once again attain full active capacity (art. 31).

Answer 5 OOO BOOK
(a) Igor – rights and obligations
Igor entered into a contract with OOO Book (“Book”) and committed himself to appear at the
exhibition in person. The scenario suggests that Igor has sufficient celebrity status to attract
those attending the exhibition to visit the stand and have books signed by him.
Igor might argue that he has engaged a substitute author to attend the exhibition and that this
author would provide a very similar service. However, the right to sub-contract the provision
of his personal service to a third party is limited in this instance because the services of two
different authors are not homogeneous as all authors are different and attract different readers.
If Book has publicised its presence at the exhibition by using Igor’s name, prospective
customers would probably not be impressed by seeing a different author there on the day of
the exhibition. It is also likely that Book would have bought in copies of Igor’s books for sale
at the exhibition.
Book would have a strong case for arguing that Igor’s substitution of another author is undue
fulfilment of the obligation. From this would flow a right of Book to be compensated.
(b) Claims by OOO Book against Igor
Book would be entitled to reimbursement of the up-front fee paid to Igor and to withhold the
outstanding fee, even if Igor promised to pay the fee to the substitute author.
Book would also be able to claim forfeit on the grounds of Igor’s absence. The forfeit would
probably be stipulated in the contract. In addition Book may claim for missed profits arising
from its inability to sell Igor’s books at the exhibition, or at the very least, missed profits from
the reduced level of sales due to the author not being present to sign copies of his books.
It is questionable whether Book would be able to claim for other costs of exhibiting at the
convention unless it could successfully prove to the court that the whole point of exhibiting
was to provide a showcase for sale of Igor’s books and no others. It is unlikely that any
company would take a stand at an exhibition to provide a platform for just one author.
Answer 6 OOO PICTURE
(a) Were the letters offers?
Tutorial note: A contract is an agreement entered into voluntarily by two or more persons or
entities, with the intention that the relationship thus created is enforceable before the law.
The creation, administration and termination of a contract are governed by the Civil Code
(Chap. 28). A contract is instigated (but not concluded) by the making of an offer by one
person or entity to another. An offer is an expression of willingness to be bound on specific
terms. The offer does not have to be directed towards one specific person or entity but cannot
be so general as to engender a response from an unlimited number of persons (art. 435).
The offer should set out the intentions of the offeror and the essential terms to which the
offeree is invited to agree.
The letter to the clients is directed at three specific persons and is reasonably detailed in
relation to the subject matter of the proposed deal; the artist’s name is given and a description
of the paintings is provided. OOO Picture has also included the price sought and the time
limit by which responses should be made to secure the paintings. If would be reasonable for
the recipients of the letters to regard the letters as offers capable of acceptance.

(b) Have contracts been concluded?
Tutorial note: For a contract to be concluded it is necessary for the offer to be accepted (art.
438). Only the person or entity to whom the offer is directed may accept it. Acceptance must
be complete. If modifications are proposed, this cancels the original offer and creates a new
offer, which the original offeror is free to accept or decline (art. 443). In order for
acceptance to be valid there must be some action on the part of the offeree. In the normal
course of business dealings, silence or inaction cannot be regarded as acceptance (art.
438(2)).
Nikolai’s response was an acceptance but the receipt of the acceptance came after the
deadline. OOO Picture can choose to accept the offer or reject it. If the painting intended for
Nikolai had been sold to another purchaser because he had not responded by the deadline,
Nikolai could not enforce his acceptance as he had not complied with the requirements in the
letter of offer.
Peter’s response is an acceptance with modifications. An acceptance is only binding if it

agrees to all the terms contained in the offer. As Peter has specified that he expects a 10%
discount, this has two effects:
(1) it cancels the original offer;

(2) it comprises a new offer (or counter-offer) which OOO Picture can accept or reject.
Svetlana did not reply to the offer at all, but OOO Picture sent a painting with the invoice,
assuming that she would purchase it. Inaction can rarely be taken to signify acceptance and
OOO Picture cannot regard its action as concluding a binding contract between the parties.
Svetlana is free to accept or reject the offer that has been made to her, but the invoice that has
been submitted is not enforceable.
Tutorial note: Some candidates incorrectly assumed that at least one of the prospective
customers must have concluded a contract. Whilst any of the proposals could have resulted
in a contract it was necessary to explain what would have been necessary for this to be the case.
Answer 7 OOO GROW
(a) Nature of security
Tutorial note: A mortgage is a form of security for a loan. It is one of the methods of
securing obligations set out in the Civil Code (Chap. 23). Specific provisions relating to
mortgage/pledge are set out in the Civil Code (art. 334-358).
A mortgage is a contract that creates obligations of a borrower (mortgagor) and rights in

favour of a lender (mortgagee). The owner of the property remains the legal owner, but
confers various rights on the counterparty. The main right is to demand that the borrower
makes regular payments (of either capital and interest or interest only with the capital repaid
at the end of a specified term).
It is common for commercial mortgage contracts (such as the arrangement contemplated by

Vladimir) to include detailed financial and non-financial covenants (promises) in order to
protect the lender’s interests.
If OOO Grow enters into a mortgage, it will be unable to sell or re-pledge the property
without the prior consent of Loan Bank (the first mortgagee).
A personal guarantee is a separate contract from a lending agreement. It is referred to as a

“surety” (art. 361, Civil Code).

The guarantee is sometimes referred to as an ancillary (or collateral) contract. Therefore, two
contracts are created:
(1) a contract between the lender (Loan Bank) and the borrower (OOO Grow); and
(2) a contract between the guarantor (Vladimir’s father) and the lender.
In the event that OOO Grow fails to meet the conditions of the lending contract, the guarantee
contract obliges Vladimir’s father to pay.
(b) Potential risks and consequences
The risk associated with the mortgage is that it is a secured debt. If OOO Grow cannot meet
its financial and other obligations, it may lose the head office building. The most efficient
way of recovering a loan is to realise the security (art. 350, Civil Code). The bank would sell
the property on behalf of the owner through a public auction, and though obliged to act in the
mortgagor’s best interests, this would almost certainly close down the company.
The risk attached to the guarantee arrangement falls to Vladimir’s father. If OOO Grow does
not meet the conditions of the loan, it will retain its asset (the head office), but Vladimir’s
father will be legally obliged to make good the debt on which the company has defaulted.
Tutorial note: Vladimir’s father would have a right of subrogation against the company (i.e.
he would be able to pursue action against the company for recovery of the monies paid in
respect of the guarantee).
Answer 8 OOO FESTIVAL
(a) Avoidance of liability
Tutorial note: The rights and obligations of parties to a civil contract are set out extensively
in Part 1 of the Civil Code.
Loxfest would be able to escape liability under certain circumstances (only TWO asked for):
(1) Festival could explicitly agree to the substitution of one group of performers for
another (accepting that the only other option is to run the event with one less act).
Tutorial note: If such agreement is forthcoming, the contract may be discharged by

engaging the services of the other act.
(2) Many civil contracts have force majeure clauses that enable a party to terminate the
contract without penalty on the occurrence of specified events (e.g. sudden illness of
one of the musicians). If such a clause was included in the contract, the organiser is
fortunate that the group originally booked to perform has arranged a replacement act.
(3) In the unlikely event that the original contract stipulated that the group would be able
to substitute another act, this too would be regarded as due fulfilment of the contract.
In the absence of force majeure or a clause permitting the group to sub-contract its obligation,
the unilateral substitution of replacement performers would represent undue fulfilment of the
contract as every music act is different (so performance by a person or persons other than the
party to the contract is improper discharge of the contract (art. 312)).
Tutorial note: This would enable Festival to claim losses suffered as a result of the
substitution, such as reduced income from the event, as well as any forfeit stipulated in the
contract (art. 393 and 394).

(b) Claim for refund
If the contract made specific provisions for either a refund or forfeit of the deposit, these
provisions would apply in respect of the 50% of the fee paid in advance.
In the absence of such provisions, Loxfest would be liable to refund the 50% advance
payment to Festival if the company declined the services of the replacement act. The
payment represented a payment for services that were not provided, so the deposit could be
claimed back (alongside reimbursement of losses and forfeit).
However, if Festival explicitly accepts the replacement act, Loxfest would become a
subcontractor. Loxfest would retain primary responsibility for the contract, but would have a
second contract with the replacement act. Festival would pay the fee to Loxfest, who in turn
would pay the group who eventually performed at the event.
(c) Right to engage replacement
If the contract provided for discharge of the obligation specifically by Sweep, there is no right
to subcontract the cleaning duties to a third party. Therefore, Sweep would have to perform
the contract.
Conversely, if the contract enabled Sweep to subcontract, it would be entitled to engage the
services of another company to carry out the work on its behalf.
Tutorial note: In this case, Sweep would retain primary responsibility for the obligation to
Festival and would incur separate obligations to the company that carried out the work.
In the absence of any provision on the right or otherwise to subcontract, Sweep could be
regarded as a general contractor and could unilaterally hire a third party to carry out the
cleaning duties. If these duties were carried out to the required standard, the substance of the
obligation would have been performed.
Answer 9 EKATERINA, LEONID AND NIKOLAI
(a) Advertisement
A general advertisement placed in a magazine cannot be regarded as an offer, as it is not

addressed to “one or more concrete persons” (art. 435, Civil Code). It is regarded in law as
an expression of willingness to sell goods. Any response by prospective customers to the
advertisement is an offer, and not an acceptance of the terms of the advertisement.
(b) Legally binding contracts
Tutorial note: A contract comes into effect (i.e. is legally binding) when an offer has been
accepted (art. 433).
Ivan and Ekaterina
Ekaterina’s letter makes an offer, which Ivan is able to accept or reject (or alternatively make
a counter-offer).
If a person making an offer withdraws the offer and the withdrawal reaches the offeror before
or at the same time as the withdrawal, it cannot be accepted (art. 435(2)). Ivan is wrong to
inform Ekaterina that her fax cannot cancel the offer. However, as no contract has been
formed, his subsequent letter to Ekaterina is an offer.

As Ivan subsequently sold the statues to Nikolai, he can withdraw his offer to Ekaterina,
provided his withdrawal reaches her before she accepts it.
Tutorial note: Ivan is fortunate, in that had Ekaterina not changed her mind, his reply to her
would have been an acceptance of her offer and he would not have been able to sell both
statues to Nikolai.
Ivan and Leonid
The lower price offered by Leonid is not a counter-offer, as the original advertisement cannot
be regarded as an offer. However, Leonid’s letter to Ivan is an offer, capable of acceptance,
rejection or counter-offer. Ivan’s fax to Leonid has accepted Leonid’s offer, and as the fax is
a virtually instantaneous form of communication a binding contract has been formed between
them. Ivan is unable to withdraw from the contract with Leonid, unless there was a problem
with the fax transmission.
Tutorial note: As Ivan sold both statues to Nikolai, Ivan may now be liable for breach of his
contract with Leonid.
Ivan and Nikolai
Nikolai made an offer in person which Ivan accepted, so a legally binding contract has been
concluded between the parties.
Answer 10 OOO LEARNFAST
(a) Consequences of Anna’s withdrawal from her contract
Anna’s failure to deliver the textbook is a clear breach of contract and she cannot assume that
Learnfast will remunerate her for the writing that she has completed. In this case, part
performance may be unacceptable to Learnfast. For example, it may now be difficult or
impossible to find an author who will complete a partly finished work, or may decide that
Anna’s failure to deliver will result in an unacceptable delay.
Learnfast can therefore choose to walk away from the contract without obligation as Anna has
materially deprived it of its rights.
Learnfast may also be able to claim financial damages from Anna if it incurs losses or missed
profits as a result of her breach. For example, losses may be incurred due to having to pay an
alternative author a higher fee for assuming responsibility for the work at short notice.
Missed profits could arise from late publication of the finished text.
(b) Consequences of Learnfast’s withdrawal from its contract with Yevgeni
In accepting the commission, Yevgeni may have declined work for other clients, anticipating
that the writing task will take a certain number of days. He may even have declined work that
offered more remuneration than the contract with Learnfast.
Just as Anna cannot assume that a proportionate fee is appropriate, Learnfast cannot assume
that it can discharge its obligation to Yevgeni by paying a quarter of the fee for a quarter of
the work. Yevgeni is able to claim losses and missed profits caused by the withdrawal of
Learnfast from the contract.

Answer 11 OOO CLOTHES
(a) Obligations of OOO Clothes
The Civil Code lays down general provisions concerning the discharge of obligations. It
states that obligations must be discharged in the proper way in conformity with the terms of
the agreement and the requirements of law (art. 309).
OOO Clothes is obliged to discharge the obligation on the particular day specified, or in
advance of that day (art. 314). Although the dress was eventually delivered, it would be
deemed an improper discharge of the obligation to delay the delivery to one day before the
wedding.
(b) Rights and obligation of Rosa
OOO Clothes would be liable for losses suffered by Rosa (art. 393). These include de facto
losses, which would not only include the consideration paid for the dress but also any
additional expenses incurred. The measure of damages in this instance could include any
additional expenditure reasonably incurred to ensure that a similar dress be available by the
day of the wedding. However, Rosa has a duty to take reasonable steps to mitigate losses, so
if she purchased a much more expensive dress from OOO Rags, the court would limit the
value of any monetary claim submitted.
Answer 12 OOO SWEET
(a) Website information
A contract is concluded when a person who has forwarded an offer receives an acceptance
(art. 433, Civil Code). Svetlana believes that she has accepted an “offer” on OOO Choc’s
website to purchase 100 boxes of chocolates at 1.000 roubles per box.
An offer is a proposal addressed to one or several concrete persons that is sufficiently

comprehensive and confirms intent to enter into a legally binding contract if it is accepted
(art. 435).
A “public offer” is an invitation to make an offer (art. 437). A public offer, which is
“addressed to an infinite number of persons”, is quite distinct from an offer that is capable of
acceptance to form a legally binding contract.
The information on the website was certainly not addressed to one or more concrete persons.
Therefore, the out-of-date price information is part of an invitation to make an offer and
Svetlana’s order was an offer (and not an acceptance which would be binding on OOO Choc).
(b) Subsequent communications and actions
Letter sent by OOO Choc to Svetlana
Although this included an up-to-date price list and was addressed to a specific person, it did
not communicate an intention to enter into a binding relationship, as it did not refer to specific
terms and conditions, such as delivery dates, discounts for bulk orders and so on.
Any response by Svetlana to this communication would form an offer as long as she provided
specific details of what OOO Sweet required and the terms on which the order would be made.
Tutorial note: However, since Svetlana did not reply to this letter no offer is made at this point.

Consignment of chocolates with an invoice sent by OOO Choc
Although this may appear to be an acceptance, it was in fact an offer. Svetlana could then
accept the offer by paying for the goods, or could return them if the new price was considered
to be unacceptable.
Svetlana’s reply to only pay the original price
This could be regarded as a counter-offer.
Tutorial note: For the reasons discussed in (a), she cannot hold OOO Choc accountable for
delivery of chocolates at 1.000 roubles and OOO Choc cannot insist on the price of 1.200
roubles as no contract has come into existence.
Answer 13 PETER
Tutorial note: A mortgage is one of six means of securing obligations set out in Chapter 23 of the Civil
Code. It is a secured borrowing arrangement through which the debtor may offer an asset in order to
raise funds. In the event of default, the creditor is able to sell the collateral so that the debt is repaid.
A mortgage is one form of pledge, the characteristics of which are defined in the Civil Code (art. 334).
(a) Extent to which the finance company can enforce its proposed actions
Failing to make repayments according to a schedule set out in the mortgage contract is the
most common event that gives rise to a breach of contract. Therefore, the assertion by the
finance company that the mortgage is in default and all sums are now payable could be a
condition of the agreement.
When the mortgage contract was formed, Peter conferred rights in favour of the finance
company, but he did not transfer ownership of the property. Therefore, the finance company
cannot claim to own it.
The finance company must follow specific procedures if it wishes to realise the value of the
security (art. 349 and 350). For example, it cannot sell the property without reference to the
court so it cannot sell the property immediately.
The mortgage is secured on immovable property and the personal belongings contained
within it are unlikely to form part of the security (as they will be movable objects). The
finance company has no rights over Peter’s belongings (unless he had explicitly granted such
rights in a written contract).
The finance company has to sell the property at a price determined by the court or by mutual
agreement with Peter (art. 350(3)). It must sell by public auction to the highest bidder
(starting at 80% of the property’s market valuation). Only if the auction fails after re-auction
(starting at 15% below the price of the first auction) does the creditor have the right to acquire
the property (appraised at a value not less than 10% below the price of the first auction). The
finance company cannot sell the property to the first buyer who offers a price that will cover
the amount of the outstanding loan.
(b) Extent of Peter’s loss
Peter will only lose everything if the property is eventually sold for less than the outstanding
debt. However, as the loan-to-value ratio is about 25%, this would be extremely unlikely. As
it is likely that the property would eventually be sold for more than the amount of the
outstanding loan, the finance company would be obliged to hand back any surplus, net of
disposal costs (art. 350(6)).

Answer 14 ALEXEI AND BORIS
(a) Letters to Alexei and Boris
Tutorial note: An offer is a proposal, addressed to one or more specific persons, which is
sufficiently comprehensive, and which expresses the intent of the person to conclude a
contract with another person (art. 435, Civil Code).
Olga has directed her communication to two specific customers, namely Alexei and Boris.
Olga’s letter referred to the subject matter of the deal, the price sought and the quantity of
prints available. She also specified a time limit by which the deal must be concluded if the
customers intend to avail themselves of the prints.
Olga has made an unambiguous statement of what is available at a stated price and what has
to be done by the counterparty to accept the offer.
As Olga is an art dealer and has written to customers with details of prints for sale, her letter
would be typical of a communication entered into in the ordinary course of her business and
therefore express intent to conclude a contract.
In conclusion, Olga’s letters to Alexei and Boris were offers, both of which would bring a
contract into effect if accepted by the due date.
(b) Extent to which the replies brought binding contracts into effect
Alexei’s initial response stated that he could obtain a print from another source at a lower
price, and so declined the offer.
Having failed to obtain the print at the lower price, he then wrote again, within the deadline
set down in Olga’s letter, to accept the print at the full price.
Alexei’s first communication was a rejection of the offer, which freed Olga from any
obligation to hold the offer open until the deadline specified in her offer. Once the rejection
has been received, the offer was effectively cancelled.
By writing again to state that he was prepared to pay the full price for the print, Alexei has
made a new offer to Olga, reversing the offeror-offeree relationship. Olga would then be able
to either accept or reject Alexei’s offer, depending on whether she has secured a sale to
another customer.
Boris accepted the offer but with one modification of the terms set out in Olga’s offer. Olga
offered only one print per customer, but Boris included a condition that he would pay the
price for the purchase of two prints. Boris’s acceptance was not valid because it must be full
and unconditional (art. 438).
This modification was a counter-offer, which had two effects:
(1) It cancelled the original offer, serving as a rejection.

