“If a company with several shareholders/participants fails to formulate and record correctly the “rules of the game” from the beginning, it may face serious problems in the future,” says advocate Narine Beglaryan, senior partner at Concern Dialog Law Firm. She leads the Firm’s corporate law and corporate reorganizations (M&A - Mergers and acquisitions) practice, as well as the directions of banking law, capital markets and protection of personal data. In her interview to Banks.am, Narine Beglaryan spoke about the risks faced by companies in the field of corporate law and introduced the services that can minimize them.Corporate law: registration of a company, business activities, alienations of shareholding, reorganizations and liquidationsCorporate law relates to legal entities, their management, and those who have ownership in the equity of legal entities. It is worth mentioning that the role of the corporate lawyers and legal advisors specialized in corporate law commences before the foundation of a legal entity. After the company is founded, corporate lawyers are engaged as corporate secretaries. They organize general meetings, act as representatives of owners of shareholding in the equity capital of a company, and render legal support in the process of making investments, including issuance and placement of shares. Furthermore, they may be involved in the transactions of alienation of shareholding in the company, act as attorney-at-law in corporate disputes, and provide legal advice and assistance during the reorganization and liquidation of companies.Concern Dialog Law Firm has been providing the aforementioned services since its foundation in 1998. I joined the team in 2013, and corporate law is one of my main professional domains. Personally, I am little involved in the processes of registration of companies or provision of corporate secretarial services, but the Firm has a team of professionals who do those job perfectly well (smiles – editor). I am actively involved in litigations, representing clients in disputes between participants, in transactions on alienation of shareholding, and in the processes of making investments in a company. Narine Beglaryan Image by: Mediamax Referring back to the role of a corporate lawyer in the process of registering a legal entity, I would like to emphasize that our Firm does not focus on the preparation of the minimum necessary package of documents required for registering a legal entity. Armenia has put in place a simple system for registration of a company, where registrations can occur through standardized templates without seeking a lawyer’s assistance. However, when dealing with foreign investments, companies with several founders, cases where property other than monetary funds are expected to be invested in a company, or a company is being founded for a special purpose, the need for professional advice arises, and standardized templates can no longer be of use. These are the cases where clients seek our advice.At Concern Dialog Law Firm, legal consultation on corporate law begins prior to the foundation of a legal entity, for example, what organizational and legal form it would be correct to register a future company. In simpler words, should it be registered as a LLC or a CJSC? Here, the specialist must explicitly explain what opportunities the business and the person participating in the equity will have if they choose one or another organizational and legal form. The question seems very simple; yet, it is not. The consultation preceding the registration of a company may be a rather abundant process. For example, we recently consulted one of our clients in this area – answering about 150 questions, introducing corporate, tax, competition and labor legislation effective in our country. In the result, the client received comprehensive information about legal regulations, developed his expectation from the legal system of Armenian and made his decisions accordingly.The consultation stage is followed by the core stage of registration of a company. Here, it is important to understand correctly the arrangements between the founders and document them in such a way as to prevent future disputes to the extent possible, and if they do arise, the solutions are already provided in the corporate documents.It may seem that the work of a corporate lawyer ends after the company is registered, but believe me, that is not the case at all (smiles – editor). In the course of actual operation of the company, the need may arise, for example, to alienate the company’s participation or to document investments in companies. As I mentioned, we are specialized in this area as well. We can and do factually conduct legal audits of various volumes, including legal audits of large companies, allowing the prospective buyer-stakeholder to comprehend the legal risks arising in the course of operations of a company. While conducting legal audits, we examine the compliance of the company’s activities with corporate, labor, contractual, regulatory, judicial, administrative and other law norms, identify risks and existing problems. Furthermore, we produce documents for transactions on alienation of shareholding and provide full legal support thereof, including consulting on declaring of transactions, where