In practice, during M&A deal negotiations, a discussion may arise between the parties regarding who and when should make the decision to appoint the general director proposed by the buyer. To date, legal practice has not developed a simple and standard solution applicable to all cases.

Generally, both parties agree that operational control over the acquired company (through the appointment of “their” director) should transfer to the buyer along with the transfer of ownership of the shares/equity interests. The problem arises because it can take up to 5 business days between the date the decision to change the director is made and the date the changes regarding the new director are entered into the Unified State Register of Legal Entities (EGRUL). During this period, the previous director will formally have the authority to act on behalf of the acquired company for third parties.

The review focuses on the issues related to the time gap between the decision to appoint a new general director and the amendment of information in the EGRUL. It analyzes various approaches to the timing of the general director’s change, key arguments of the parties during negotiations, as well as the risks to each party and possible ways to mitigate them.