(2) It created a new offer through which Olga became the offeree. Olga would be
entitled to either accept or reject the counter-offer made by Boris.

Answer 15 ALEXANDER
(a) In which court?
Alexander wishes to pursue legal action for damage inflicted by Igor. At face value, it would
seem that Igor is liable for driving through a stop sign. The strength of the case would depend
on the evidence available and would be affected by the presence and testimonies of witnesses.
If Alexander believes he has a sufficiently strong case, he must pursue this through the courts
of general jurisdiction. The reason for this is that although Alexander is an entrepreneur and
Igor is a commercial driver, the incident did not take place in the course of entrepreneurial
activity between them.
Tutorial note: For similar reasons, Alexander’s case against OOO Carfix would also be
dealt with in the courts of general jurisdiction. In reality, Alexander would probably be
insured, even though Igor is not insured. This means that Alexander’s insurance company
may take action on his behalf under its power of subrogation, instead of Alexander taking
action on his own behalf. Such action would be dealt with through the arbitration court.
(b) Rights and obligations
Tutorial note: Alexander has the right to pursue legal action against Igor’s employer or Igor
personally for the damage inflicted in the first accident. He has a greater prospect of success
if he sues the employer, as the latter would be vicariously liable if the case is proven. He also
has the right to sue Carfix for the improperly completed work on his vehicle, the damage
caused to the vehicle and any monies that he has to pay to the owner of the building, provided
that it can be established that the steering failure was a consequence of the work. He may
also sue the company for the extra money that he has paid for the flight, but he is unlikely to
succeed in this action as the loss is remote and could not be foreseen by Carfix.
Igor
As an employee of his company, Igor may be liable to make good any losses arising from
Alexander’s claim against the company if his company takes a regress action against him.
Igor may be criminally liable for driving without insurance, although the responsibility may
fall to his employer. If it can be established that Igor drove through a stop sign, he will be
criminally liable for careless driving.
Igor’s employer
The employer is the owner of the commercial vehicle and as such bears responsibility for any
loss inflicted by the vehicle (art. 1068, Civil Code). It may choose to take a regress action for
recovery of the losses from Igor, although the amount he would be expected to pay is limited
by the law.
Tutorial note: In practice, it would also be limited by his personal ability to pay.
The employer would probably be liable under criminal law for failing to insure its driver.
OOO Carfix
If it can be established that defective work was a the direct cause of Alexander’s second
accident, the company has liability for damage caused to Alexander’s car.
It would not be liable for the extra expenditure on Alexander’s rescheduled flight as it could
not be reasonably foreseen.

Engineer employed by Carfix
The engineer is in a similar position to Igor. Provided he is employed under a labour contract,
the employer will be liable for his actions in the ordinary course of business but can sue him
if it has lost money as a result of his defective work.
Answer 16 OOO FOOD
Tutorial note: The question tested the candidates’ understanding of non-contractual obligations. The
scenario described a situation in which a company owed a duty of care to its customers and failed in
that duty of care.
(a) Tests applied by the court
The Civil Code lays down the following tests through which such obligations will be assessed
by the courts:
(1) Some event of damage must occur in that a person or entity must suffer some loss,
injury or other harm.
(2) The conduct of the person who inflicted the damage (or failed to prevent damage or
injury) must have been unlawful.
Tutorial note: The term is “unlawful” and not “illegal”. It is not necessary for a
criminal act to have occurred for the harm to be established and this test fulfilled.
(3) A causal link must be established between the unlawful act and the harm done.
(4) There must be fault or blame on the part of the person inflicting the harm.
Tutorial note: This does not mean that there has to be intent to establish a liability
– the harm may be caused by error or oversight. It can be brought about by action
or inaction.
(b) Potential liability
There is little doubt that the customers have redress against OOO Food. The company sold
the frozen produce which, in the absence of further evidence, was delivered by the
manufacturer’s distributors in good condition. The event that triggered the illness to the
customers was Sasha’s failure to adhere to temperature control guidelines issued by the
supplier of the display units.
Sasha is absolved from primary responsibility to the customers as we are told that he was an
employee of OOO Food. It is generally accepted that an employer takes vicarious
responsibility for the actions or inactions of its employees in the normal course of their duties.
Therefore, any action of Sasha is carried out on behalf of the employer. Sasha’s defence that
he was inadequately trained would presumably be contested by the company.
Vicarious liability would not apply if, for example, Sasha had maliciously adjusted the
temperature of the display units to inflict harm deliberately, in which case he would be
personally liable under both civil and penal law.
Sasha may not escape sanction altogether, as OOO Food has a right of regress action against
him for harm inflicted on its customers. However, the company will be limited to what it can
claim from him (firstly by the cap imposed by law and secondly by his actual financial means).
The frozen food manufacturer will probably escape any liability unless it could be proven that
the instructions supplied with the cabinets were incomplete, incorrect or incomprehensible.

Answer 17 OOO CONSULT
(a) Non-contractual obligation
Tutorial note: Note that in comparison with part (a) of the previous question, this part does
not call for the details of the tests applied by the courts but for the application of those tests to
a scenario in which a member of the public has suffered injury, apparently due to the actions
or inactions of the workers.
The simplest interpretation of the chain of events is that the workers employed by Fix
neglected to clear the debris from their work and as a result Anna suffered injury. Applying
the tests that will be considered by the courts:
(1) real harm or injury suffered is a matter of fact, as Anna has to take time off work
and pay for medical attention;
(2) an unlawful action to place as the employees of Fix have a general civil duty to
others (which would include action to prevent injury);
(3) the employees were at fault (even if it was through carelessness rather than
deliberate);
(4) there is a direct causal link as the materials upon which Anna fell would not have
been present had the work not been carried out in the reception area.
(b) Potential obligations and whether they depend on Anna’s own conduct
OOO Fix
As a legal entity which employs its workers under a labour agreement Fix is responsible for
the actions of its employees (assuming that their actions or inactions arose in the normal
course of their duties). This is the principle of vicarious liability. Anna definitely has a case
against Fix.
Tutorial note: In turn, Fix has a case against its employees under a regress action if it can
prove that they did not follow relevant procedures. For example, if they left the reception
area covered in debris it could argue that failure to clear the site on a regular basis was a
neglect of duty. However, if Anna’s claim is substantial it is unlikely that Fix would be able
to claim the entire compensation from its workers, as the Labour Code caps the amount that
an employer may claim from an employee in the event of harm inflicted on a third party.
OOO Consult
Although OOO Consult is liable as the owner of the property it is less likely to be legally
accountable to Anna. However, this may depend on the contractual arrangements agreed
between Consult and Fix and the demarcation of responsibility for “housekeeping” in the
relevant area of the building. Any potential claim against Consult is dependent on whether
their operative management of the reception area was material to Anna’s injury. For example,
the contract between the companies may have specified that Fix was engaged to carry out a
certain set of tasks and nothing more. Implicit in this may be an obligation of the owner of
the building to make the site safe.
Anna’s own conduct
If the injuries were caused partially or entirely by her conduct, this could reduce or eliminate
the accountability of the other parties. For example, she may have entered an area of the
reception that had been cordoned off by the workers, or ignored clear warning signs.

Answer 18 PAO TRADE
Tutorial note: Alexander lost control of his car and his action in almost immediately offering to
reimburse the cost of the destroyed vegetables would suggest that he acknowledges that a non-
contractual obligation has arisen.
(a) Claims by Mihail
As chief executive officer of PAO Trade, Alexander is capable of representing the company
without power of attorney, so this commitment to pay 50.000 roubles to Mihail has the
characteristics of a contract (albeit in a very basic form). Also, as Alexander was driving
back to his office from a business meeting in a company car, it is indisputable that PAO Trade
would be vicariously liable for Alexander’s actions.
Mihail rather opportunistically increased the claim by 50% in a letter to PAO Trade. The
company could argue that its representative had already agreed a final sum payable in respect
of the damage, so the increased claim is unlikely to succeed. A possible exception arises if
Mihail could prove that he was somehow incapacitated at the time he signed the note (e.g. due
to shock arising from the accident) or that he was coerced into signing the note.
(b) Claims by the restaurant owner
Having acknowledged that he caused the damage to the vegetable stall, Alexander would find
it difficult to deny causing damage to the restaurant. Provided the value of the damage to the
shop front and the furniture could be validated, the restaurant owner has a claim against PAO
Trade for 150.000 roubles. However, it is questionable whether the trade that would be lost
over a three-month period would be a valid subject of claim, as the damage to the restaurant
would have to be very severe indeed (and presumably affect the kitchen area) to disrupt the
business for that period of time.
Answer 19 OOO VISION
(a) Potential liability for damage to laptop
Tutorial note: There was no contractual relationship between the employee (Veronika, the
cleaner) and Anna (the owner of the laptop) although there would have been a contract
between the hotel and either Anna or OOO Vision, which organised the conference. The law
relating to civil wrongs (torts) is set out in Chapter 59 of the Civil Code.
In assessing liability in tort, the courts consider:
whether an unlawful act occurred (or can be presumed);
whether there has been negligence on the part of the person purported to have
inflicted the deed;
whether there has been loss or damage; and
the existence of a direct causal link between the deed and the losses or damage
suffered.
It is not necessary to establish intent to commit the unlawful deed, so an obligation may arise
from a purely accidental act.
In cleaning hotel rooms, it is reasonable to assume that Veronika would have to move some
personal belongings of the guests and that she would do so with an appropriate level of care.

If there was a lack of reasonable care on the part of Veronika, the hotel would be vicariously
liable (as Veronika’s employer) for the damage to the laptop. The hotel could take regress
action against Veronika for any compensation that it may have to pay to Anna, although the
amount that it could claim from her would be capped by law.
The hotel might avoid any liability if conditions of occupancy included a term that valuable
items should be deposited at reception and not left unattended in guest rooms. (This is a
common exclusion clause used in the hospitality industry.)
(b) Potential liability to delegates
Tutorial note: Any outcome of claims by delegates against OOO Vision would have to be
assessed with reference to the contract between the two parties.
The contract was formed by participants enrolling for the conference (making an offer) and
OOO Vision receiving the conference fees and issuing confirmation and joining instructions
(acceptance). Unless the particulars of the conference package were highly specific about the
information that would be provided, delegates would be unlikely to anticipate the exact
content of the presentation.
OOO Vision’s response would ensure that delegates would have at least the same information
that would have been available in Anna’s presentation if the laptop had not been damaged.
Unless the information was extremely time-critical, delegates will have received all
information due to them, albeit up to two weeks late, and will not have incurred damage,
losses or missed profits. Any claim against OOO Vision is, therefore, likely to be rejected.
Answer 20 OOO TEACH
(a) Rights to redundancy pay
Assuming that no alternative prospects exist in the company, the redundant employees are
entitled to severance pay of one month’s remuneration (in addition to what they are owed).
They are also entitled to remain on the payroll of the company for up to two months or until
they commence new employment elsewhere, whichever occurs sooner. The redundant
employees are also entitled to pay for any holiday leave that they have not taken prior to their
release from duties.
(b) Legal implications of declaration giving up rights to redundancy pay
Tutorial note: A labour agreement is a formal contract, governed specifically by the Labour
Code. It contains a set of rights and obligations of the two parties to the agreement – the
employer and the employee.
Although the salaries were set aside voluntarily to help the company to address its financial
difficulties they remain an obligation of the company as the workers have agreed to delay the
payments, not to forfeit them. OOO Teach is therefore legally obliged to pay these, and as it
is only one centre and not the entire company that is being closed down (so the liability to the
workers cannot be avoided).
The right to redundancy (or severance) pay is a legal entitlement under the provisions of the
Labour Code. This cannot be set aside by Sergei’s proposed action, which effectively seeks
to hold the employees to ransom by withholding the salaries due to them.
The employers can refuse to sign the declaration giving up their rights to redundancy pay.

(c) Changing the terms of labour agreements
Like other forms of contract, a labour agreement can only be altered with the consent of both
signatories. Generally, a contract cannot be changed unilaterally, unless it contains clauses
permitting one party or the other to introduce such variations.
Sergei cannot change the terms of the labour agreement without consulting the lecturers.
Some of the lecturers may be willing to switch to part-time work, even at a reduced salary.
This will be more likely if their skills are in demand and they can offer their services
elsewhere to supplement the reduced income from Teach.
Alternatively, Sergei may declare the role of the full-time lecturer redundant. (This may be
justifiable if he is correct in his assertion that the only viable business model is to use less
full-time employees and switch to part-timers and outside contractors.) This course of action
will have a short-term cost in that the company will have to continue paying salaries for two
months plus any entitlement to severance pay. The company could then recruit part-time
lecturers with an entirely different labour contract. (It is possible that some of the existing
full-time lecturers would apply for these positions.)
Answer 21 ANDREI AND NIKOLAI
(a) Rights and obligations
Any trust between Andrei and Nikolai has already been broken as Nikolai has been making a
secret profit. If Nikolai used partnership resources in the partners’ working time, Andrei has
a case against Nikolai for breach of the partnership agreement. Andrei can claim for lost
profits as a result of the undeclared work and income. In turn, Nikolai may have an
obligation to make good any monies withheld from his partner.
Andrei cannot simply walk away from the hotel project without incurring obligations. The
partnership’s contract with the hotel binds the partners, jointly and severally, to the terms of
the contract. Under the partnership agreement they are each entitled to half the profit, so
Andrei would be responsible for half the costs of the work. It is likely that Andrei would be
entitled to a proportion of the profit but would be responsible for the same proportion of the
costs, including some costs incurred after walking out of the business.
Andrei is likely to be responsible for half the costs of the materials used in the completion of
the hotel project.
(b) Termination of partnership obligations
From the point at which a partnership is terminated, the partners bear joint and several
responsibility for the failure to perform any outstanding common obligations to third parties.
The best way for Andrei to escape further obligations arising from the former partnership is to
serve three months’ notice of the severance of their arrangement by making a statement of
repudiation. In doing so, he will escape any liabilities incurred after the expiry of the three
month period.

Answer 22 ROSA AND ALEXEI
(a) Whether Alexei can demand that the IT equipment be returned
There are two reasons why Alexei’s demand that the computer equipment be returned to the
supplier will be unacceptable:
(1) It is unreasonable to expect a trader doing business with a partnership (or any other
form of legal entity) to be fully conversant with its internal rules (as this would
greatly impede normal commercial trade). The supplier has supplied the equipment
in good faith and expects to be paid under the terms of the contract agreed.
(2) The equipment has been delivered, installed and now modified with new software.
This would be sufficient evidence to confirm that the business had the intention of
retaining and using the equipment. (It would also be unreasonable to expect the
supplier to accept the return of equipment to which modifications have been made.)
(b) Withdrawal from partnership
Alexei can withdraw from the partnership at any time by submitting his resignation in writing.
Resignation is normally subject to six months’ notice, but breach of the agreement by Rosa
will probably be set out as a ground for dissolving the partnership in the partnership
agreement.
If Alexei resigns, this means that the partnership will terminate, as it cannot continue with
only one partner.
(c) Action against Rosa
Tutorial note: As Alexei cannot set aside the contract completed with the supplier of the
computer equipment, he is liable with Rosa to pay the invoice submitted by the supplier. This
means that either or both of them can be sued for the money if the partnership failed to
discharge the obligation in full.
As Rosa has breached the terms of the partnership agreement she will be liable if Alexei
decides to sue her. Rosa’s breach has rendered Alexei liable for a greater financial obligation
than that which would have been sustained had Rosa remained fully compliant with the terms
of the partnership agreement.
Therefore, Alexei will be successful if he decides to take legal action against Rosa for
reimbursement of some of the expense incurred in meeting the obligation to the computer
supplier.
Answer 23 ALEXEI, IULIA AND LEONID
(a) Whether contract can be enforced against the partnership
Tutorial note: The Civil Code regards a partnership as a business form with no legal
personality distinct from its partners (art. 66-81). This contrasts with the various types of
limited company, all of which have a separate personality in law. Therefore, while a
company can own assets, bear obligations and sue or be sued in its own name, these
attributes do not apply to a partnership. For these reasons, the partnership form relies on a
high degree of mutual trust between the participants in the business.
As a general rule, the partners bear responsibility for the obligations of the partnership on a
joint and several basis. This means that Alexei, Iulia and Leonid are each liable for the whole
debt, not just one-third of it.

The supplier of raw materials cannot be expected to have a detailed knowledge of the internal
rules of the partnership (e.g. that business dealings should be confined to the Moscow
metropolitan area or of the limit to each partner’s mandate to make transactions on behalf of
the business). Provided the supplier has acted in good faith without knowledge of these
matters, it can enforce the contract against the partnership. The company can therefore take
action against one partner or any combination of partners to enforce the obligation and
recover the monies due to it.
(b) Potential personal liabilities of the partners
Tutorial note: The termination of a partnership does not extinguish the outstanding
liabilities to third parties at the time of termination. These fall to the individual partners,
though not always in equal proportions.
If the partnership is dissolved, the three partners remain liable for the obligation to the
supplier in Ekaterinburg (as well as all other outstanding partnership’ liabilities due to other
third parties). If the apportionment of liabilities is not stipulated in the partnership agreement,
they would be divided equally between the partners, subject to the limitation on Alexei’s
contribution.
As the investing (commandite) partner, Alexei’s liability is limited to his original contribution
to the business. Therefore, the maximum sum that he may be required to contribute is
500.000 roubles. His liability may be less than this if Iulia and Leonid are compelled to make
pro rata contributions to meet the obligations.
Tutorial note: The only way in which Alexei’s liability may exceed 500.000 roubles is if he
has participated in the management or entrepreneurial activity of the partnership, contrary to
the restrictions placed on investing partners by the Civil Code.
Iulia has clearly acted outside her authority, so Alexei and Leonid can take action against her
due to her breach of the partnership rules. She would be liable for the transaction with the
supplier of raw materials. It is immaterial that she has resigned, as leaving the partnership
does not absolve her of responsibility for obligations incurred while she was a partner.
Answer 24 HELENA, ROSA AND YURI
(a) Actions that Helena and Yuri can take against Rosa
Tutorial note: The characteristics of general partnerships and the obligations of partners to
one another are governed by the Civil Code (art. 67).
The expenditure of 700.000 roubles by Rosa was a violation of the partnership agreement, so
the other partners will be able to take legal action against Rosa for full recovery of this sum.
The partners in a general partnership are fully accountable to the other partners in respect of
the provision of information on their business activities. Helena and Yuri can demand full
financial details of the personal work undertaken by Rosa (art. 73(3)). Rosa’s offer to pay
100.000 roubles may or may not be a fair reflection of the income she has earned, but the
partners are entitled to corroborate whether this is the case against Rosa’s actual records of
the business.
(b) Obligation to accept a return
The Civil Code precludes any right of the partnership to rely on the provisions in the
partnership agreement in order to compel Train to set aside the contract of sale, unless it can
prove that Train was fully aware of the restriction on Rosa’s capacity to act in her own right
(art. 72).

