On September 08, 2022 the President Decree No. 618 implemented another hurdle for foreign companies trying to terminate their business operations in Russia. Since March of this year foreign companies from “unfriendly countries” were restricted to execute any transaction with shares of the Russian joint stock companies and other Russian securities, unless they obtained the consent of the Government Commission for these.
From now the approval of the Government Commission will be also mandatory in relation to any transactions with the shares of Russian limited liability companies in cases persons (individuals or legal entities) from “unfriendly countries” are involved. In the event foreign company is party to the transaction its “unfriendly status” can be based both on direct or indirect control of the person from the “unfriendly country”.
Hereto, any transactions entailing directly and (or) indirectly the establishment, change, termination of the rights of ownership, use or disposal of shares or of other rights that allow determining the conditions for managing Russian limited liability company or the conditions for its business activities are subject to the prior approval by the Government commission. If required the Government commission may also stipulate the conditions under which such transactions are allowed.
The detailed procedure for obtainment of such governmental approval has not been specified yet, and should be issued within 10 days from the publication of President’s Decree.
The approval requirement will not be applicable in case the exemptions from the unfriendly status are given:
- Entities whose beneficiaries are Russian persons will not be considered persons of unfriendly countries, provided that control is disclosed to the tax authorities.
- Entities under the control of persons of friendly countries will also not be considered persons of unfriendly countries, provided that such control was established before March 1, 2022.
Consequently, the separation process from the Russian subsidiaries in the form of third-party sale or management buy-outs will require additional time and efforts from the foreign businesses and even could be put on hold by the Government Commission.
We will monitor further changes and will be glad to provide advice on your exit / freezing options within the Russian market.