A Special Procedure Introduced for the Disposition of Shares in Limited Liability Companies
On September 8, 2022, the Russian President signed a decree[1], establishing a procedure for entering into transactions in shares in limited liability companies (LLC/OOO). Closing such transactions now requires a prior authorization from the Russian Government Commission[2].
What transactions are subject to this special procedure?
- Any transactions that result, directly and/or indirectly, in establishing, altering, or terminating the rights of ownership, use, and/or disposition of shares in limited liability companies.
- Any transactions that result, directly and/or indirectly, in establishing, altering, or terminating any other rights that allow to determine about the conditions of management of such limited liability companies and/or the conditions of their business activities.
These transactions, inter alia, include share purchases and changes in the size of a share in a company. We believe such transactions may include an increase in the share capital of a company, enter of a shareholder, and the withdrawal of a shareholder from a limited liability company, and authorization may be required to appoint a management company.
Who may enter into these transactions only with the authorization of the Russian Government Commission?
The authorization of the Russian Government Commission will be required where a transaction is entered into between:
- A resident[3] and a foreign entity/ foreign individual from an “unfriendly country” or an entity that is controlled by an entity/ individual from an “unfriendly country”;
- Foreign entities/ foreign individuals from “unfriendly countries”;
- Foreign entities/ foreign individuals from “unfriendly countries” and foreign entities/ foreign individuals from “friendly countries”.
In other words, only Russian residents[4] may enter into these transactions without the authorization of the Russian Government Commission.
How to obtain the authorization of the Russian Government Commission?
The Russian Government Commission will establish a procedure for issuing authorizations within ten (10) days.
Based on the practice of previous rules regulating the issue of such authorizations for transactions, we may conclude that the key difficulty with obtaining an authorization is that the regulations do not specify any time limit for issuing such an authorization.
We would be pleased to advise you on this matter in more detail, including on the development of alternative methods for achieving your objectives, and provide to you the support you may need in obtaining authorization from the Russian Government Commission.
If you have any questions or you would like to discuss this further, please feel free to email Alexandra Yudina or Anton Kabakov.
Truly yours,
[1] Decree No. 618 of the President of the Russian Federation dated September 8, 2022.
[2] The Russian Government Commission on Control over Foreign Investments in the Russian Federation.
[3] The term “resident” is defined in Article 1(1)(6) of Federal Law No. 173-FZ On Currency Regulation and Currency Control dated December 10, 2003.
[4] The term “resident” is defined in Article 1(1)(6) of Federal Law No. 173-FZ On Currency Regulation and Currency Control dated December 10, 2003.