The partners will therefore not be entitled to demand a refund from Train, which presumably
acted in good faith when selling the package to Rosa. As a third party, Train is under no legal
obligation to check the credentials of Rosa, especially if the company has conducted business
with the partners in the past (it is an established supplier) and has encountered no previous
difficulties. The partners may be able to negotiate a return of the training software package
with Train.
(c) Claim against the bank
The principles outlined in part (b) above similarly apply to the withdrawal from the bank.
However, the partnership is in a stronger position here, as it would be likely that the bank
would have been furnished with a copy of the partnership agreement when the account was
first opened. This is a normal condition underpinning the commencement of a banker-
customer relationship.
The partners could therefore argue that the bank had constructive notice of the restriction on
transactions by individual partners, and that it should not have sanctioned the withdrawal by
Rosa.
Answer 25 BORIS, MARIA AND OLEG
Tutorial note: A commandite partnership is an enterprise that consists of one or more general partners
and at least one investing partner. The general partners bear unlimited liability to the full extent of
their personal assets. Investing partners enjoy limited liability and can only be held liable up to the
value of the investment in the business. The rights and obligations of the partners are set out in a
formal agreement between them. The law relating to commandite partnerships is set down in the Civil
Code.
(a) Rights of the partners
The general partners (Boris and Maria) have a right to represent the partnership and act on its
behalf subject to the terms of their agreement. When entering into business deals, third
parties would be expected to take reasonable steps to assure themselves that partners have the
power to bind the partnership.
By contrast, Oleg is an investing partner and is not permitted to engage in the day-to-day
business of the partnership (art. 84(2)). He is only able to invest in the business and take
profits.
(b) Liability for purchase of furniture
The general partners bear unlimited liability for their actions on a joint and several basis.
Therefore, these partners are potentially liable for the transaction entered into by Boris as it
exceeded the 500.000 roubles limit permitted by any partner. Arguably, as the supplier had
dealt with the business before, it would expect Boris to have the authority to make the deal on
the partnership’s behalf.
Therefore, Boris and Maria would be liable for the transaction with unlimited liability. Oleg
would only bear liability to the extent of his investment.
(c) Is contract to purchase electrical fittings binding?
As Oleg has taken an active role in the business by concluding a contract, he is personally
liable for this contract with the supplier of electrical fittings. (Furthermore, his actions render
him liable as if he were a general partner, as by taking part in the business he forfeited the
privilege of limited liability.)

His only hope of escaping the obligation rests with the prospect of the contract being set
aside, as it fell outside the usual business of the partnership. Whether this is the case would
be determined by the extent to which the supplier of electrical fittings should have anticipated
the need to assure itself of Oleg’s authority.
Tutorial note: In relation to the breach of the partnership rules, Boris would bear
responsibility to the other partners as he instigated expenditure that should have been
sanctioned by all of the partners.
Answer 26 ANNA, OLEG, PETER, ROSA AND VIKTORIA
Tutorial note: A general partnership is one of the most flexible forms of business. It is possible for a
partnership to have as many partners as mutually agreed, subject to a minimum of two partners
remaining in the business.
(a) Courses of action regarding disagreement about dismissal of Peter
Tutorial note: Three partners (Anna, Oleg and Rosa) agreed that Peter was not putting
sufficient effort into the business; only one partner, Viktoria, dissenting.
At face value, it might seem that as three of the five partners form a majority they should be
capable of removing Peter from the partnership. However, the proposal is defeated as the
partners only have a right to demand through a court that a partner be expelled in conformity
with the unanimous demands of the remaining partners and in the face of serious grounds
(art. 76(2), Civil Code). Since Viktoria acknowledges that Peter brings valuable ideas to the
business, there is no such unanimous agreement. The grounds necessary to remove Peter
from the partnership are therefore unfounded.
(b) How the disagreement may be otherwise resolved
Anna, Oleg and Rosa could resign from the partnership and form a new partnership between
them. The decision to do so would be subject to six months’ notice of withdrawal (art.
77(1)), and they would remain liable for any obligations arising from their work with the
existing partnership. Their willingness to form a new partnership would also depend on the
extent to which they could operate without the services of Peter and Viktoria.
(c) Can the partners prevent Svetlana from becoming a partner?
Tutorial note: The possible courses of action that can be taken when a partner in a general
partnership dies are envisaged by the Civil Code (art. 78(2)).
An heir to a deceased partner has a legal right to join the partnership, but only with the
consent of all other partners. In this case it is clear that the surviving partners are opposed to
working with Svetlana, so they can prevent her from joining the partnership in succession to
her mother.
Tutorial note: Svetlana does, of course, have the right to make a claim against the
partnership in respect of Anna’s share in the joint capital (and this would have to be paid out
from partnership resources). Svetlana would also bear responsibility for Anna’s obligations
to third parties.
Although Svetlana has no legal right to compel the surviving partners to accept her as a
partner, she can make a claim for the residual value in the partnership attributable to her late
mother, net of any obligations for which she was answerable.

The partnership can continue in business with the surviving four partners, either choosing to
continue with the reduced number of partners or replacing Anna with a new partner
unanimously agreed between them.
Answer 27 ANATOLY, BOGDANA & VALERIYA
Tutorial note: Members of a general partnership are required to act in conformity with the agreement
made between them when the partnership was established (art. 73, Civil Code). The scenario described
two separate breaches of the terms of the partnership.
(a) Liabilities of Anatoly and Bogdana
Anatoly withdrew 500.000 roubles from the partnership account and used the funds for a
family holiday. He may therefore be held liable by the other partners for this unlawful
appropriation and Bogdana and Valeriya may pursue a claim against him. Depending on the
precise details of the transaction, Anatoly could also be held accountable under criminal law
for fraud.
As Anatoly had the authority to make the transaction at the bank, the latter acted properly in
facilitating the withdrawal, provided that it did not have any knowledge of his ulterior motive.
Bogdana withdrew 750.000 roubles from the partnership account and used this to purchase
modern kitchen equipment for sale in the shop. As the partnership’s business was restricted
to dealing in antiques, Bogdana’s transaction was unlawful, and she too may be held
accountable for this by the other partners.
The supplier of modern kitchen equipment is absolved of any responsibility for checking that
the transaction conformed to the terms of the partnership agreement (art. 72), so the
transaction cannot be set aside by the other partners.
(b) Partner’s liabilities for inability to meet the partnership’s debts
In relation to the debts (accounts payable) that the partnership is unable to discharge, all three
partners are liable for these on a joint and several basis. All partners bear subsidiary liability
for the obligations of the partnership with all their wealth (art. 75). Therefore, even though
Valeriya was an innocent party to the irregular transactions that may have weakened the
partnership’s financial position, her liability for the partnership’s obligations is no less than
that of her partners.
Answer 28 NATASHA AND NIKITA
(a) Commandite partnership
Tutorial note: The commandite partnership is relatively uncommon in Russia. The essential
characteristics of this type of business entity are set out in the Civil Code (art. 82-86). It
enables unlimited partners to enter into business supported by a limited partner (or
commandite) who must adopt a non-participative role.
Advantages
The basic model of having unlimited partners (Natasha and Nikita) supported by an investor
(Natasha’s mother) is quite consistent with the needs of the entrepreneurs.
Natasha’s mother would not be able to participate in the business (as she knows nothing about
it) so her position as a prospective investor suggests that she would fulfil this role. Natasha
and Nikita would be unlimited partners, participating fully in business activity.

The commandite partnership is quite a simple business form. The formalities involve the
creation of a constituent document and registration; there are few legal requirements in
respect of division of management or administration. The three individuals could simply set
down their desired roles in the constituent document. (Minimum requirements in respect of
the matters to be included in this document (art. 52) are not onerous.)
This partnership form offers flexibility in relation to how the business develops or, if
appropriate, is terminated or transformed. (For example, new partners could join, and if this
were to be the case either of the founding unlimited partners could leave.)
As the commandite partnership does not have shareholders, there would be no requirement to
hold general meetings.
(b) Limited liability company
Tutorial note: The essential characteristics of this business entity are set out in the Civil
Code (art. 87-94), as amended by Federal Law 312-FZ. The limited liability company
enables participants to take shares in the company, the size of which is determined by the
founders’ agreement.
Advantages
The limited liability company involves investment in shares, which are transferable.
Participants in the limited liability company have a specific financial claim against the entity,
as well as formalised voting rights.
All registered participants have no greater financial liability than the value of their shares.
Tutorial note: This is a major advantage. By contrast, in the commandite partnership only
Natasha’s mother would enjoy this privilege.
The limited liability company must have a charter and its decision-taking body is the general
meeting of participants. This greater degree of formality has some advantages in the event of
disputes arising, as there will be clear mechanisms for resolving disputes between the
shareholders.
A limited liability company can admit new participants as the business expands which can
attract new capital more readily than through the partnership form.
Answer 29 ROSA AND SERGEI
(a) Termination of position as partner
Tutorial note: The law relating to partnerships is set out in the Civil Code (art. 69-81).
The partnership is governed by a constituent document (art. 70), the minimum content of
which includes the terms on which partners may withdraw from the partnership (art. 52(2)).
Therefore, Rosa’s right to walk away from the business would be subject to any conditions
imposed by the constituent document.
Any partner has the right to withdraw from the partnership after having declared a refusal to
take part in it, but that six months’ advance notice is required (art. 77). Exceptions are
permitted only on valid grounds. Therefore, Rosa can only leave immediately, without
incurring further obligations, if exceptional circumstances exist.

It would be unlikely that Rosa would be free to withdraw without accepting responsibility for
known ongoing costs (e.g. rent of premises, utility bills, etc). Rosa is answerable for
obligations incurred prior to the withdrawal for a period of two years (art. 75).
(b) Claims against Rosa
The major project would almost certainly have been a contractual obligation, entered into by
the partnership for which all partners would have joint and several liability (art. 75). Failure
to discharge their contractual obligations would result in both Rosa and Sergei being liable to
their customer, irrespective of circumstances or blame. Sergei could hold Rosa accountable
for her failure to act in the best interests of the partnership due to her refusal to meet her
obligations to the customer.
Rosa could argue that Sergei’s decision to engage the services of Maria without the approval
of both partners fell outside his authority, but Sergei could claim that he had little choice.
Were he to argue this successfully before a court, he would potentially be able to claim for the
additional costs incurred in hiring Maria, as well as for any incidental losses brought about by
Rosa’s departure.
Rosa’s claim would be stronger if the cost of hiring Maria was excessive and disproportionate
to the size of the project.
If the work carried out for the customer was divisible (e.g. delivered in phases), Rosa could
have a claim for a proportion of the income generated by the work, though this would almost
certainly be offset to some extent by any compensation which she would have to pay due to
the violation of her obligations to the partnership.
Answer 30 OOO INVESTOR
(a) Withdrawal of a participant
A participant may withdraw from a limited liability company only if expressly provided for in
the charter (federal law “On Limited Liability Companies” as amended by 312-FZ). In this
case a participant may sell or otherwise assign its participatory share to one or several
participants or to a third party (unless this is prohibited by the company’s charter).
Ownership of a participatory share may be transferred only to the extent that it has been paid
up.
Investor must notify (in written form, individually or via Levadia) the other participants and
Levadia about selling his participatory share to a third party, indicating the price and other
sale terms.
The following persons can enjoy the pre-emptive right for the participatory share at the price
offered by a third party or a different price set in the charter (“pre-determined price”):
company participants pro rata to their shares (a non-proportionate order may be set
by the charter or by a unanimous decision of the general meeting);
the company, if the participants do not exercise their right (if stipulated by the
charter).
If neither the participants, nor the company exercise the pre-emptive right within a month
(unless otherwise stipulated), the participatory share (part of the participatory share) may be
sold to a third party at a price and on terms of which the participants have been advised

(b) Ownership of property contributed
The owner of the property and monetary means contributed to the statutory capital is the
company itself (i.e. Levadia). Only if Investor contributed the laptops for a specified period
can ownership be reclaimed (when that period expires). Assuming this not to be the case,
Levadia is not obliged to return the computers.
Although Levadia has a pre-emptive right to acquire Investor’s participatory share it is not
obliged to do so. If other company participants exercise their pre-emptive right to acquire
Investor’s share they would clearly be unable to return, within the purchase consideration, the
laptops contributed. If Levadia has the opportunity to exercise the right and does so it is
obliged only to settle the value of the share – which may be with property of the same value
(with Investor’s consent). Investor will only receive back the laptops as part of the
consideration by his agreement if they are offered by Levadia.
Answer 31 SVEN, TRUDI, URI AND VIKTOR
(a) Suitability of a partnership form of business
As the four colleagues do not wish to expose their personal assets to risk, they should
immediately reject the possibility of setting up a partnership. Although it is possible to use a
partnership structure to establish a new business of this type, the personal assets of the
partners would be inseparable from their business assets and they would operate on an
unlimited liability basis (art. 69, Civil Code) which is clearly contrary to the needs they have
expressed.
All four persons are active participants in their existing business, which probably means that
the commandite partnership is also inappropriate. Therefore, although Sven and Trudi see
some benefit in the partnership model, they should be encouraged to reject this as a way
forward.
(b) Alternative business form
The needs and aspirations of the four colleagues suggest that they should form either a limited
liability company or a non-public joint-stock company (company limited by shares).
Tutorial note: Only ONE of these business forms was called for by the requirement.
Both types of business have a separate legal personality in law which would enable the
colleagues to separate their personal financial resources from their business investment. In
the short-term it is unlikely that there will be more than 50 investors, so either business form
would appear to be suitable.
Limited liability company
This provides a suitable structure for a start-up business. It is a simple business form that
requires minimal founding capital and there is little complexity involved in dealing with the
constitutional aspects. It has the simplest procedures necessary to establish the business. The
stake of each party is measurable and identifiable, and if deemed necessary the number of
participants may be increased as the business expands (art. 87-94, Civil Code).
The limited liability company will be a robust enough form of business until operations reach
a certain critical level but then offers limited possibilities for long-term growth (such as that
envisaged by Uri and Viktor).

Joint-stock company
The non-public form could be established initially, with a view to opening up the company to
further investment should the strategic vision of Uri and Viktor materialise. Although the
company limited by shares has a higher statutory capital threshold and greater complexity in
respect of constitutional and operational matters, these issues should not deter the individuals,
all of whom have been involved in an existing successful business (art. 96-104, Civil Code).
The advantage of this form is that once it is established the same business model can be used
as a platform for future growth (which is anticipated). Eventually the company could
become a public joint-stock company with a stock market listing. Generally, well-established
public companies should find it less difficult to attract either share capital or loan capital.
However, the joint-stock company is more expensive and complex to set up and has more
onerous reporting and compliance requirements (e.g. establishing a formal management
structure as well as internal and external audit).
Answer 32 NATASHA AND MARIA
(a) Taking on the new production as an individual entrepreneur
Under this option, Natasha would rely on Maria to advance the necessary funds. This would
involve minimal administration but would expose Maria to a personal credit agreement with
Natasha, and thereby totally on Natasha’s ability (and willingness) to repay. The credit
agreement between them could be supported by a contract conferring rights to revenues from
the finished production.
The main advantage of this business form is its simplicity. The disadvantage is the exposure
of both parties to risk. Natasha would be entirely reliant on finance provided by Maria, and if
the investment is large and the project fails, may not be able to repay the debt. In turn, Maria
would have little prospect of recovering her investment. For these reasons, the individual
entrepreneur approach is entirely unsuitable.
(b) Alternative forms of partnership
(i) Unlimited (general) partnership
Natasha and Maria could draw up a partnership agreement with express provisions relating to
their rights and obligations. They could also form the unlimited partnership for the sole
purpose of carrying out one collaborative venture together, terminating the partnership on
conclusion of the production.
The advantages are its simplicity and the flexibility of being able to draw up the partnership
agreement according the precise requirements of each partner. However, Maria would bear
joint and several liability with Natasha and neither would be able to shield their general assets
from the risks of the production. These disadvantages suggest that the unlimited partnership
would be unsuitable for them.
(ii) Limited partnership
Natasha would participate as the unlimited partner and Maria as a limited (“commandite”)
partner, contributing a pre-determined capital sum. This form would enable Maria to limit
her exposure to her capital contribution. Again, the partnership could be terminated on
conclusion of the production.

The limited partnership is a suitable option for the venture. Maria could participate as an
investor, and as she has no desire to play an active role in Natasha’s production, this is
entirely consistent with the role of the investing partner as envisaged by the Civil Code.
Another advantage is the ability to limit Maria’s liability.
Although the limited partnership is not a popular business form in Russia, the equivalent
model is used in several countries for funding productions in the creative arts. Its main
disadvantage is that Maria could not intervene in the running of the business at all without the
prospect of losing her limited liability status.
Answer 33 OOO HOLIDAY
(a) Request to withdraw from the company
Limited liability companies can include bespoke provisions in either the participants’
agreement and/or the charter to determine how any withdrawal of a participant will be
facilitated.
As the charter of OOO Holiday permits Bogdan, Eva and Filipp to exercise pre-emption
rights, this enables them to buy out the interests of Agata and David at their own discretion.
Should Bogdan, Eva and Filipp choose not to exercise these pre-emption rights, Agata and
David are able to offer their interests in the company to third parties.
Any transfer of shares is subject to notarisation (and only when this is confirmed to both the
company and the Unified State Register will it take effect).
Tutorial note: Although not called for by the question, a practical issue for Agata and David
is that if their colleagues are not prepared to buy out their interests, they will have to find
alternative investors who are prepared to invest in what is both a relatively new business and
one that is failing in its formative years.
(b) Potential consequences of decision to form a new company
Tutorial note: It is relatively common for small businesses to protect their interests by the
inclusion of restraint of trade clauses, restricting participants (and sometimes executives)
from directly competing in the event of leaving the organisation. These clauses may restrict
the individual from forming a new business within a specific period of leaving, or within a
certain geographical area.
All five participants in OOO Holiday entered into a participants’ agreement in which they
undertook not to compete directly with the company within one year of withdrawal. This is a
legally binding contract.
As Agata and David have taken steps to form a new company, this is a contravention of the
agreement. The potential consequence of this is that OOO Holiday can petition the Arbitrazh
Court to prevent them from going ahead with their new venture, at least for the agreed one
year period.
Should Agata and David proceed to form the company and trade, OOO Holiday could take
action against them in respect of any lost business and/or missed profits resulting directly
from their unlawful act.

