Prosecutor General Yury Chaika said Tuesday that his office would prosecute shareholders as well as executives of companies who don’t pay their employees, a move that may undermine the legal foundations of the limited liability corporation.
“Not only should the managers of enterprises be held responsible for wage arrears, but the owners should too — even including criminal prosecution,” he said after a meeting on labor legislation in Barnaul.
“Unfortunately, judgments on debt collection are not now carried out efficiently enough,” he said.
But legal experts say Chaika’s initiative might not have enough of a legal framework to be able to implement it effectively.
“According to Russian law, the shareholder’s liability is limited by his ownership of capital stock,” said Alexander Nadmitov, a partner with the Nadmitov & Partners law firm. “It is quite difficult to make shareholders legally liable for wage arrears.”
Wage arrears are regulated by the country’s Criminal Code, which outlines punishments for guilty executives ranging from a fine to prohibition from certain posts for several years to imprisonment, depending on the gravity of the violation.
Shareholders, on the other hand, can be forced to pay off the debts if there is evidence that they were responsible for the arrears, but the law does not allow for punishment.
“[The laws] have limited scope and are applicable in insolvency proceedings or to dependent companies. They require special circumstances and there is a heavy burden of proof required in order to invoke such provisions. Therefore they are unlikely to be relevant for most solvent companies,” he said.
Government officials have felt pressure to be as tough as possible on companies with wage arrears after protests over unpaid salaries erupted in Pikalyovo in June, prompting Prime Minister Vladimir Putin to fly into town and force factory owners, including billionaire Oleg Deripaska, to pay wage arrears and reopen the factories.
Shortly after the Pikalyovo incident, President Dmitry Medvedev threatened to fire governors who didn’t deal with unemployment and wage arrears in their region.
The State Statistics Service reported Tuesday that wage arrears throughout the country decreased 14.2 percent to 5.5 billion rubles ($178.5 million) in August compared with 6.4 billion rubles in July.
Despite the absence of an applicable law, the Prosecutor General’s Office could find ways to hold stockholders responsible for their companies’ wage arrears.
“Any company in Russia operates with certain deficiencies and has difficulties, let’s say, meeting accounting, fire security or sanitary standards,” said a corporate lawyer who asked for anonymity because of the delicate nature of the topic.
“And if the prosecutor’s office wants to go after a company, they will find ways to make them more cooperative, so to speak,” the lawyer said.
“Not only should the managers of enterprises be held responsible for wage arrears, but the owners should too — even including criminal prosecution,” he said after a meeting on labor legislation in Barnaul.
“Unfortunately, judgments on debt collection are not now carried out efficiently enough,” he said.
But legal experts say Chaika’s initiative might not have enough of a legal framework to be able to implement it effectively.
“According to Russian law, the shareholder’s liability is limited by his ownership of capital stock,” said Alexander Nadmitov, a partner with the Nadmitov & Partners law firm. “It is quite difficult to make shareholders legally liable for wage arrears.”
Wage arrears are regulated by the country’s Criminal Code, which outlines punishments for guilty executives ranging from a fine to prohibition from certain posts for several years to imprisonment, depending on the gravity of the violation.
Shareholders, on the other hand, can be forced to pay off the debts if there is evidence that they were responsible for the arrears, but the law does not allow for punishment.
“[The laws] have limited scope and are applicable in insolvency proceedings or to dependent companies. They require special circumstances and there is a heavy burden of proof required in order to invoke such provisions. Therefore they are unlikely to be relevant for most solvent companies,” he said.
Government officials have felt pressure to be as tough as possible on companies with wage arrears after protests over unpaid salaries erupted in Pikalyovo in June, prompting Prime Minister Vladimir Putin to fly into town and force factory owners, including billionaire Oleg Deripaska, to pay wage arrears and reopen the factories.
Shortly after the Pikalyovo incident, President Dmitry Medvedev threatened to fire governors who didn’t deal with unemployment and wage arrears in their region.
The State Statistics Service reported Tuesday that wage arrears throughout the country decreased 14.2 percent to 5.5 billion rubles ($178.5 million) in August compared with 6.4 billion rubles in July.
Despite the absence of an applicable law, the Prosecutor General’s Office could find ways to hold stockholders responsible for their companies’ wage arrears.
“Any company in Russia operates with certain deficiencies and has difficulties, let’s say, meeting accounting, fire security or sanitary standards,” said a corporate lawyer who asked for anonymity because of the delicate nature of the topic.
“And if the prosecutor’s office wants to go after a company, they will find ways to make them more cooperative, so to speak,” the lawyer said.
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