needed. A corporate lawyer must also have strong knowledge of competition law. For example, where the companies decide to merge, in certain cases it is required to file a declaration on merger with the Commission for Protection of Economic Competition and seek its prior approval. Violations of the requirement to disclose/declare the merger can lead to serious consequences for both the buyer and the company, particularly in cases where the merger is recognized unlawful. “The rules of the game must be established correctly from the beginning” If a company has a sole owner (shareholder, participant), it is unlikely that it will face risks in the field of corporate law. Services of our professional team are sought when a company has several owners and there is a need to record/document accurately the arrangements between them from the very beginning.Concern Dialog’s team of corporate lawyers has experience in corporate litigations as well. The Firm represents the interests of shareholders in courts in the most problematic disputes in the Republic. This is important, since our advisory practice builds on that experience. If shareholders failed to formulate and document their arrangements accurately from the beginning, they may later face a dispute, which can be resolved only judicially. Narine Beglaryan Image by: Mediamax Particularly problematic are cases where shares are distributed evenly – on a principle of 50/50, that is, neither party enjoys a privilege of at least one vote. From a corporate governance perspective, it is desirable for one party to have at least +1 vote, which will allow a simpler resolution of disagreements. Where it is impossible, it is the task of the corporate lawyer to ensure the accurate content of the shareholder agreement in the case of a 50/50 distribution. Thus, the rules of the game must be established correctly from the beginning. Corporate law also addresses the fiduciary responsibility of a company director: what is this?Both joint stock and limited liability company laws have established a rule whereby a company’s executive body, board, or external manager has a fiduciary responsibility towards the company. It implies acting in good faith and due diligently at all times in the best interests of the company, i.e., subordinate personal interests to the fiduciary responsibility.Unfortunately, many managers do not even realize the boundary between their personal and company interests. Directors who are not shareholders of the company often do not even comprehend that they are accountable to the shareholders. Let me give a simple example of fiduciary responsibility. Imagine that a company is engaged in the import of X product and sells it to an already established group of Y customers. The company director who knows that the product already enjoys a stable demand does the following: he founds another company under his sole ownership, imports the same product, and the company managed by him refuses to import it. Eventually, when customers ask how to purchase the product they need, the director responds that the product is no longer available in the company he manages, but it is sold here (in his own company). It is important mentioning that such conduct is not only a classic example of a breach of fiduciary responsibility, but even entails a criminal liability. Corporate lawyers also help to develop an understanding of acting in the best interests of the company when making this or that decision.“Entrusting information to a law firm will make you more protected”By providing specialized services in corporate law, we do not compete with in-house lawyers of companies, in any way. Moreover, quite often they are the ones who outsource the services to us, because in one case or another there is a need to look at the situation from a broader perspective, through a consortium of lawyers with different specializations. In-house lawyers can benefit from the opinion of outsourced specialists who deal with different precedents every day, appear in courts, and work with tens of companies simultaneously. Today, Concern Dialog employs over 30 specialists, including a team that deals with economic crimes and a corporate team that is skilled in competition law as well, and we are qualified to act as attorney-at-law. There is one more peculiarity here, Concern Dialog is a firm of attorneys; therefore, the “Law on Advocacy” and the Code of Conduct for Advocates (rules of ethics for advocates) apply to us. This means that the information entrusted to us is protected under a special confidentiality regime – Advocate-Client Privilege.There are companies that provide corporate or legal services without being a firm of attorneys, meaning that the Code of Conduct for attorneys is not applicable to them, which envisages disciplinary liability for failure to comply with the rules of conduct, including acting contrary to the client’s interests, failure to adhere to Advocate-Client Privilege, etc.Thus, when choosing a corporate lawyer, keep in mind that when you trust an attorney or a firm of attorneys, you will be more protected under the conditions where the advocacy activities are regulated and the guarantees for the protection of Advocate-Client Privilege are present. Yana ShakhramanyanPhotos by Emin Aristakesyan Tweet Views 25025