Answer 34 MR CHAIKIN
(a) Right to conclude
The power of attorney empowers the person only for execution of deeds and/or actions
directly provided for in the power of attorney. Mr Boiko is empowered only to receive goods
due to OOO ABC but not for concluding contracts. OOO ABC will be responsible for the
contract with OOO Y only if the contract concluded by Mr Boiko by ABC is subsequently
approved. Otherwise the contract will create rights and obligations directly for the person
who signed it, namely Mr Boiko. Mr Boiko will be personally responsible for fulfilment and
non-fulfilment of obligations under the contract (e.g. if the prepayment is not made).
(b) Sale of share capital to Mr Ivanov
(i) Powers as general director
No. The fact of change of owner of the company does not directly influence the personality
of the general director. However, appointment of the general director is the competence of
general participants’ meeting and the new 100% owner (Mr Ivanov) may convene a meeting
and terminate Mr Chaikin’s powers as a general director.
Tutorial note: The general director will be changed by the general participants’ meeting
decision.
(ii) Validity of power of attorney
No. The power of attorney was issued by the company ABC and the change of owner of the
company does not influence the validity of deeds executed and concluded by the company.
Answer 35 NIKITA
(a) Contract of commission
Tutorial note: Contracts of commission are one form of voluntary representation in the
Russian Federation. They are governed by the provisions of the Civil Code.
Nikita is the principal (or komitent) who instructs OOO CAET (“CAET”) who is the agent (or
komissioner). Under a contract of commission the parties enter into transactions in their own
names, so the agent is liable for the quality of the goods.
The terms of the contract for the sale of the goods can therefore be legally enforced by
company CAET and the purchaser of the goods.
(b) Liability of shortfall in price
Instructions in a contract of commission must be carried out precisely by the agent. The agent
must act personally unless otherwise provided for in the agreement with the principal.
If a subcontract is entered into, the agent remains responsible for carrying out the principal’s
instructions (unless the contrary is expressed in the commission agreement).
If it can be established that a sale for a lower price was necessary to prevent greater losses
being incurred by Nikita, then CAET may be able to escape liability for the shortfall in
revenue. Otherwise CAET will be liable to make good the deficit (i.e. Nikita may sue CAET
for the shortfall).

(c) Liability to Nikita
Generally, the agent is responsible for entering into the contract of sale for the goods but not
for the execution of the contract (unless the arrangement is of a del credere nature). Nikita
cannot therefore enforce the terms of the contract by claiming against CAET.
Tutorial note: If, however, the goods were sold by CAET in the open market, it would be
liable to Nikita.
Also, if it can be established that CAET did not act reasonably in identifying a buyer, it may
be liable to Nikita.
Answer 36 OOO TRADE
(a) Contractual obligations
Tutorial note: A contract of commission is a form of voluntary representation, governed by

Chapter 51 of the Civil Code. The nature of a contract of commission is defined in art. 990.
Under the contract of commission, the commission agent (Alexei) acts in his own name and
acquires rights and obligations.
Alexei is obliged to carry out the instructions of the principal (OOO Trade) in return for a
commission fee (art. 991). Alexei has sold the caviar for a profit but the mushrooms for a
loss.
The third party with whom Alexei dealt is responsible for paying for the goods in full under
the terms agreed with Alexei.
Alexei is obliged to divide any profit made over and above the agreed contract price with the
principal (art. 992). Therefore, the extra income for the caviar (100 cases × (7.000 – 5.000) =
200.000 roubles) will be divided equally between Alexei and Trade.
Alexei is fully liable for the shortfall of 50.000 roubles (100 × (1.500 – 2.000)) on the
mushrooms (art. 995). However, Alexei may be able to escape liability if he can establish
that failure to sell at 2.000 would have resulted in greater loss.
Tutorial note: In summary, the deals will be settled by a payment of a commission fee of
25.000 roubles plus half the profit on the sale of the caviar (100.000) minus the shortfall on
the sale of the wild mushrooms (50.000 roubles). Calculations will not be required in the
examination but are provided for additional information.
(b) Obligations for quality
As the contract of sale is entered into between the agent (acting on his own behalf) and the
purchaser of the goods, Alexey bears responsibility for the quality of the goods. Therefore, if
the purchaser chooses to take legal action on the grounds of inferior quality, the defendant in
the legal case will be Alexei and not Trade.
Whether Alexei has any redress against Trade depends on the precise terms of the contract of
commission between them.

Answer 37 OOO VENDOR
(a) Contract of commission
Tutorial note: Contracts of commission are governed by Articles 990 et seq of the Civil Code.
A contract of commission is one form of voluntary representation through which one party
acts on behalf of another. In this case OOO Vendor is the commitent and Alexander is the
commissioner. The latter carries out the instructions of the former, usually in return for a
commission fee. Alexander and OOO Vendor created rights and obligations under the
contract between them.
The revenue generated by the sale to Rosa exceeded OOO Vendor’s minimum price by 1.000
roubles per case (500.000 roubles in total). This profit is divided equally (i.e. 250.000 roubles
each) between Alexander and OOO Vendor (art. 992).
Alexander was not permitted to depart from OOO Vendor’s instructions (art. 995) and is
therefore liable for the shortfall on the sale of potato snacks (500 roubles per case).
Alexander may, therefore, have to reimburse the shortfall of 250.000 roubles.
However, a commissioner may sell at a lower price without incurring liability for the loss, if
he can prove that failure to sell the product in a timely manner would result in greater losses.
Depending on the shelf life of the potato snacks Alexander may be able to prove that the sale
at the discounted price was the best outcome practicably attainable and that he is not therefore
liable for the shortfall.
(b) Potential liability for inferior quality of chocolates
An essential feature of a contract of commission is that the commissioner acts in his own
name and acquires rights and obligations in dealing with third parties. Alexander would
therefore be liable to Rosa for any shortcoming in the quality of the chocolates, provided their
inferiority can be proven.
Depending on the terms of the contract of commission between Alexander and OOO Vendor,
Alexander could have a right to make a claim against the OOO Vendor.
Answer 38 PAO X
Tutorial note: The question tested the candidates’ understanding of the law relating to preference
shares and distributions.
(a) Dividend payment due
The dividend to be paid to holders of preference shares of each type is 100 roubles (10% ×
1.000 roubles) as follows:
300 roubles for each cumulative share (100 roubles × 2 years cumulative, plus 100
roubles for 2017);
100 roubles for each non-cumulative preference share;
12·5 roubles for each ordinary share as the dividend rate cannot exceed the value
recommended by the Board (50.000 less 40.000 divided by 800).
Tutorial note: If the charter does not specify preference shares to be “cumulative” (i.e. any
unpaid dividend, or portion, is accumulated to be paid later) they are deemed to be non-
cumulative. Calculations will not be required in the examination. This question is provided
to illustrate how profits are distributed between different classes of shares.

(b) Situations in which the payment of a dividend is prohibited
A company cannot adopt a decision on payment of a dividend in the following circumstances:
if the statutory capital (i.e. as set down in the charter) is not paid up in full;
if shares that have been requested to be redeemed have not been purchased;
if there are signs of insolvency as laid down in the law “On Bankruptcy” (or if there
will be such signs if the dividend is paid);
if net assets are deficient (or if the dividend payment would result in such a deficit).
Tutorial note: The amount of net assets will be deficient if less than the charter capital, plus
the value of the reserve fund, plus the excess over nominal value of the liquidation value of
the issued preference shares.
The company cannot adopt a decision to pay a dividend on the non-cumulative preference
shares unless a decision has been made to pay the dividend in full on the cumulative
preference shares (i.e. including the arrears). Similarly, a dividend on the ordinary shares
cannot be declared unless a dividend has been declared on all classes of shares with a
preference.
Answer 39 OOO MUSICMASTER
(a) Appraisal of assets contributed
The premises contributed by Natasha in the process of the formation of the company would
have been evaluated at the behest of the founders of the company.
Tutorial note: If the premises had been contributed after the company had been formed and
become operational, they would have been evaluated on instruction of the board of directors.
Premises have to be evaluated by an independent expert appraiser (i.e. one who is competent
and free of influence by Natasha or her colleagues in putting a value on them).
Once valued, shares can be issued to correspond to the contribution.
(b) Use of property
Natasha owns shares in the business in return for the contribution and therefore no longer has
any rights over the asset that formerly belonged to her. Shareholders have a claim against the
company but do not own a proportion of the underlying assets. How the property is used is
therefore a matter for the shareholders acting as a collective decision-making body. It would
be inappropriate as well as unworkable for Natasha to expect 40% of the premises to be used
for purposes dictated by her on the grounds that she owns 40% of the capital.
Natasha is in a relatively strong position as the main shareholder of the company. If she can
persuade one other shareholder to vote with her, any decision requiring a simple majority can
be passed routinely.
Natasha may have some power to prevent the disposal of the premises. Since the book value
of the premises is likely to be 25% or more of the company’s assets (as at the last financial
reporting date), the disposal transaction would be a major transaction under the federal law
“On Joint Stock Companies”. This will require the unanimous consent of the board of
directors (or, failing that, a majority of the shareholders present in general meeting).

Tutorial note: The majority requirement increases to 75% if the book value of the asset
exceeds 50%. The outcome would ultimately depend on the support or lack of support from
the other shareholders for Natasha’s case.
Answer 40 PAO VOLATILE
(a) Effect on income of fluctuating trading performance
Ordinary shareholders
Tutorial note: The income of ordinary shareholders is entirely dependent on the trading
performance of a company and directly related to profitability. When a company performs
well and makes a profit its dividends are likely (but not guaranteed) to be higher than when it
performs badly. The ability of a company to pay a dividend depends on its ability to make
distributions out of profit and the decision of the board of directors on the proportion of profit
that should be retained for reinvestment. Although the decision of the directors is a
“recommendation” to the general meeting, the federal law “On Joint Stock Companies” does
not permit the shareholders to overturn this recommendation.
The ordinary shareholders are directly exposed to the trading experiences of the company and
the decisions of the directors. For PAO Volatile, this means that the ordinary shareholders
have a reduced prospect of income from dividends and little prospect of their shares
increasing in value when the company performs badly. However, when the company
increases its profitability, the ordinary shareholders should benefit from both dividend and
capital growth.
Preference shareholders
Preference shareholders are in a better financial position than ordinary shareholders when
there is a downturn in profitability. However, if there are no funds for distribution then even
the fixed dividend cannot be paid.
Tutorial note: Subject to provisions in the charter, preference shareholders are paid a fixed
dividend and are therefore entitled to the same income every year assuming that the company
makes a profit. Preference shares may carry a right to accumulation (through which any
unpaid dividend in one year carries over to the next year before the ordinary shareholders
are entitled to any distribution).
Preference shareholders are at a relative disadvantage when the company is generating a high
level of profit and the directors recommend a substantial dividend. The income of the
preference shareholders is fixed regardless of the performance of the company (i.e. the benefit
from the prosperity generated by the company mainly falls to the ordinary shareholders).
Holders of loan capital
Debtholders have a contractual debtor-creditor relationship with the company. They receive
interest and not dividends. Therefore, the regular payment of income to the creditor is a
contractual obligation that must be met, irrespective of whether the company is profitable or
not. Therefore, the holders of loan capital are certain to be paid provided the interest cover is
adequate.

(b) Circumstances for redemption of ordinary shares
Tutorial note: A joint-stock company is said to have perpetual succession which means that
the company will continue to exist in its registered form even though its shareholders may be
transient. Share capital is not intended to be an investment that can be realised in the same
way as (for example) a savings account or a loan. The capital is generally regarded in law as
permanent capital.
Ordinary shareholders may demand redemption of their shares if, for example, it is permitted
by the charter should the company be liquidated (even though it is solvent).
Shareholders may also demand redemption on reorganisation. Thus, if the sale of the
breakfast foods business constitutes a reorganisation the shareholders will be able to demand
redemption.
Redemption of shares is also permitted where the company enters into a major transaction,
but only by those who voted against the major transaction (or did not vote at all).
Shareholders may redeem their shares if the general meeting of shareholders takes a decision
that directly and adversely affects the rights of shareholders.
Lastly, redemption of shares is an automatic right if one individual or entity obtains 30% or
more of the company’s equity.
Tutorial note: Only three circumstances were asked for. In all instances the shares are
purchased by the company at a price struck by the board of directors, which in turn may be
no lower than the market value estimated by an independent appraiser.
Answer 41 PAO SPORTCLUB
(a) Issuing new shares
Tutorial note: The company can issue additional ordinary shares to raise funds from
existing and new investors. As a public company, the shares can be offered to the public,
provided that existing shareholders are given their statutory pre-emption rights to purchase
the shares ahead of new investors (federal law “On Joint Stock Companies”).
If new shares are issued, existing shareholders purchasing the shares increase their stake in
the company and acquire additional voting rights, usually on the basis of one vote per share.
Further rights of shareholders may be stipulated in the company’s charter. Some investors’
rights may be enhanced if their new purchases take their stake beyond the thresholds
necessary to secure various constitutional rights.
New investors acquire voting rights for the first time. Konstantin’s level of control over the
company’s affairs may therefore be diluted by the potential expansion of the shareholder base
(unless he too takes more shares).
As share capital is permanent risk capital shareholders would expect long-term capital growth
and a regular dividend as a return on their investment. Both are dependent on the underlying
future performance of the company. There is no automatic legal right to a dividend. Share
capital cannot generally be withdrawn from the company.
Ordinary shareholders are entitled to a dividend if declared. However, a dividend may not be
declared if profits are insufficient (e.g. in bad trading years) or if the directors choose to retain
profit for reinvestment.

Tutorial note: Any recommendation of the directors in this respect cannot be set aside by the
general meeting of shareholders.
(b) Issuing company bonds
Tutorial note: Marina’s proposal to raise bonds could be based on a financial assessment,
as the cost of the capital may be lower to reflect the lower risk to the lender. There is also
greater certainty in relation to outbound cash flows, as the payments to debt holders (interest)
can be predicted accurately.
By contrast with share capital, loan capital provides no right of ownership or control over the
company, though bond holders do obtain certain rights to participate in (or influence) decision
taking if the company becomes insolvent in the future.
The basis of the relationship between a bond holder and the company is a civil and contractual
one, with rights and obligations laid down in the written agreement between the parties and
governed by the Civil Code:
 Bond holders receive interest and the entitlement to this interest is contractual,
whether the company performs well or badly.
Tutorial note: In years where trading performance is disappointing, the company

still has to pay returns to bond holders, as well as the capital when it falls due. If
the company cannot meet the obligation to pay, the bond holder can litigate for the
debt, which may in turn prompt a case for insolvency.
 In the event that the company is liquidated, the provisions of the federal law “On
Insolvency (Bankruptcy)” ensure that the bond holders have a more secure position.
The funds due to them are repaid before the shareholders receive any money back at
all. (This risk element is likely to be reflected in the price of the alternative types of
security, and potentially also in the projected regular returns.)
Tutorial note: As the question clearly called for the analysis of “legal rights and
obligations” it was unnecessary to deal with the relative costs of finance and market
conditions.
Answer 42 OOO SNACK
(a) Implications of acquiring a 10% stake
Tutorial note: A minority stake in Snack will not, in itself, be sufficient to influence the
strategic decision-making or other management issues of the company. However, Vera will
be able, acting alone or in concert with other shareholders, to influence any discussions in
general meetings of shareholders.
More than 2% of the voting shares means that Vera will be able to propose no more than two
items to be placed on the agenda for a general meeting for consideration by the shareholders
(art. 53(1), federal law “On Joint Stock Companies”).
As Vera will hold 10% of the voting shares she will be entitled to convene an extraordinary
general meeting (art. 55).
Vera would of course have greater powers to influence the decisions of general meetings if
supported by other shareholders. The degree of support necessary to do so depends on
whether her proposals require a simple majority (50%) or a super-majority (75%) of
shareholders to act in concert with her.

(b) Potential consequences of guaranteeing minimum income
According to the federal law “On Joint Stock Companies” dividends of a company can only
be paid out of net profit (art. 42(2)).
Although Snack is currently profitable, there is no guarantee that it will remain so. If future
profits are insufficient to fund Vera’s demand, it would be illegal to make such payments.
(c) How to guarantee a return of 10% to Vera
(1) It could issue cumulative preference shares with a fixed dividend.
Tutorial note: This would, however, preclude Vera from voting on matters other
than those directly relevant to her rights as a preference shareholder.
Although the payment of fixed dividends is contingent on the company making

sufficient profits (so an annual return is not actually guaranteed), unpaid dividends
would rank ahead of distributions to ordinary shareholders whenever dividends can
be paid (and on liquidation of the company).
(2) It could issue bonds. A bond is not equity but a loan based on a civil contract
between the two parties. The return on the bond is interest, which could be
specified at the agreed rate. The payment of interest would be contractually binding
and Vera could pursue monies payable in the event of default.
Tutorial note: However, Vera would have no right to participate in decisions of the
company at all, unless it becomes insolvent.
Answer 43 PAO EDUCATE
(a) Obligations of share acquisitions
Alexander is seeking to purchase Yevgeni’s 20% holding and a further 11% stake.
Since shareholders can dispose of their shares at will, without the consent of other
shareholders (art. 97, Civil Code), Alexander can acquire these shares. His aggregate
shareholding will then be 51%, giving him a constitutional right to take any decision
unilaterally, except where the law requires a “super-majority” vote (75%) in favour of a
proposal.
As the proposed acquisitions will take Alexander’s aggregate shareholding to 30% of the total
voting shares in the company, he must offer the other shareholders the opportunity to sell
their shares to him (art.84, federal law “On Joint Stock Companies”).
Tutorial note: This obligation is first triggered by the agreed purchase of Yevgeni’s shares.
This obligation also extends to any further tranches of 5% of the voting shares subsequently
acquired (so to the further 11%).
All other shareholders therefore have the option to sell their shares to Alexander at a fair
price. This might be considered by Maria, given her imminent dilution of influence in the
company and her strong opposition to Alexander’s plans for its future.
Tutorial note: Alexander could avoid the obligation to make a general offer if there is a
provision in the charter to this effect, or if the shareholders sanction this by simple majority.

