Notary Participation in Corporate Governance: Do Businesses Need Notarial Protection?

Key conclusions

Business needs notary insurance

“Business needs notary insurance because in corporate governance, if a transaction, for example, goes through the board of directors, a notary is present, and he/she certifies the results, then it is easier for business. You no longer need to go to court or sue. First, it’s a big time saver. Second, it’s global protection against hostile takeovers [...] At a limited liability company, where there is one director and one founder, this is a good thing for a raider: it takes roughly two days to change the owner and director. Business and notaries need to think about using notaries as often as possible in corporate governance. This will reduce any risks that may arise,” Deputy Minister of Justice of the Russian Federation Maxim Beskhmelnitsyn said.

“It’s not guardianship, but a partnership. And constant movement forward,” Federal Tax Service of Russia Deputy Head Vitaly Kolesnikov said.

“The same thing should be introduced in relation to natural monopolists. There is enormous public interest in this. And here it’s not a question of a notary’s optional participation, but a question of mandatory participation [...] It’s a good thing when a notary is actually the corporate secretary of a large public company or a natural monopolist,” Minister of Justice of the Russian Federation Konstantin Chuychenko said.

“Yes, of course, business needs a notary. As a guardian, as insurance, as an assistant in putting this legal entity’s papers in order,” Belarusian Notary Chamber Chairperson Natalia Borisenko said.

Business understands the need for a notary’s involvement in corporate governance

“Last year, the number of applications for the certification of decisions made by the governing bodies of legal entities increased by 25%. In total, more than 225,000 such actions were committed across the country in 2021. For comparison’s sake, this is five times more than in 2019. So demand is increasing. Business understands that it is important to contact a notary. Obviously, for company owners, contacting a notary in this case allows them to protect their property from fraudulent schemes and various kinds of offences,” Federal Notary Chamber President Konstantin Korsik said.

“The stability of civil commerce is necessary and essential for everyone involved in the market and civil commerce. And in this regard a notary is a guarantor of stability,” Kutafin Moscow State Law University Rector Viktor Blazheyev said.

PROBLEMS

Businesses and notaries are becoming vulnerable in the age of digitalization 

“A notary’s involvement in governing legal relations is relevant in light of the active spread of electronic formats of business and civil transactions. After all, a simplified procedure, which essentially involves instant decision-making in digital conditions, increases vulnerability, including for people in the corporate sphere. This mainly concerns small and medium-sized businesses, as well as individual entrepreneurs, whose resources are objectively limited in this regard. An illustrative example in the corporate sphere is the use of false electronic digital signatures for the management bodies of legal entities and the recording of false information in the Unified State Register of Legal Entities: in such a scheme, fraudsters don’t even have to look for a candidate for the role of a dummy CEO and certify his/her signature at a notary, since the entire scam is actually carried out remotely if there is no notary here,” Federal Notary Chamber President Konstantin Korsik said.

“In recent years, legal procedures at the most important legal bodies have become much more simplified, and courts of general jurisdiction and arbitration courts consider most the bulk of cases as part of ‘contactless justice’, which does not allow for personal communication between the judge and the parties involved in the proceedings. Similar reforms are taking place in enforcement proceedings. The centre of gravity in legal procedures continues to gradually shift to the virtual and digital realm. And we need to decide whether these mechanisms should be developed in the notarial system, where personal communication with the client is of fundamental importance and ensures the indisputability as well as the special evidentiary and executive power of notarial acts. The State Duma does not always, in fact, support the digitization of anything and everything,” First Deputy Chairman of the Committee of the State Duma of the Federal Assembly of the Russian Federation on State Building and Legislation Yury Sinelshchikov said.

“Notaries are now coming under increasing pressure from other legal professions that are looking for new labour markets for themselves, including through the traditional expertise of a notary,” First Deputy Chairman of the Committee of the State Duma of the Federal Assembly of the Russian Federation on State Building and Legislation Yury Sinelshchikov said.

SOLUTIONS

Creation of a strong notarial culture will help solve strategic tasks

“We need to set more ambitious goals for notaries […] Notaries face an ambitious task — the creation of a new corporate legal culture of doing business,” Deputy Minister of Justice of the Russian Federation Maxim Beskhmelnitsyn said.

“A strong notarial culture will make it possible to fulfil any strategic plans. Today, the country’s development essentially depends on culture, business, governance, and the actual approach,” Federal Tax Service of Russia Deputy Head Vitaly Kolesnikov said.

Notaries should act as guarantors of security in the age of digitalization

“Notaries have all the tools they need to work effectively in the new digital environment. A notary’s electronic infrastructure makes it possible to provide parties to legal relations with reliable legal protection without restricting them in the broad use of digital goods. The notary certifies the document electronically and sends the certified information for registration in the state register. It’s convenient, comfortable, and provides a high degree of protection. Clients at notaries’ offices do not need to acquire their own digital signature or spend additional money on it. As part of a single notarial act, the notary also certifies the authenticity of the signature, and is required to send a corresponding record to the registering authority on the day the notarial act was prepared. It’s convenient, comfortable, and provides a high degree of protection. This speeds up the well-organized digital exchange of information between the notary and a number of departments, including [the Federal Service for State Registration, Cadastre, and Cartography] and the Federal Tax Service, and simplifies legal procedures,” Federal Notary Chamber President Konstantin Korsik said.

“We need to resolve the issue of how to ensure that notaries have free access to all open and closed information resources of the state authorities and organizations that perform public functions. Today, such access is often limited. Lifting unreasonable barriers will make the result of a notarial act truly reliable and save clients from the need to collect documents that require a notarial act to be concluded,” First Deputy Chairman of the Committee of the State Duma of the Federal Assembly of the Russian Federation on State Building and Legislation Yury Sinelshchikov said.

“We need to continue searching for optimal ways to delimit the competencies of a notary and other legal, related organizations, such as lawyers, realtors, and banks, given the serious competition on the real estate market and the corporate law market, while ensuring the recording of property rights in this area,” First Deputy Chairman of the Committee of the State Duma of the Federal Assembly of the Russian Federation on State Building and Legislation Yury Sinelshchikov said.

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