The Bank of Russia clarifies procedure for terminating obligations to foreign persons
The Bank of Russia has published new Clarifications No. 1-OP dated March 22, 2024 on the procedure for applying Decree No. 95 of the Russian President dated March 5, 2022 (the “Clarifications” and “Presidential Decree No. 95” respectively).
As you may remember, in performing their obligations with respect to loans, borrowings, and financial instruments to persons from so-called “unfriendly” countries (“non-residents”), Russian residents are required to comply with the temporary procedure established by Presidential Decree No. 95.
As set forth in Presidential Decree No. 95, obligations for an amount of over RUB 10 million, or a foreign currency equivalent, a month are to be performed using a special type “C” account opened with an authorized Russian bank or to the counterparty under an individual authorization issued by the Bank of Russia and the Russian Ministry of Finance[1].
In the new Clarifications, the Bank of Russia explicitly states that an individual authorization for terminating obligations to non-Russian residents will also be required when:
- Obligations are terminated by providing other consideration (including a set-off of counterclaims, a termination fee, novation) without any funds being credited to a special type C account of type.
Since Presidential Decree No. 95 applies to the performance of obligations for an amount of over RUB 10 million (or a foreign currency equivalent), we believe that an individual authorization for the performance of obligations by setting off counterclaims, paying a termination fee, and novation (or by other non-monetary means) will be required only if such performance terminates obligations that exceed the specified limit.
Forte Tax & Law is monitoring changes in legislation and law enforcement practice. We would be pleased to assist you in resolving complex issues and obtaining necessary authorizations from the Bank of Russia and the Russian Ministry of Finance.
If you have any questions or you would like to discuss this further, please feel free to email Julia Talagaeva or Artem Eretenko.
Sincerely,
[1] Authorizations are issued by the Bank of Russia to lending institutions and non-bank financial institutions or by the Russian Ministry of Finance to other persons as agreed upon with the Bank of Russia