(b) Actions to limit power to control the company
Tutorial note: If Alexander’s proposed transactions were to go ahead, this would greatly
weaken the position of Maria, Igor and Svetlana, even if they did not agree to sell their shares
to Alexander. Collectively they would hold 26% of the voting shares in the company.
However, various powers remain at their disposal.
As they each hold more than 2% of the voting shares, they could place items on the agenda of
any general meeting of shareholders.
Maria could convene an extraordinary general meeting of shareholders, as she holds more
than 10% of the voting shares. Together, Maria and her parents could block any resolution
that required a super-majority (75%) vote in favour.
Tutorial note: As the company has a large number of small shareholders, such action to
oppose Alexander’s plans could have a significant effect on the value of the shares.
Crucially, if the company’s charter does not allow for Alexander’s plans (e.g. if provisions
restrict the objects of the company) he may be unable to proceed with them, as any changes to
the charter require a super-majority vote (which cannot be achieved if Maria, Igor and
Svetlana all refuse to support him).
Answer 44 PAO MIX
(a) Sale of training centre
As “a significant asset” the sale will be a major transaction if the training centre is valued at
25% or more of the company’s total assets at the last accounting date (art. 78, federal law
“On Joint Stock Companies”). If it does not exceed 50% of the value of total assets, the sale
would require the unanimous agreement of the board of directors. If it exceeds this threshold,
a super-majority (75%) of the shareholders is required to approve the transaction.
Failure to follow the due process would render Anton (and any other director who sanctioned
the deal) personally liable for the transaction.
As Anton’s brother is a major shareholder (presumably holding at least 20% of the equity
shares) in the company that is interested in purchasing the training centre, the proposed sale is
a transaction in which there is an interest (art. 81-84). This transaction would require the
consent of either the board of directors (e.g. if less than 1.000 holders of voting shares) or the
general meeting of shareholders.
Anton (and his colleagues on the board of directors) could be liable if the sale goes ahead but
is deemed not to be in the best interests of the company (art. 71).
(b) Cash injection if the net assets position is compromised
OOO Mix can accept Vladimir’s capital injection and set-off the liability to him with a
payment of shares (“debt to equity conversion”). However, the directors are obliged to make
appropriate disclosures to shareholders in the annual report including measures to bring the
net asset value of the company into line with its charter capital.
If the deal arranged between the directors and Vladimir does not serve the best interests of the
company, the directors may be personally liable for their actions.

Answer 45 PAO ZVEZDA
(a) Parties to the deal
LLC Technoproject concluded with LLC Ensk a contract of sale of shares, being the agent
under the contract of mandate concluded with the issuer of shares, PAO Zvezda (“Zvezda”).
According to the general principles of a contract of mandate (set by the Civil Code), rights
and obligations under a deal concluded by an agent are possessed by the beneficiary.
Therefore, the actual seller and the party to the contract is Zvezda.
(b) Order of conclusion
Tutorial note: Clearly the transaction is one in which Zvezda has an interest, since the
general director of the purchaser, LLC Ensk, is a member of the board of directors of Zvezda.
A transaction in which there is interest must firstly be approved by the board of directors or
the general meeting of the company. Since the amount of placed ordinary shares exceeded
2%, the decision upon the deal should have been made at the general meeting by the majority
of shareholders that were regarded as not having interest in the deal.
(c) Consequences of non-observance
A transaction in which there is interest, concluded with infringements of the requirements set
by Federal law, may be regarded as void (disputable).
Right to file claim
The right to go to court in that case belongs to the company or its individual shareholder.
Therefore, the claim of a shareholder of Zvezda is allowed.
Answer 46 PAO TRUCKING
(a) Sale of head office premises
Tutorial note: The scenario clearly points to the sale being a “major transaction”.
A major transaction is one whose value is 25% or more of the book value of the company’s
assets as at the end of the last accounting period. If the book value of the transaction is more
than 25% but less than 50% of PAO Trucking’s assets, the board of directors must agree
unanimously on the sale. If they do not all agree the decision passes to the shareholders in a
general meeting. Their decision on this matter is taken by simple majority.
Peter and Rosa own 50% of the shares, so they only need the holder of one more share to
sanction the transaction and therefore back their plan.
(b) Transaction in which there is an interest
Tutorial note: Transactions in which there is an interest are governed by the federal law
“On Joint Stock Companies”. The purpose of the rules on this matter is to reduce the
prospect of “interested persons” from securing personal gain from the company’s transactions
at the expense of the shareholders.
Transactions in which there is an interest are not forbidden, but it is necessary to follow the
legal requirements on disclosure and decision taking.

It is suggested that the HGVs will be sold to a company in which Peter’s brother has an
interest. If so, this is a transaction in which Peter has an interest and he would be excluded
from voting on the matter.
As PAO Trucking has more than 1.000 shareholders, the decision on the sale may be taken by
a majority vote of the board of directors provided that the property value does not exceed 2%
of the book value of the company’s assets.
As the book value of the sales of a “large proportion” of the HGVs will most likely exceed
2% of the company’s assets it requires the approval of a majority of the shareholders voting in
a general meeting.
Tutorial note: If less than 2% the decision must be taken by a majority of the shareholders
voting in a general meeting only if all of the directors are deemed to be interested persons
(which is not suggested by the scenario).
Answer 47 PAO OFFICE
(a) Actions by shareholders who object
Tutorial note: All companies must have a charter which will always include the purposes
and objectives of the company (art. 11(3), federal law “On Joint Stock Companies”). The
objectives of PAO Office are narrowly defined.
A fundamental change in mode of operation (e.g. from traditional retailing to internet and
direct mailing operations) will inevitably involve transactions that may not be entirely
consistent with the stated objectives of the company.
Tutorial note: Usually, this is because such changes were not envisaged when the company
was originally formed. Also, the charter would have to be extremely detailed to
accommodate all necessary actions.
Actions that fall within the objectives of the company are referred to as intra vires while those
that fall outside the terms of reference in the charter are termed ultra vires.
If decisions are inconsistent with the provisions of the charter, any shareholder can petition
the court to render the transaction invalid.
Shareholders are entitled to rely on the company’s stated objectives in order to protect their
investments. Therefore, if the actions of the directors conflict with the provisions of the
charter, the shareholder can refer the matter to the courts, who will then decide on the most
appropriate course of action (see (b) below).
Depending on their percentage shareholding the dissenting shareholders could contemplate

other courses of action:
Call a special meeting to propose a resolution restricting the specific or general

actions of the directors, precluding deals of a specific nature or in excess of a
specified monetary value.
Propose the removal of individual directors and if deemed appropriate nominate

persons of their own choice.
Most importantly, any shareholder (or groups of shareholders) with 1% or more of

the shares in the company may litigate against individual directors to reimburse
losses brought about by their actions.

(b) Consequences of inconsistency with the charter
For PAO Office
If the transactions have already been concluded they cannot be set aside.
Tutorial note: Third parties have no obligation to satisfy themselves of the power or
otherwise of the company to enter into such deals. To reverse the land deals that have
already taken place would be impractical.
For the directors
The directors who sanctioned the transactions are in a more precarious position if it is proven
that the transactions were ultra vires and that they did not act in the best interests of the
company.
A transaction that is concluded without the relevant authority (e.g. if an individual exceeded
his powers) is considered to have been made on behalf of the individual and not the company
(art. 183, Civil Code). Therefore, the individual director would be liable for the transactions
made.
The directors may also be liable for any damage or losses (including moral harm) sustained
by the company.
Tutorial note: Therefore, to avoid personal liability, the directors would have to persuade
the shareholders that the transactions were made to support the company’s operations and
not for speculative reasons.
Answer 48 PAO HOPEFUL
(a) Extent of power to enter into transactions
Generally, Yuri would be able to enter into transactions on behalf of the company, subject to
any limitations imposed by the charter or resolutions of the shareholders. It is quite common
for a general director to be able to bind the company without power of attorney.
However, this power is not absolute, as Yuri would be forbidden from taking decisions on
major transactions and interested party transactions without the approval of the directors (art.
78) and, in some cases, the approval of the shareholders (art. 81).
(b) Composition of the board and capital structure
Yuri could influence the future composition of the board of directors but could not take
decisions on appointments. The appointment of directors is subject to the approval of the
shareholders (art. 48 and 66). Similarly, Yuri could not be guaranteed a position on the board
for five years, as a general meeting of shareholders would be able to remove him from his
position at any time, and at least annually.
The company’s capital structure is set out in its charter. Amendments to the charter require
the approval of the shareholders (art. 12(1)). Although Yuri could propose changes some
would be subject to limitations or conditions (e.g. increases and reductions in capital needing
to be sanctioned by board resolution and in some cases the shareholders).

(c) Guaranteed minimum return
Unless Yuri invests in bonds in the company, he cannot be guaranteed a minimum return.
Interest on bonds would have to be paid before any dividends.
Cumulative preference shares would offer Yuri a fixed dividend, but this would only be paid
if and when there are sufficient profits (and cash).
Dividends on ordinary shares are variable depending on the company’s underlying

profitability and the recommendation of the board of directors. Dividends must be paid out of
net profits (art. 42). An excessive distribution would be illegal as this would have the effect
of diluting the company’s capital.
Answer 49 OOO SPORT
(a) Dmitriy’s authority
The purchase of the football shirts proved to be disastrous because the company acquired the
inventory when new designs were shortly to be introduced. At face value, this could be
considered to be simply an unwise commercial transaction. However, OOO Sport is a
company that deals with such products in its normal course of business, so it is difficult to
understand why a decision might be taken to purchase potentially obsolete inventory.
As chief executive officer (CEO) Dmitriy would be able to act without power of attorney for
the purchase of inventory (unless precluded from doing so by the company’s charter or inner
documents).
The CEO must perform his duties in the interests of the company and act reasonably and in
good faith (art. 71, federal law “On Joint-Stock Companies”). Dmitriy may have been merely
negligent in purchasing obsolete inventory but as the company deals with such goods in its
normal course of business it seems more likely that he acted unlawfully.
(b) Legality of the transaction between OOO Sport and OOO Shirt
As Dmitriy’s brother-in-law held 28% of the equity of OOO Shirt, the purchase was a
“transaction in which there is an interest” (art. 81-84, federal law “On Joint-Stock
Companies”). Such transactions are not prohibited but require approval by non-interested
directors or the general meeting of shareholders.
Since it appears that Dmitriy’s interest only came to light on subsequent bankruptcy the
transaction was effected without regard for due process and may therefore be declared invalid
(i.e. regarded as null and void). Dmitriy and/or his colleagues on the board could be held
personally liable for the losses sustained.
(c) “Harmful” transaction
As the purchase was during three years prior to the acceptance of bankruptcy notice it may
be found to be invalid (i.e. null and void) if:
it was aimed at causing damage to the property rights of OOO Sport’s creditors;
it actually resulted in such damage; and
the other party (i.e. the brother-in-law) had knowledge of the debtor’s (i.e. OOO
Sport’s) intent.
In this case knowledge will be assumed as the other party is deemed an interested person.
Intent will also be assumed if, for example, the transaction was made on a gratuitous basis
when there were signs of the debtor’s insolvency. As “controlling persons”, Dmitriy and his
colleagues could be held jointly and severally liable for losses incurred.

Answer 50 PAO CLOTHES
(a) Agreement to acquire stores from PAO Garb
As the value of the transaction exceeds 25% of the total assets of the company (2.000 ÷ 3.500
= 57%), it falls within the definition of a major transaction. Moreover, as it exceeds 50% of
the total assets it can only be decided on by the general meeting of shareholders. Therefore,
the board of directors cannot proceed with the acquisition without consulting the general
meeting of shareholders and securing a super-majority (at least 75%) of voting shareholders
(art. 79(3), federal law “On Joint-Stock Companies”).
If concluded without the necessary approval it can be declared void by the court. However,
the court may not necessarily declare the transaction void if the counterparty (PAO Garb) did
not know, and could not be expected to know, that the transaction was ultra vires.
Tutorial note: In such a case, the shareholders would still have strong grounds for legal
action against the directors if it could be proven that they had not acted in the best interests
of the company, or had done harm to the company.
(b) Change in supplier policy
If it can be established that the directors of PAO Clothes have financial interests in PAO
Fabric (as asserted by a shareholder), the proposed transaction could fall within the definition
of a transaction in which there is an interest (art. 81, the federal law “On Joint-Stock
Companies”). The directors of PAO Clothes will be deemed to be interested parties if they
hold 20% or more of the voting shares in PAO Fabric or hold managerial positions in that
company.
Those affected have a duty to disclose their interests to the board of directors and the
transaction is then subject to approval. (For example, if the company has more than 1.000
shareholders, by a majority of independent directors who are not interested in the transaction.)
An interested party transaction may be declared void by the court (art. 84) but could be
enforceable (if PAO Fabric did not know, or could not be expected to know, that this was an
interested party transaction). If this was to bring harm to the company, the directors could
bear personal responsibility.
Even if the transaction is not an interested party transaction, the directors could still be liable
for failing to pursue the best interests of the company (art.71).
Answer 51 A, B, C AND D
(a) Was the general meeting empowered to vote?
The following issues are deemed to be within the scope of responsibility of the general
meeting of shareholders (art.48, federal law “On Joint Stock Companies”):
(1) re-organising the company;
(2) approving annual reports and annual financial statements (in particular, statements
of profits or losses); and
(3) approving the allocation (distribution) of profit, in particular, announcing dividends.

The general meeting of shareholders is deemed to have a quorum if it is attended by

shareholders owning, in aggregate, more than half of the votes of floated voting shares of the
company.
As A and B have a majority vote (holding 60% of the votes) the general meeting is deemed to
have had a quorum.
(b) Legal adoption of decisions
(i) Dividend payment
The decision to pay annual dividends is adopted by a simple majority (50%) of votes, present
at the meeting. Thus the decision was legally adopted because A has a majority vote of the
holders (2/3 of votes present at the meeting).
(ii) Reorganisation
The decision with regard to “re-organising” the company has not been adopted because it
must be adopted by a general meeting of shareholders by a “super-majority” (i.e. 75%) of the
votes. A had only 2/3 of votes present at the meeting.
Answer 52 OOO SIGNET
Tutorial note: A major transaction is one that deals with the acquisition or divesting of property that
has a value of 25% or more of the book value of the company’s assets as at the last formal reporting
date, unless it is specifically excluded by law.
(a) Validity of decision
Assuming that the general meeting was properly convened, it was within its powers to
consider the transaction.
The general meeting is deemed to be quorate if attended by shareholders representing at least

one half of the voting rights (i.e. 50 shares (or votes) for OOO Signet). Shareholders
representing 92% of the company’s voting capacity attended and voted.
A general meeting can approve a major transaction if 75% (or more) of the voting rights of
those present are cast in favour. Shareholders A, B and C cast 80 votes (of the 92 present) in
favour (i.e. 87%).
The major transaction has therefore been properly concluded by the meeting.
(b) Submission of applications for redemption
Right to demand redemption
Tutorial note: For full marks it is necessary to say why the shareholders can/cannot redeem
their shares – because the requirement was “explain” (not merely “state”).
Shareholder C has no right to redeem his shares because he voted in favour of the resolution.
Shareholder D has a right to redeem his shares as he voted against the approval of the major
transaction.
Shareholder E also has a right to redeem his shares as he did not take part in the meeting.

To whom
Applications to redeem shares must be presented to the board of the company.
By when
Application must be submitted within 45 days of the decision by the general meeting of
shareholders.
Tutorial note: An application must include details of the shareholder’s address and the
number of shares that are to be redeemed. The board must decide and redeem the shares
within 30 days of the expiry of the 45 day period.
Answer 53 PAO CAET
(a) Cumulative voting
As a general rule, voting is often carried out at general meetings on the basis of one share
representing one vote. This ensures that democratic processes are observed but also means
that those who have made large contributions to the risk capital of the entity have an
appropriate degree of influence.
Cumulative voting may be used for elections of directors if stipulated in the charter. Under
this method, each voting share gives the owner of the share the same number of votes as the
number of directors of the company. The member can therefore apportion all of these votes
for one candidate or spread then as desired across the candidates presenting themselves for
election.
Cumulative voting can therefore produce a profoundly different outcome to an election to that
which might apply if standard voting procedures are adopted. The member can strongly
support one or more candidates in order to tactically exclude others.
(b) Convening a formal meeting of shareholders
Any meeting of the shareholders that is not the annual general meeting (AGM) is deemed to
be an extraordinary general meeting. Such a meeting can be convened by the board of
directors at the request of the internal audit commission, external auditor or entitled members.
Members may convene an extraordinary general meeting if they hold not less than 10% of the
voting rights in the company.
Therefore, if the dissatisfied member has this minimum shareholding, he is entitled to call the
meeting. Alternatively, he must persuade other shareholders to join with him in petitioning
for the meeting in order to attain the 10% threshold required.
Tutorial note: If the dissenting shareholder is not able to attract the 10% threshold
necessary, he is still able to submit items for the agenda of the AGM, provided he has a
minimum of 2% of the voting shares.

Answer 54 MIKHAIL
(a) Actions by board of directors
As Mikhail works under a contract of service (within the meaning of the Labour Code), the
board of directors can dismiss him from his position as general director. This would be their
right (even their duty) since Mikhail’s actions appear to be contrary to the company’s best
interests.
Mikhail has behaved in gross violation of his fiduciary duties (e.g. he did not declare an
interest that may give rise to conflict).
Tutorial note: Other fiduciary duties could be mentioned (e.g. failure to exercise
independent judgement or failure to avoid conflicts of interest) but a complete list is not
called for in a 2 mark requirement).
If it can be established that his actions have inflicted damage on the company, Mikhail could
also be dismissed for breach of his duty as a chief executive officer.
(b) Removal as a shareholder
Mikhail cannot be removed as a shareholder without his consent. As his shares are his
personal property, they can be sold or otherwise transferred at his initiative; he cannot be
dispossessed simply because of the circumstances concerning his employment with the
company.
The owners (shareholders) appoint the directors to run the company on their behalf but the
directors do not appoint the shareholders. Therefore, the company cannot force Mikhail to
sell his shares or treat him differently to any other shareholder.
(c) Rights as a shareholder
Mikhail has the rights to receive notices of general meetings and to participate in them (i.e. to
“attend and be heard”) and to vote on resolutions placed before the meeting.
Mikhail’s 15% equity stake gives him additional rights. He may inspect the list of
shareholders and propose items for inclusion on the agenda of the meeting (subject to giving
sufficient notice). Thus he can influence the business that will be heard at the meeting and
possibly put his arguments to all the shareholders.
Mikhail can nominate persons of his choice as directors at the next general meeting of
shareholders.
Tutorial note: Although he can nominate himself he is unlikely to do so as the existing

directors have a right to reveal the full circumstances underlying his dismissal at the meeting.

