New restrictions on cash transactions from March 18, 2022
A Presidential Decree providing for new restrictions on cash transactions was issued on March 18, 2022[1]. This decree, among other things, bans residents until December 31, 2022 from purchasing shares, contributing to assets or share capital of non-resident legal entity without permission from the Central Bank which is to draw up rules for issuing such permissions within 10 days.
In other words, Russian companies and citizens (and other entities recognized as residents under Federal Law N 173-FZ dated December 10, 2003 On Currency Regulation and Currency Control) are prohibited from purchasing shares, contributing to assets or share capital of foreign companies in any currency.
The Law on LLC provides that shares in a company’s share capital may be paid in cash, securities, other things or property rights or other rights with a monetary value[2]. So, we believe that the payment of shares in any form, including payment with assets may be prohibited, and as a result, this will make it more difficult to relocate businesses or set up companies outside Russia.
And the question as to whether payments to third parties under a share sale-purchase agreement are prohibited remains open.
If you have any questions or you would like to discuss this further, please feel free to email Anton Kabakov.
Truly yours,
[1] Presidential Decree No. 126 dated March 18, 2022 On Additional Temporary Economic Measures and Currency Regulation to Ensure the Financial Stability of the Russian Federation
[2] Article 15(1) Federal Law On Limited Liability Companies