Answer 55 ALEXANDER
(a) Potential actions by OOO JKL
Alexander is employed under a fixed-term labour contract, so if the directors feel that the
internal auditor’s evidence is sufficient to justify dismissal, they may dismiss him
immediately on the grounds of misconduct. However, this is subject to having such power
reserved in the charter of the company. If not, it would be the responsibility of the
shareholders to consider this action.
If Alexander has shared confidential information with a major competitor, this is a serious
breach of his fiduciary duty and he may have inflicted harm on the company as a result.
Alexander may therefore be liable for losses inflicted. Although any award of damages
would be difficult to quantify, the court would base on an estimate of both financial and moral
harm. Legal action could be instigated by the company or the shareholders.
(b) Actions in defence
To avoid being dismissed, Alexander would have to provide compelling evidence to refute
the accusations of the internal auditor and justify the interactions with executives from OOO
PQR. If he proved his case, Alexander would be able to claim compensation from the
company, including the damage to his reputation that would inevitably have arisen from the
incident.
As a shareholder he would be able to address the shareholders at a general meeting to put his
case to them. He could insist that his concerns be discussed by adding an item to the agenda
of the next general meeting (subject to appropriate notice being given).
As he holds more than 10% of the shares he can convene a general meeting of shareholders
for the specific purpose of explaining his actions and securing the support of the shareholders.
He would be able to decide the agenda for the extraordinary general meeting.
Tutorial note: In turn, the other directors would have the opportunity to put their case.
Answer 56 PAO RELAX
(a) Actions that shareholders owning 8% of the shares could take
The shareholders exercise their powers through general meetings. Providing that they
collectively hold 10% of the shares they can convene an extraordinary general meeting to
seek to resolve issues that have serious implications for the company. Therefore this group
will need to persuade shareholders owning a further 2% of the shares to convene such a
meeting.
The group is, however, sufficient to put items on the agenda of the next annual general
meeting. They can therefore bring their concerns to the attention of the other shareholders,
presumably backed by the directors who consistently opposed the diversification plans.
If there is sufficient evidence of mismanagement shareholders holding at least 1% of the

shares can apply to the court for compensation of losses caused by the actions of directors
(art. 71, federal law “On Joint Stock Companies”).

(b) Potential accountability for losses sustained by the company
Members of the board of directors, “must, when exercising their rights and performing duties,
operate in the interests of the company and exercise their rights and perform duties with
respect to the company reasonably and in good faith” (art.71(1)). Moreover, management
bears responsibility to the company for losses caused by its actions (or inactions).
Tamara (and the members of the board who backed her ideas) may be accountable to the
company for losses inflicted by her decisions. The burden of proof in relation to the size,
nature and causes of losses would rest with those bringing the action against the relevant
directors.
The three directors who opposed Tamara’s strategy are protected as directors who vote
against decisions that lead to losses (or did not vote at all) will not bear responsibility for the
losses suffered (art. 71(2)).
Answer 57 OOO PERITUUS
Tutorial note: Bankruptcy proceedings are the procedures applied to a debtor deemed bankrupt in
order to meet creditors’ claims.
(a) Bankruptcy estate
Subject to certain exclusions, a bankruptcy estate consists all the debtor’s assets available (as
indicated in its balance sheet or similar) as at the date of the receiver’s appointment and assets
revealed during bankruptcy proceedings. This includes the warehouse and 730.000 roubles in
the bank account.
The kindergarten building which is part-owned by OOO Perituus is a pre-school institution.

Although it will be sold its purpose must remain the same.
Tutorial note: If this condition is contravened, the sale contract will be dissolved by court
decision and the building must be transferred to municipal ownership.
(b) Procedure for the sale of the warehouse
Unless the decision of creditors’ committee (creditors’ general meeting) provides otherwise
the warehouse must be sold at a public auction (i.e. by open bidding). If otherwise, the terms
and conditions of sale of property must be approved by creditors’ committee.
The auction must be organised by the receiver. Auction in electronic form is required for the
sale of real estate.
If the warehouse is not sold during the first public auction it may be put up for sale at a
successive auction or sold without bidding by the receiver on the basis of sale and purchase
agreement.

(c) Turn of satisfaction
Tutorial note: The Federal Law “On Insolvency (Bankruptcy)” provides that settlements
with creditors be effected according to their priority in the register of creditors’ claims (kept
by the arbitration manager). Claims are satisfied according to different categories (“turns”).
The creditors’ claims will be satisfied as follows:
(1) Bank Z credit (out of the proceeds of the mortgaged property);

(2) Employees working according to the labour contract;
(3) Obligatory budget payments (taxes payable);
(4) Other claims – bank X and other creditors (for goods provided) on a pro rata basis.
Tutorial note: If the proceeds of the warehouse are insufficient to satisfy bank Z’s claim the
bank will rank as an unsecured creditor for the outstanding debt. If the claims had included
the arbitration fees this would rank after Bank Z but before the employees. If the claims had
included indebtedness to a municipal authority (e.g. for hot water supply) this would rank
after the employees but before obligatory budget payments.
Answer 58 PAO KRAITEPLOENERGO
(a) “Composition”
Composition – is an amicable settlement that may be concluded between the debtor and
creditors at any phase of the arbitration court’s consideration of bankruptcy. It is deemed to
have been accepted by creditors if it is approved by the majority of bankruptcy creditors. It
must be concluded in writing and further approved by the arbitration court. Unilateral
renunciation of composition, which is already effective, is inadmissible.
Composition contains provisions on:
the amount, order and terms of performing the debtor’s obligations; and/or
terminating the debtor’s obligations by cancellation, compensation, novation of
obligation or other means stipulated by the Civil Code.
(b) Consideration as a separate claim
The amount of creditor’s claims, who concluded composition with the debtor, is determined
by the terms stipulated in the composition.
In 2017 the arbitration court approved the composition concluded by the debtor and creditors
in the course of observation and terminated the bankruptcy proceedings. According to
composition, KTC’s debt to PAO KraiTeploEnergo (“KTE”) amounted to 150.000 roubles.
Therefore, KTE cannot file claims on debt recovery to the amount of 3 million roubles since it
would be unlawful.

Answer 59 PAO FAIL
(a) Order in which obligations will be met
Tutorial note: The federal law on insolvency sets down the order in which the claims against
an insolvent business will be discharged. Claims are satisfied according to priorities
(“turns”) laid down in the legislation.
In the event of corporate insolvency all creditors rank ahead of shareholders. Generally,
secured creditors rank ahead of unsecured creditors.
The turns are applied once the claims of the liquidator (administration manager) and court
costs and fees associated with the liquidation have been met as well as wages of employees
arising after commencement of bankruptcy procedure.
The first claims are those of natural persons in relation to harm inflicted by the company (or
vicariously by its employees) on life and health.
Tutorial note: This also includes claims by creditors who have suffered “moral damage” at
the hands of the company.
The second claims are of current and former employees (i.e. remuneration obligations due
under labour contracts).
The third claims relate to mandatory payments to the budget and non-budget funds (e.g. taxes
and pension contributions).
Lastly, creditors are paid, including all unsecured creditors (including the bank).
Only after these claims are satisfied in full will the shareholders receive anything (which is
unlikely in the case of PAO Fail).
Secured creditors are paid from monies received from the realisation of their respective
securities. For PAO Fail this will apply if the bonds are secured on pledged (or mortgaged)
assets (80% of proceeds apply for a loan agreement).
Tutorial note: 15% of the proceeds will be applied to discharge claims of first and second
priority creditors (in case of insufficiency of other property in the bankruptcy estate) and the
balance towards court costs and certain other insolvency expenses.
(b) Action in respect of loan repaid
The repayment of the loan immediately prior to insolvency suggests that the directors were
seeking to avoid personal losses that would be inevitable if the bank called upon them to
honour their personal guarantees. The directors would almost certainly be personally liable.
Tutorial note: A guarantee is a collateral obligation that requires the guarantor to pay if the
principal debtor cannot pay. Therefore, the failure of the company would result in the
directors having to pay the bank up to the limit specified in the guarantee contract.
Even if they could establish that they genuinely had no idea about the company’s financial
difficulty, the repayment was “a transaction entailing preferential treatment of a certain
creditor”. If large enough to have triggered the insolvency process, the directors could also be
responsible for intentional bankruptcy.

If proven the directors would bear responsibility for the repaid debt, with the potential for
further penal sanctions against them.
If the repayment is found to be invalid PAO Food’s obligation is deemed restored (and must
be included in the register of creditors’ claims).
Answer 60 OOO FLOP
Tutorial note: The relevant laws are FZ-127 (federal law “On Bankruptcy”) and FZ-228, which
introduced additional provisions in relation to “suspicious transactions” and “unfair preferences”.
(a) Potential consequences of the sale of the warehouse
The inference here is that the finance director of OOO Flop may have been an “interested
person”. This could be difficult to prove, as the parties concerned could simply state that their
personal relationship was formed subsequent to the transaction taking place. However, the
finance director could be liable on two legal grounds:
(1) It is the duty of all directors to act in good faith, in the best interests of the company
(art. 71(1), federal law “On Joint Stock Companies”). Even if the personal
connection between the parties could not be proven, a case could be built against the
board collectively on this ground.
(2) The sale of the warehouse could be regarded as a suspicious transaction as it took
place in the three years prior to granting the insolvency petition. To prove liability,
it has to be shown that the transaction was aimed at damaging the claims of
creditors, that their claims were actually jeopardised and that the other party was
aware of this.
(b) Implication of the loan repayment
The loan repayment just one month before the bankruptcy petition was granted was
suspicious because the loan was secured by a personal guarantee given by an interested
person. The external manager of OOO Flop can challenge the transaction (repayment) as
having created an unfair preference. If the court declares the transaction to be invalid the
lender must return the 2.000.000 roubles (if possible) and the personal guarantee of the
member of the board will still be in force. The claims of the other creditors will thereby be
protected.
Answer 61 ARTEM
(a) Criminal or civil action
Under the Criminal Code of the Russian Federation (CC), bribery committed in Russia is a
criminal offence.
The Russian legal system allows filing of a civil action as part of the penal process or as an
independent action in civil court. The Russian Civil Code prohibits, for example, acceptance
of gifts with a value exceeding 3.000 roubles by state officials.
Tutorial note: It is important when reading the requirements of “Section B” questions to

interpret whether to whether they relate to the scenario of “stand-alone”. This part stated
“in relation to bribery” (i.e. in general). Only parts (b) and (c) are specific to the scenario.

(b) Bribery offences
Although an offer (or promise) of a bribe is not expressly included in the “active” bribery
offence (i.e. bribe-giving) which is prohibited (art.291, CC) it is covered by the notion of
attempt and preparations for a crime (art. 29 and 30); it does not matter that the director
declined it.
Bribery is an offence under CC if it is committed anywhere (in or outside Russia) by a

Russian national. Thus, it does not matter where Artem was when he offered the money to
the director, he has committed an offence.
(c) Liabilities
Commercial bribery is an offence (art. 204). That is, it is an offence to illegally transfer
money (also securities or other assets) to another person who performs managerial functions
in a profit-making (or any other) organisation to act in the interests of the giver. A person
who performs managerial functions similarly commits an offence if he receives a financial or
other advantage.
As a director, Leo would have committed the offence of passive bribery if he had accepted
Artem’s offer.
Sanctions against Lev could include multiples of the bribe, imprisonment, confiscation of the
bribe and proceeds of the private sale and prohibition from holding certain positions, entering
into contracts, etc.
Answer 62 ANNA AND NIKO
(a) Anna and insider dealing
“Insider dealing” arises in relation to companies whose securities are listed and where trading
is based on price sensitive information (i.e. information which if made public would
significantly affect the market price of those securities).
Anna obtained the information that prompted her to buy the shares from a confidential
internal meeting. The information was not in the public domain and could be assumed to be
sensitive, in that disclosure could affect the prices of securities traded on the stock exchange.
The federal law “On Securities Market” prohibits the buying and selling of securities based on
information that is not publicly available, and Anna’s actions were therefore illegal.
(b) Niko and criminal charges
Niko was not involved in insider dealing.
Tutorial note: The transactions that he made are sometimes referred to as a “pump and
dump” scheme that will inflate share prices to enable a quick gain to be made. As such, he is
a buyer and seller in a market and has chosen to make transactions that will probably, but
not certainly, increase his wealth.
In a free market investors are able to make choices to buy and sell securities of their own
volition. Niko has done nothing illegal in this respect, though he has undoubtedly created a
temporarily artificial market situation.
Niko’s transactions have interfered with the price of the share of the company that employs
him. Deliberate market distortion is improper conduct which is now a criminal offence (the
federal law “On Combating Unlawful Use of Insider Information and Market Manipulation”).

Answer 63 IOSIF
(a) Criminal offences associated with money laundering
(i) Failure to report
It is an offence for a professional adviser who has grounds to believe that transactions or
arrangements have been made for the purposes of money laundering (or the financing of
terrorism) not to report the fact to the appropriate responsible authority (Rosfinmonitoring).
Tutorial note: Rosfinmonitoring is the Financial Intelligence Unit for Russia.
(ii) Tipping off
It is an offence to make a disclosure which is likely to prejudice an investigation into money

laundering (also drug trafficking and terrorism).
Tutorial note: The Russian Federation is a member of the Financial Action Task Force
(FATF) which recognises three main categories of offence – laundering, failure to report and
tipping off.
(b) Iosif and Jet
It is clear that Iosif and Jet are involved in money laundering. The original money to buy the
football club was not the product of crime, so the purchase is not covered by the money
laundering legislation. However, the club is being used to conceal the fact that the source of
much of Jet’s money is criminal activity.
Jet would therefore be guilty of money laundering (under the federal law “On Combating
Money Laundering and the Financing of Terrorism”).
Iosif is also guilty of assisting Jet in his money laundering procedure. He is actively
concealing and disguising criminal property and his arrangement with Jet “facilitates the
retention of criminal property”.
Iosif is also liable for failing to disclose the suspiciously high profits from the football club.
Leo should report his suspicions to Rosfinmonitoring.

Fundamentals Level – Skills Module
Corporate and
Business Law
(Russia)
Monday 8 December 2014
Time allowed: 2 hours
This paper is divided into two sections:
Section A – ALL 45 questions are compulsory and MUST be

attempted
Section B – ALL FIVE questions are compulsory and MUST be
attempted
Do NOT open this paper until instructed by the supervisor.

You must NOT write in your answer booklet until instructed by the
supervisor.
This question paper must not be removed from the examination hall.
The Association of Chartered Certified Accountants

Section A – ALL 45 questions are compulsory and MUST be attempted
Please use the space provided on the inside cover of the Candidate Answer Booklet to indicate your chosen answer to
each multiple choice question.
1 In relation to contract law, which of the following statements about an offer are correct?
(1) It must be made in writing
(2) It must signify an intention to be legally bound
(3) It must be addressed to one specific person
(4) It must contain all essential terms of the proposal
A (1) and (3)
B (2) and (3)
C (2) and (4)
D (3) and (4)
(2 marks)
2 When there is a conflict of laws, which of the following provides the HIGHEST source of authority?
A The Constitution
B An international treaty
C A federal law
(1 mark)
3 In relation to unlimited partnerships, which of the following statements is true?

A The authority to conclude deals on behalf of the partnership must be confirmed by power of attorney
B The statutory agreement is binding on the partners but not on external par ties
C Profits must be distributed in proportion to the capital contribution of the partners
(1 mark)
4 –OAO- Zero has become insolvent.
Which of the following payables has the HIGHEST priority claim against the company?
A Boris, a holder of preference shares
B YYY Capital Ltd, which holds bonds in the company
C MMM Bank, which provided an unsecured overdraft facility to the company
D Bogdan, who advanced funds secured on the company’s premises
(2 marks)
2
5 Which of the following is a necessary condition for a non-contractual obligation to arise?
A The injured party must prove intent to cause harm on the part of the defendant
B The parties to the action must be known to one another
C The damage suffered must be tangible and quantifiable
D There must be a causal link between action or inaction and the damage suffered
(2 marks)
6 In relation to dividends, which of the following statements is correct?

A Dividends must be paid within 30 days of their declaration
B The dividend decided by shareholders may not exceed the directors’ recommendation
C If dividends are unclaimed, they must be held in a suspense account indefinitely
(1 mark)
7 Anatoly owns 1% of the voting shares in –OAO- Mix. He wishes to make proposals at the forthcoming general meeting
of shareholders, and has written to the company requesting the following:
(1) A list of participants in the for thcoming meeting
(2) That a resolution be put to the meeting expressing no confidence in the directors
(3) That his friend Anna be put forward as a director of the company
Which of the above is he legally entitled to insist upon?

A (1) only
B (1) and (2)
C (2) and (3)
D (3) only
(2 marks)
8 Which of the following are recognised as two of the stages in the money laundering process?
A Layering and integration
B Placement and distribution
C Dissemination and integration
D Placement and consolidation
(2 marks)
9 What is the consequence for an employee of a labour agreement NOT being concluded in the designated form?
A The contract is void and cannot be enforced by the employee
B The contract is deemed to exist from the employee’s starting date
C If the employee has started work, the contract exists and no further action is required
(1 mark)
3 [P.T.O.
10 When does a legal entity attain separate legal personality?
A When the agreement of the founders to form the entity is signed
B When the founding agreement is signed by all of the founders
C When the minimum statutory capital is confirmed as being in place
D When the entity’s name is entered into the Unified State Register
(2 marks)
11 If a decision of the Duma to enact a federal law is rejected by the Federation Council, and it is put to a second
vote by the Duma, what majority is required to adopt the federal law?
A A simple majority
B Two-thirds
C Three-quarters
(1 mark)
12 –OAO- Give announced that it could not make payments of dividends to any of its shareholders or of interest to its
bondholders.
Which of the following have a right to pursue legal action in respect of this decision?
A Preference shareholders only
B Preference shareholders and bondholders
C Bondholders only
(1 mark)
13 Which of the following is dealt with by the courts of arbitration?

A Corporate bankruptcy
B Crimes committed in relation to the sale of goods
C Immovable property disputes
D Claims for unpaid personal debts
(2 marks)
14 What is the minimum age from which an individual may exercise an author’s rights to works of science, literature
and art?
A 14 years
B 16 years
C 18 years
D 18 years, or 16 years if married
(2 marks)
4
15 Anatoly’s labour agreement was subject to a three-month probationar y period. His work has not been satisfactory, so
the company has decided to dismiss him before the end of his probation period.
To which of the following is Anatoly entitled?

A Severance pay
B A minimum of one week’s notice of dismissal
C To insist that the dismissal be approved by his trade union
D To appeal his dismissal to the court
(2 marks)
16 In relation to the implementation of law, the fulfilment of obligations such as the payment of tax by individuals
and legal entities is an example of which of the following?
A Execution
B Observance
C Accomplishment
D Enforcement
(2 marks)
17 Which of the following courts deals with contesting a refusal to register a mass media body?
A Arbitrazh court
B Constitutional court
C Court of general jurisdiction
(1 mark)
18 Bogdan has made an offer to Valery by sending him a formal proposal by post.
When is Bogdan committed to the terms made in the offer?

A When the offer is posted
B When the offer is received
C When the offer is accepted
(1 mark)
19 In relation to acceptance of an offer, which of the following statements is correct?

A Silence can never be regarded as acceptance
B Conditional acceptance binds the parties if made in writing
C Oral acceptance can never bind the parties
D Late acceptance may bind the parties
(2 marks)
5 [P.T.O.
20 Vladimir has been made redundant by his company, and the company has been unable to offer him alternative work.
For how long after his termination of employment will Vladimir remain on the company payroll?
A One month
B Two months
C Three months
(1 mark)
21 In relation to limited partnerships, which of the following statements is correct?

A Full partners must be natural persons but cannot be legal entities
B A partner in a limited partnership may also be a full partner in an unlimited partnership
C A full partner cannot be a full partner in another limited partnership
D A private sector commercial organisation cannot be an investing partner
(2 marks)
22 In relation to company insolvency, when can a composition (amicable settlement) be reached between the
company and its creditors?
A During the observation stage only
B While the company is under trusteeship only
C At any time until receivership commences
D At any time during the insolvency process
(2 marks)
23 In relation to the provisions of the Civil Code, which of the following statements about a pledge is correct?
A Irrespective of provisions in the contract, all pledged property must remain in the custody of the pledgor
B In the event of non-fulfilment of an obligation, the pledgee has a right to acquire the pledged property
C The pledgee has no statutory right to use the item of pledge, unless stipulated in the contract
(1 mark)
24 Vasilisa is a member of the board of directors of a joint-stock company. She wishes to express an opinion and vote at
a forthcoming meeting of the board, but cannot attend due to urgent family business.

A She must attend in person if she wishes to express an opinion and vote
B She can appoint the chairman as her proxy to speak and vote on her behalf
C She will not be able to express an opinion, but can vote on the matter in writing
D She can appoint any other member of the board of directors to represent her
(2 marks)
6
25 Which of the following is a major level (first tier) court?
A A city court of Moscow or St Petersburg
B A municipal court
C The supreme court of a territory of the Russian Federation
(1 mark)
26 When a commissioner acting under a contract of commission makes a surplus profit by selling goods for a higher
price than that specified in the contract and assuming that no specific provisions are made in the contract, how
will the surplus income be appropriated?
A The commissioner is entitled to keep the surplus
B The surplus will be divided between the commissioner and the principal
C The whole surplus must be paid to the principal
(1 mark)
27 For which of the following legal entities is it mandatory to prepare inner documents on formation?
(1) Partnerships
(2) Limited liability companies
(3) Joint-stock companies
A (1) and (2) only
B (2) and (3) only
C (3) only
D (1), (2) and (3)
(2 marks)
28 ‘The unlawful transfer to an individual performing management functions in a commercial or other organisation of
money, securities or other property, or the unlawful rendering to such person of services with a monetary value in
return for the performance by this individual of an act/omission in the interests of the giver by virtue of that person’s
authority.’
This extract from the Criminal Code defines which of the following crimes?
A Bribery
B Money laundering
C Fraud
D Ungrounded enrichment
(2 marks)
29 In relation to insolvency, what is the primary role of the external manager?

A To liquidate the company
B To restore the company to solvency
C To ensure that the assets of the company are distributed fairly
(1 mark)
7 [P.T.O.
30 During the insolvency process, suspicious transactions relating to undue payments may be uncovered. These
transactions may be time limited to being within either one year or three years of the bankruptcy proceedings
commencing.
Which of the following transactions may be treated as null and void if it was made within one year of
commencement of the bankruptcy proceedings?
A One which resulted in the debtor receiving a disproportionate payment
B One which damaged the claims of creditors or affected the priority of claims
C One which damaged the property rights of the creditors
(1 mark)
31 When can an offer be recalled?

A It can never be recalled once it has been issued
B If the recall is received by the offeree before or at the same time as the offer
C At any time prior to acceptance of the offer by the offeree
(1 mark)
32 Andrei is an executive working for –OOO- Speed. He was delivering an urgent set of documents to a client of the
company and skidded off the road, causing damage to a food kiosk situated next to the road. Dazed by the incident,
and in a hurry to ensure the documents were delivered, he wrote and signed a note accepting responsibility for the
damage and handed this to the owner of the kiosk.
Which of the following statements is correct in relation to liability for the damage?
A –OOO- Speed bears primary responsibility for payment of compensation
B Andrei bears primary responsibility for paying compensation
C Andrei’s written statement overrides any responsibility which –OOO- Speed might bear
D Andrei and –OOO- Speed are jointly and severally liable to pay compensation
(2 marks)
33 Which of the following may be included in a labour agreement at the employer’s discretion, but is not
a mandatory clause?
A A confidentiality agreement
B Specification of the place of work
C Social insurance requirements
D A description of working conditions
(2 marks)
34 Anna has been dismissed by her employer due to continuing poor health.
What is her entitlement to severance pay?

A Anna has no entitlement to severance pay
B One week’s pay
C Two weeks’ pay
D One month’s pay
(2 marks)
8
35 Which of the following is an essential feature of a forfeit?
A It must take the form of a payment or performance of an obligation
B It must be expressed in monetary terms
C It is only payable in respect of tangible financial losses
(1 mark)
36 Which of the following statements about dividends are true?

(1) Preference share dividends may be paid from a special fund set aside for this purpose
(2) A joint-stock company may decide to pay a dividend based only on half yearly or annual financial results
A Both statements
B Neither statement
C Statement 1 only
D Statement 2 only
(2 marks)
37 Which of the following is an essential feature of a tort?

A Intent to cause harm, loss or injury
B Monetary loss or missed profits
C Causal link between conduct and harm
(1 mark)
38 In relation to a surety with no date fixed for its expiry, what is the latest date on which the creditor must file their
claim against the debtor if the creditor wishes to avoid termination of the surety?
A The expiry date of the principal obligation
B Six months from the expiry date of the principal obligation
C One year from the expiry date of the principal obligation
(1 mark)
39 What is meant by the term ‘alternative forfeit’?

A The forfeit may be claimed but not additional losses
B The amount of forfeit is decided by the court
C Both the forfeit and losses may be claimed
D The claimant may choose to accept the forfeit or losses
(2 marks)
9 [P.T.O.
40 Many written contracts include force majeure clauses.
Which of the following would be regarded as a force majeure incident which would absolve a party from
responsibility for breach of the contract?
A An unexpected 75% devaluation in the value of a foreign currency, making it impossible to fulfil the contract
without incurring significant losses
B The bankruptcy of an airline, resulting in a party to a contract not being able to travel by air from St Petersburg
to fulfil a contractual obligation in Moscow the following day
C The cancellation of a concert by a singer due to the concert venue suffering serious fire damage three hours
before the concert was due to start
D The failure of a seller to deliver goods due to their supplier being unable to source the goods due to a long-
standing industrial dispute at the manufacturer’s plant
(2 marks)
41 Which of the following statements about labour agreements are true?

(1) The minimum age for concluding a labour agreement for work in jobs involving hazardous working conditions is
16 years
(2) The maximum term generally prescribed for fixed term labour agreements is three years
A Both statements
B Neither statement
C Statement 1 only
D Statement 2 only
(2 marks)
42 In relation to forms of contract, which of the following statements is correct?

A Notarial form is only required for contracts where the subject matter requires state registration
B All contracts between legal entities must be in written form
C Oral contracts cannot be binding unless there is a witness to the agreement
(1 mark)
43 Which of the following statements about a bank guarantee is correct?

A It is a contractual obligation which is independent of the debtor’s principal obligation
B It is terminated if the debtor subsequently borrows additional funds from the creditor
C It can be revoked by the guarantor, even if there is no provision to this effect in the contract
D It must be executed in writing and in notarial form
(2 marks)
44 What damages are payable in the event of a breach of contract?

A Only penalties explicitly laid down in the contract between the parties
B Missed profits sustained by the injured party plus penalties
C Missed profits and all losses sustained by the injured party
(1 mark)
10
45 George offered to sell a car to Maria for 600.000 roubles, but Maria stated that she would only be prepared to pay
500.000 roubles for it. George refused this, but stated that he would keep the offer open for two more weeks. Maria
found it impossible to find a car of the same quality for the price she wished to pay, and so returned to George
after one week in order to accept his offer. Unfortunately, George had sold the car to Sergei two days earlier.
Which of the following statements is correct?

A George is in breach of contract and must recall the car from Sergei
B George is in breach of contract and will have to compensate Maria
C No contract was formed, as Maria’s counter-offer cancelled the original offer
D No contract was formed, as no offer was accepted at any stage
(2 marks)
11 [P.T.O.
Section B – ALL FIVE questions are compulsory and MUST be attempted
Please write your answers to all parts of these questions on the lined pages within the Candidate Answer Booklet.
1 –OOO- Teaching is a training company specialising in industrial safety. During the most recent semester, it engaged
the services of Olga to deliver five seminars. However, after only two seminars, Olga withdrew her services, stating
that she found the travelling too demanding. –OOO- Teaching hired a replacement speaker at short notice, who
performed badly and received adverse feedback.
–OOO- Teaching had to cancel two seminars due to lack of participants. This angered –OOO- Firm, which had taken
five places over the two seminars and had incurred unnecessary expenditure on agency staff to fill in for the seminar
participants.
Neither the contract with Olga nor the terms and conditions of the seminars refer to any withdrawal or cancellation
fees.
Required:
(a) State the consequences of Olga’s withdrawal from the seminars. (2 marks)
(b) State the consequences of the seminars being cancelled by –OOO- Teaching. (2 marks)
(c) Explain how businesses normally address these issues in the content of their contracts. (2 marks)
(6 marks)
2 Natasha and Veronika are partners in an unlimited partnership. They had a major disagreement about the work on a
current project, resulting in Natasha walking out. Natasha stated that she would refuse to work any more on the
current project, and to ensure that it was completed on time, Veronika incurred significant expense on sub-contracted
labour.
Veronika now wishes to terminate the partnership, and has informed Natasha that she will be accountable for her
share of the expenditure prior to termination, as well as any losses incurred due to Natasha walking out on the
business.
Required:
(a) State the extent to which each partner will be entitled to income from the current project, or liable to
expenditure in connection with it, following Natasha’s withdrawal. (2 marks)
(b) Discuss the possible action which can be taken by Veronika against Natasha. (2 marks)
(c) State how obligations of the partnership which emerge after it is terminated will be treated. (2 marks)
(6 marks)
12
3 Grigor has inherited 2.500.000 roubles and wishes to make investments in order to provide regular income as well
as capital for the future. He is prepared to take some risk, as he has some funds set aside in deposits. Knowing
nothing about investments, Grigor talked to his brother who suggested investing in securities issued by companies.
His brother told him that corporate bonds and preference shares in joint-stock companies presented little risk, but he
could generate a much higher income by investing in ordinary shares.
Required:
(a) State the legal characteristics of these investments which are relevant to Grigor’s decisions. (3 marks)
(b) State the implication to Grigor if any company in which he invests becomes insolvent. (3 marks)
(6 marks)
4 The executives of –OAO- Acquire have decided to enter into a financing contract to enlarge its corporate headquarters
and increase its production capacity. The decision is not without risk, as the entire project will cost 33% of the value
of the company’s assets, and although the increase in production capacity relates to the introduction of a new process
which may bring about significant competitive advantages, it is known that other companies in the industry are
considering similar initiatives.
Some of the shareholders are excited by the decision but others are angry. In particular, concerns have been raised
by some shareholders about the possible effect of the project on the financial position of the company.
Required:
(a) Explain the legal safeguards which are in place to ensure that the shareholders can control the actions of the
executives. (3 marks)
(b) State the extent to which those responsible for the management of the company may be held liable if the
project brings eventual harm to the company. (3 marks)
(6 marks)
5 Yuri is the finance director of –OAO- Big, a company whose securities are quoted on the Moscow Stock Exchange.
Knowing that his company was in advanced but secret merger discussions with –OAO- Med, another listed company,
he purchased shares in –OAO- Med and sold them after the formal merger proposal was announced, making a large
profit. Yuri then transferred the funds which he had raised to a company owned by himself, recording the
transaction as an IT consultancy fee, and subsequently drew down dividends to his personal bank account.
Required:
(a) Explain why Yuri’s behaviour will expose him to criminal charges for insider dealing. (3 marks)
(b) Explain why Yuri’s behaviour will expose him to criminal charges for money laundering. (3 marks)
(6 marks)
End of Question Paper
13
Fundamentals Level – Skills Module, Paper F4 (RUS)
Corporate and Business Law (Russia) December 2014 Answers
Section A
1 C
2 B
3 B
4 D
5 D
6 B
7 A
8 A
9 B
10 D
11 B
12 C
13 A
14 A
15 A
16 A
17 C
18 B
19 D
20 B
21 C
22 D
23 C
24 A
25 B
26 B
27 C
28 A
29 B
30 A
31 B
32 A
33 A
34 B
35 B
36 C
37 C
38 C
39 D
40 C
41 B
42 B
43 A
44 C
45 B
Section B
1 Part 1, s.III of the Civil Code sets down provisions in relation to civil obligations.
(a) By withdrawing from the seminars, Olga is in breach of contract. As the company had to incur additional expense in
engaging a replacement, it may file a claim for damages to the court. Damages are usually assessed with reference to
missed profits and de facto losses, so the additional expense falls into the latter category.
Additional damages may also be claimed for any consequences of the negative feedback in respect of the replacement
lecturer’s presentations. This could be assessed by considering the impact of lost bookings, cancellations and possibly
damage to the reputation of –OOO- Teaching.
(b) –OOO- Teaching entered into a contractual obligation by accepting reservations for its seminars from –OOO- Firm, and so has
a commitment to deliver the seminars. In the absence of any exclusion clauses in the contract, –OOO- Teaching would be
liable to pay damages to –OOO- Firm in respect of the additional costs of employing agency staff.
17
(c) The problems are usually pre-empted by companies such as –OOO- Teaching in two ways:
First, it should have included a forfeit in the contract with its speakers through which their potential liability for withdrawal
could be determined.
Second, it should have included a clause in the booking contract reserving a right to cancel any seminar by giving notice to
its customers, and accepting no liability for consequences of cancellation. This is a standard exclusion clause used by many
commercial businesses.
2 (a) In an unlimited partnership, all partners share responsibility for liabilities on a joint and several basis. All partners own all the
income and incur all the expenditure. The general provisions relating to unlimited partnerships are laid down in
Articles 69 et seq of the Civil Code.
In the case scenario, by walking away from the project, Natasha has failed to complete her obligation. The extent to which
she will be entitled to income from the project depends on any relevant provisions in the partnership agreement. In the
absence of such provisions, her entitlement to income may depend on her contribution to the project. Veronika would argue
that by walking away she has improperly performed the obligation and is therefore entitled to no income from the project.
Both partners are jointly and severally liable to expenditure incurred in relation to the project, including the additional costs
of completing the work, though the partnership agreement may lay down specific conditions in this respect.
(b) Veronika may take civil action against Natasha to recover the additional costs of completing the project. This would be
assessed on the basis of the difference between the projected cost had the work been completed by both of the partners, and
the actual cost taking into account the extra expenditure incurred.
As Natasha’s withdrawal resulted in there being only one partner remaining, the partnership must be terminated, so
Veronika could also claim for loss of income in respect of forthcoming work. Her case is supported by Article 77 of the
Civil Code, which specifies that withdrawal is subject to no less than six months’ notice.
(c) Article 75 of the Civil Code states that each partner is liable for obligations incurred by the partnership for a period of
two years after the partnership is terminated.
Both Natasha and Veronika would therefore be liable for any obligations incurred while the partnership was active. These
costs could extend to any work instigated by the partnership but incurred after Natasha’s departure.
3 (a) Ordinary shares provide no guarantee of income or capital preservation. Dividends paid on ordinary shares are recommended
to the general meeting of shareholders by the board of directors. Dividends are only payable out of profits and other
distributable funds, so if the company is not profitable, no dividends can be paid. The directors may also decide not to
recommend a dividend if it is in the interest of the company to retain profits and not distribute them. Further, ordinary
shareholders can see the value of their investments increase or decrease.
Preference shares provide for a fixed dividend, payable out of profits or special funds set aside. Again, dividends are not
guaranteed, as they are subject to funds being available for distribution. However, preference shareholders are paid ahead of
ordinary shareholders, and their rights to a dividend are usually cumulative. The capital value of preference shares can
increase or decrease.
Corporate bonds are created by a civil contract between a debtor and a creditor, so interest must be paid and the capital
must be returned to the investor when due. Failure to do so entitles the investor to take legal action against the company.
However, both capital and interest are dependent on the company’s performance.
(b) On insolvency, ordinary shareholders are paid after all other obligations of the company have been met. This means that they
pose the greatest risk to the investor. If the company is insolvent, the shareholder must receive less than the capital value of
the shares, as any shortfall in respect of assets to liabilities will be taken out of capital.
The capital due to preference shareholders is paid ahead of the ordinary shareholders but after all other obligations have
been met. Preference shares are therefore a more secure investment, but there is no guarantee that the liquidation fund will
meet the capital due on them.
Corporate bonds may be secured or unsecured. If secured, the investor can rely on the collateral, but if unsecured, the owner
of the bond stands as a creditor. As such, the investor is paid ahead of all shareholders but after payments due to the
liquidator, secured creditors with prior claims and preferred creditors (such as employees).
4 (a) The funding of the project is a major transaction within the meaning of Article 78 of the Federal Law on Joint-Stock
Companies. A major transaction is any transaction which is 25% or more of the book value of the company’s assets at the
last reporting date.
As the transaction is between 25% and 50% of the value of the company’s assets, a decision on it must be agreed
unanimously by the board of directors. If the directors are not unanimous, the decision must be taken by the general
meeting of shareholders.
18
(b) Most commercial decisions by the management of a joint-stock company are subject to risk. However, Article 71 of the
Federal Law on Joint-Stock Companies requires directors to act in good faith and in the best interests of the company. This
is supported by Article 53 of the Civil Code.
Failure to act in good faith and in the best interests of the company can render the director liable to action by both the
company itself and by the shareholders, subject to the establishment of a causal link between the actions of the director
and the damage suffered.
These responsibilities must be balanced by the need for those who manage the company to take commercial risks, as
acknowledged by Article 5 of the Civil Code. An executive who has voted against the decision cannot be held liable.
5 (a) Insider dealing is buying or selling shares in listed companies based on price-sensitive information which is not in the public
domain in order to make a profit or avoid a loss. The offence can only apply to dealings in securities which are traded on a
recognised capital market.
The information on the merger was price-sensitive information, and Yuri had access to this by virtue of his position in the
company. Therefore he has been able to take advantage of his access to the information by buying relevant securities and
making a profit.
(b) Money laundering is concealing or disguising the proceeds of crime to make the funds appear legitimate.
By investing the proceeds of insider dealing in his company, Yuri has disguised the funds as a consultancy fee. These funds
lay concealed until the company paid dividends to him. In this way, Yuri converted funds illegally obtained into apparently
legitimate payments.
19
Corporate and Business Law (Russia) December 2014 Marking Scheme
Section A
1–45 One or two marks per question, total marks 70
Section B
1 (a) Recognition of entitlement to damages 1 mark

Further explanation of measure of damages 1 mark
(2 marks)
(b) Recognition of entitlement to damages 1 mark

Further explanation of measure of damages 1 mark
(2 marks)
(c) Addressing problem of replacing lecturer 1 mark

Addressing cancellation of seminars 1 mark
(2 marks)
(Total 6 marks)
2 (a) Application of partnership law Up to 2 marks

(2 marks)
(b) Application of partnership law Up to 2 marks

(2 marks)
(c) Provisions of Civil Code on termination 1 mark

Other application 1 mark
(2 marks)
(Total 6 marks)
3 (a) Legal characteristics of ordinary shares 1 mark

Legal characteristics of preference shares 1 mark
Legal characteristics of bonds 1 mark
(3 marks)
(b) Rights on liquidation of ordinary shareholders 1 mark

Rights on liquidation of preference shareholders 1 mark
Rights on liquidation of bondholders 1 mark
(3 marks)
(Total 6 marks)
4 (a) Law on large scale transaction 1 mark

Application 2 marks
(3 marks)
(b) Duty to act in best interests 1 mark

Application 2 marks
(3 marks)
(Total 6 marks)
5 (a) Definition of insider dealing 1 mark

Application 2 marks
(3 marks)
(b) Definition of money laundering 1 mark

Application 2 marks
(3 marks)
(Total 6 marks)
21
Fundamentals Level – Skills Module
Corporate and
Business Law
(Russia)
Monday 8 June 2015
Time allowed: 2 hours
This paper is divided into two sections:
Section A – ALL 45 questions are compulsory and MUST be

attempted
Section B – ALL FIVE questions are compulsory and MUST be
attempted
Do NOT open this paper until instructed by the supervisor.

You must NOT write in your answer booklet until instructed by the
supervisor.
Do NOT record any of your answers on the exam paper.
This question paper must not be removed from the examination hall.
The Association of Chartered Certified Accountants

Section B – ALL FIVE questions are compulsory and MUST be attempted
Please write your answers to all parts of these questions on the lined pages within the Candidate Answer Booklet.
1 Mikhail is an employee of –OOO- Plant, a company which supplies and maintains trees, shrubs and floral window
boxes for corporate clients. While working on the premises of –OOO- Drop, Mikhail accidentally pushed a window box
containing plants from the balcony of a second floor office. The window box fell on to an executive car owned by
Maria, a visitor to the premises.
Required:
(a) Explain the tests which will be applied by a court in assessing liability for the damage caused to the car.
(2 marks)
(b) Examine the potential liability of Mikhail and –OOO- Plant for the damage caused by the accident.
(4 marks)
(6 marks)
2 Galina and Veronika are hoping to start a business together. Galina has some capital to invest, but is keen to protect
her investment if possible. Veronika has no funds at all but has greater technical expertise. Maria, Galina’s mother, is
prepared to make a substantial investment in the business on condition that her investment will be returned and that
she will receive a share of annual profits. Maria has no interest in the business venture itself.
Required:
(a) Explain why it would be undesirable to establish the business as an unlimited partnership. (3 marks)
(b) Discuss the extent to which forming a commandite partnership would meet the needs of these individuals.
(3 marks)
(6 marks)
3 –OOO- College offers professional training courses. The company is expanding and is profitable, but needs capital in
order to realise its future plans. Konstantin, a friend of one of the directors, is considering the possibility of investing
in –OOO- College. However, he has stated that he would expect an average minimum annual return of 8% on his
investment, a guarantee that his capital is protected and a significant influence over the decisions of the company.
Required:
(a) Discuss the extent to which Konstantin’s demands would be met by issuing shares to him. (3 marks)
(b) Discuss the extent to which Konstantin’s demands would be met by issuing bonds to him. (3 marks)
(6 marks)
11 [P.T.O.
4 Clothes Co is a retailer of fashionable clothing. It is a large company, with shares quoted on the stock exchange. Its
charter specifies that the only purpose of the company is to sell clothes. In recent years, the company has moved
towards online retailing and has closed down several shops. The shareholders are concerned that profits from the core
business are falling, and that the company’s continued profitability has become more dependent on profits made from
disposals of shops, other land transactions and gains made on investments in surplus funds. One influential investor
has pointed out that only 20% of profits made in the last two years are attributable to sales of clothing.
Required:
(a) Explain the actions which may be taken by shareholders to ensure that the directors of the company focus
on the core business as laid down in the charter. (3 marks)
(b) Explain the potential legal consequences to the company, its directors and any external parties to contracts
made with the company if any specific deals contradict the provisions of the charter. (3 marks)
(6 marks)
5 Leo runs a private company in which he owns all of the shares. In addition to carrying out legitimate trade, Leo sells
illegal goods and deposits the proceeds of these sales in his company’s bank accounts alongside his lawful earnings.
Leo then invests funds in several different long-term single premium insurance policies, located in tax-friendly
jurisdictions. When these policies mature, the funds are invested in a private bank.
Maxim is Leo’s accountant and handles all deposits and money transfers on Leo’s behalf. Maxim has suspected for a
long time that Leo’s business is suspicious, but is highly paid and raises no questions about the nature of the funds.
Required:
(a) Explain the specific features of Leo’s activities which would be regarded as money laundering by the
enforcement authorities. (3 marks)
(b) Explain the offences which have been committed by Leo and Maxim. (3 marks)
(6 marks)
End of Question Paper
12
Answers
Corporate and Business Law (Russia) June 2015 Answers
Section B
1 (a) The accident is an example of negligence, which is treated as a civil wrong under the provisions of the Civil Code. Mikhail,
who unintentionally caused the damage, has no direct contractual relationship with the client but nevertheless may be held
liable for his actions.
In ascertaining whether a civil wrong has occurred in this case, the court will take account of the following:
(i) There must be some undue action, either by a person or a legal entity.
(ii) There must be fault, though not necessarily intention, by the person who inflicted the damage.
(iii) There must have been either physical or moral harm done.
(iv) There must be a direct causal link between the undue actions and the harm to the victim of the event.
(b) The Civil Code states that non-contractual obligations arising from employees in the course of their normal duties are the
responsibility of the organisation which employs them. This is sometimes referred to as vicarious liability.
Liability of –OOO- Plant:
–OOO- Plant would be liable for the acts of Mikhail, its employee. It would therefore have to pay full compensation for damage
caused, including the damage to the car plus any further costs which directly arise, such as the charges for renting a
replacement vehicle if applicable.
Liability of Mikhail:
Although Mikhail is protected by the provisions of the Civil Code in relation to vicarious liability, he would nonetheless have
a potential liability to his employer, who could take a regress action against him to recover the compensation paid to the owner
of the car.
The court would limit Mikhail’s liability if the compensation due was wholly disproportionate to his personal financial
circumstances.
If Mikhail’s accident arose from actions not connected with his usual duties, he could be fully liable. For example, if the
window box had fallen due to Mikhail’s improper conduct, then his company could be absolved of responsibility.
2 (a) An unlimited partnership is a business form which has no separate legal personality in law. The business affairs of the
partnership are inseparable from those of the partners, who own the assets and incur the liabilities, jointly and severally.
This business form is unsuitable for several reasons. Galina’s desire to protect her investment cannot be achieved by forming
an unlimited partnership, as there is no limited liability. In addition, the disparity between the financial situation and the
expertise of the two partners suggests that it would be difficult to form a consensus on how profits should be allocated in their
partnership agreement. This could cause difficulties if the partnership was terminated. Finally, Maria’s demand that she is
involved only as an investor precludes her direct involvement in the partnership, as she would be liable alongside the other
two partners (though she could invest by providing loan capital without becoming a partner).
(b) The commandite partnership form meets some, but not all, of the needs of the individuals involved. It is a type of
partnership in which there must be at least one investor (commandite partner) and at least one unlimited partner. Implicit in
the proposal is that Maria would be the investor and Galina and Veronika would be unlimited partners.
Depending on the extent to which Galina insists on protecting her investment, she too could be a commandite partner, but
this would prevent her from participating in the business.
By joining as an investing partner, Maria’s desire to fund the business on an arm’s length basis could be achieved. She has
no wish to participate in the operations of the business, and this is consistent with the rules governing this type of partnership.
Further, her financial liability would be confined to her investment in the partnership, and any liabilities in excess of this would
fall to the two unlimited partners.
3 (a) Konstantin’s demands could partially be met by enabling him to invest in shares.
If Konstantin’s investment took the form of ordinary shares, his stipulation that he would expect a minimum 8% annual return
on his investment would be dependent on the dividend recommended by the directors each year, but this in turn would
depend on the profitability of the company and whether it was in a position to pay such a dividend. If profits proved to be
inadequate, Konstantin could not be paid out of capital. If the investment was in preference shares, these could carry a fixed
coupon of 8% per annum as required, but even then, the company could not guarantee the payment, as dividend
payments are contingent on sufficient earnings.
For both ordinary shares and preference shares, Konstantin’s capital could not be guaranteed.
15
By investing in ordinary shares, Konstantin would be able to exert influence by voting at the shareholders’ meetings, but his
right to vote would be limited if he invested in preference shares, as these shareholders may only vote in instances provided
for by legislation. With the approval of the shareholders, he could become a director, subject to annual re-election.
(b) Konstantin’s demands could partially be met by enabling him to invest in bonds.
Bonds are loan capital and are based on a contract between a debtor and a creditor. As such, any terms could be included
with the agreement of both parties. It is quite usual for bonds to carry fixed interest, so Konstantin’s desired 8% per annum
return could be one of the conditions agreed.
Although interest payable to bondholders is a contractual obligation of the company, there is a possibility that the company
may not be in a position to pay this every year. To this extent, his wish to protect his capital is served better by investing in
bonds, but not guaranteed.
Bondholders have no constitutional rights while the company remains a going concern, as all decisions concerning
management and administration are the ultimate responsibility of the shareholders. Konstantin would only have a significant
influence if he was nominated and elected as a director, and in the event of the company becoming insolvent, in which case
he would have a voice at the creditors’ meeting.
4 (a) The shareholders could act on their concerns in three ways.

First, the shareholders could directly question the business model adopted by the directors and seek more direct involvement
in operational decisions. The extent to which this would be achievable would depend on how many shareholders have
concerns and whether their collective voting powers were sufficient to achieve these aims. As the company is an open
joint-stock company (public company), it could have hundreds or perhaps thousands of shareholders who would have
practical difficulties in coordinating their efforts. The shareholders could also propose specific resolutions to be passed at a
general meeting if they believed that the business plans of the company were fundamentally flawed.
Second, the shareholders could intervene by proposing changes to the management structure. This could involve removing
some or all of the existing directors, appointing new directors or demanding other changes in the senior executive structure.
Third, the shareholders could mobilise the internal audit commission or an independent external body to carry out an in-
depth analysis of the company’s financial performance. This could reveal whether the disproportionate contribution of non-
core activities is a temporary phenomenon or should be expected to continue. Such an analysis would also consider
whether the decisions and actions of directors were in the company’s best interests, or whether the directors were using
the company’s resources as an investment vehicle.
(b) If a company becomes over-reliant on investments of surplus funds and profits from deals in non-current assets, it could be
argued that it is in violation of the provisions of the charter. This contravenes Article 11 of the Federal Law on Joint-Stock
Companies. The shareholders could therefore compel the directors to act to address this situation, or alternatively could
change the provisions in the charter if it was deemed appropriate to do so.
The directors could be exposed to personal liability if it was established that their actions were not in the best interests of the
company. The same federal law states that directors can be held personally accountable to the company for such actions.
Deals made with third parties remain valid, provided they were made in good faith. So as long as the company remains a
going concern, external third parties have a reassurance that any contracts entered into by the company which are
inconsistent with the provisions of the charter cannot be nullified, provided the external third parties were not aware of this.
5 (a) Money laundering is often carried out in three overlapping stages: placement, layering and integration.
Placement occurs when Leo deposits illegal funds alongside his legitimate earnings, thereby combining legal and illegal
sources of income.
Layering occurs when Leo invests funds in long-term life assurance policies.
The funds are integrated when these funds mature. Each of these stages represents an opportunity to further conceal the
funds, so that on maturity of the investments it will be difficult or impossible to ascertain whether the funds are the proceeds
of crime or not.
(b) Two separate offences have been committed.

Leo has deliberately used his company as a vehicle through which the proceeds of illegal activities are concealed or disguised.
This is the essence of money laundering as an offence, and if it can be proven that illegal funds have been channelled through
different transactions for the purpose of making the funds appear to be legitimate, an offence is committed.
It should be noted that Leo’s illegal activities from which criminal proceeds are derived are not money laundering. However,
he would be guilty of at least one other criminal offence.
Maxim has also committed an offence through his inaction. As he deals with Leo’s financial transactions and has a
suspicion that money laundering is taking place, Maxim has failed to report his concerns to an appropriate authority. This
duty arises when an individual has grounds for suspicion, not necessarily proof, that illegal transactions are taking place.
16
Corporate and Business Law (Russia) June 2015 Marking Scheme
Section B
1 (a) Tests to determine liability 2 marks
(b) Vicarious liability 1 mark

Regress action 1 mark
Application – Mikhail’s liability 1 mark
Application – liability of company 1 mark
(4 marks)
(Total 6 marks)
2 (a) General features of unlimited partnership 1 mark

Per reason why unsuitable 1 mark, maximum 2 marks
(3 marks)
(b) General features of commandite partnership 1 mark

Per reason why suitable 1 mark, maximum 2 marks
(3 marks)
(Total 6 marks)
3 (a) Extent to which shares guarantee return 1 mark

Extent to which shares guarantee capital 1 mark
Extent to which shares offer influence in company 1 mark
(3 marks)
(b) Extent to which bonds guarantee return 1 mark

Extent to which bonds guarantee capital 1 mark
Extent to which bonds offer influence in company 1 mark
(3 marks)
(Total 6 marks)
4 (a) Direct intervention in operational matters 1 mark

Right to call meeting or pass resolutions 1 mark
Right to influence composition of the board 1 mark
(3 marks)
(b) Impact on company 1 mark

Impact on directors 1 mark
Impact on third parties 1 mark
(3 marks)
(Total 6 marks)
5 (a) General definition of money laundering 1 mark

Per discussion of specific actions as money laundering 1 mark, maximum 2 marks
(3 marks)
(b) Offences under money laundering laws 1 mark

Offence committed by Leo 1 mark
Offence committed by Maxim 1 mark
(3 marks)
(Total 6 marks)
17
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ACCA

CORPORATE AND BUSINESS LAW

REVISION QUESTION BANK

For December 2017 and June 2018 Examinations

©2017 Becker Educational Development Corp. All rights reserved. (i)

Copyright ©2017 Becker Educational Development Corp. All rights reserved.

(ii) ©2017 Becker Educational Development Corp. All rights reserved.

Question Name Page Answer Marks Date worked

MULTIPLE CHOICE QUESTIONS

1 Sources of law 1 1001 41

1 Student Petrov 58 1026 6

5 OOO Book (ACCA J07) 59 1029 6

15 Alexander (ACCA J06) 64 1037 6

©2017 Becker Educational Development Corp. All rights reserved. (iii)

Question Name Page Answer Marks Date worked

20 OOO Teach (ACCA D06) 67 1041 6

21 Andrei and Nikolai (ACCA J06) 67 1042 6

LEGAL PERSONALITY AND COMPANY FORMATION

30 OOO Investor 71 1049 6

34 Mr Chaikin (ACCA D01) 73 1053 6

CAPITAL AND FINANCING

38 PAO X (ACCA D03) 75 1055 6

COMPANY MANAGEMENT AND ADMINISTRATION

45 PAO Zvezda 79 1062 6

(iv) ©2017 Becker Educational Development Corp. All rights reserved.

Question Name Page Answer Marks Date worked

51 A, B, C and D (ACCA J03) 82 1066 6

57 OOO Perituus 85 1071 6

CORPORATE FRAUDULENT AND CRIMINAL BEHAVIOUR

DECEMBER 2014 (Specimen Exam)

Section A (not published by ACCA)

©2017 Becker Educational Development Corp. All rights reserved. (v)

(vi) ©2017 Becker Educational Development Corp. All rights. res.erved

MCQs 1 SOURCES OF LAW

A It is primarily derived from decisions of the Russian courts

A When the regulations concern human rights and liberties

A Public law regulates relations between a citizen and society

A It is not a regulatory legal act

1.7 Accomplishment of a law is described by which of the following?

A A form of law implementation involving the prohibition of actions

©2017 Becker Educational Development Corp. All rights reserved. 1

A It is executed by subjects of the Federation and is applicable to a defined group of

1.9 Which of the following is NOT an example of law enforcement?

A Compulsory military service

1.10 A law lacuna is described by which of the following statements?

A It is a law enacted by the legislative body of a subject of the Federation

(1) It may be resolved by adoption of a law by competent bodies or by decree of the

2 ©2017 Becker Educational Development Corp. All rights reserved.

A Deputies of the State Duma

1.15 What vote is required to override a veto by the President?

A It must be limited to a narrow range of military matters

©2017 Becker Educational Development Corp. All rights reserved. 3

A The President decides which prevails

A Amend the Constitution

1.22 Which of the following is NOT a category of international treaties?

Which law prevails?

A Both are void

4 ©2017 Becker Educational Development Corp. All rights reserved.

Which of the following statements are true?

Is the new legislation subordinate to the treaty?

MCQs 2 COURT STRUCTURE

2.1 Which of the following is a component of the Russian judicial system?

(1) Courts of general jurisdiction