On May 21, 2025, a draft law was published for its second reading. It outlines special considerations that would apply to foreign investors wishing to exercise their right to acquire (buy back) the shares (interests) previously held in Russian companies (the “Draft Law”) [1].

The Draft Law stipulates that a special procedure will apply when a foreign investor[2] retains the right to buy back shares (interests) in a Russian company and the purchaser in the transaction is a Russian citizen, a Russian company or a foreign company from a so-called “friendly country” [3] that is controlled by a Russian citizen.

Purchaser’s right to refuse a compulsory sale

The Draft Law provides that the purchaser may unilaterally waive the obligation to sell shares (interests) back to a foreign investor, if the following conditions are simultaneously met:

1. A foreign investor is a person associated with so-called “unfriendly countries” (g., by citizenship, registration, place of business or profit-making), or is under the control of such persons.
2. The shares (interests) were sold between February 24, 2022 and March 1, 2025.
3. The shares (interests) were sold with an option to buy them back within three years or more, and the sale price was significantly lower than the market price;
4. It has been at least two years since the sale of shares (interests) took place; and
5. The company, in which the shares (interests) were acquired, (the “Target Company”) has been properly fulfilling its obligations to its employees (former employees) and creditors.

If the purchaser exercises the right to refuse a compulsory sale, the foreign investor’s right to buy back will be terminated. In other words, buying back such shares (interests) will no longer be possible.

Prohibition on a buyback

According to the Draft Law, the federal executive body that supervises the Target Company’s activities will have the right to prohibit a foreign investor from buying back shares (interests) in it, even if the purchaser has not exercised his right to refuse a compulsory sale. This prohibition may be imposed if the Target Company—and/or the group, of which it is a member—has a significant impact on Russia’s socio-economic development or if there are other circumstances as determined by the federal executive body.

The Draft Law fails to shed any light on what exactly will be considered a “significant impact” on Russia’s socio-economic development. Relevant executive bodies may at their sole discretion prohibit buybacks on any other grounds. It gives the federal executive bodies wide discretion, which creates additional uncertainty and the need for foreign investors to assess their risk of being refused a buyback in advance.

Foreign investor’s right to compensation

Within one year from the date on which the purchaser exercises the right to refuse a compulsory sale, or from the date on which the federal executive body prohibits a buyback, the foreign investor will have the right to demand compensation from the purchaser for the termination of his right to buy back.

If the transfer of shares (interests) was due to the foreign investor refusing or evading the exercise of the rights of shareholder (member) rights, hindering company management, or creating risks for the Target Company, including suspension, liquidation or bankruptcy, the purchaser will have the right to demand a reduction in compensation or refuse to pay it altogether.

Since the procedure for calculating compensation and the grounds for reducing it or refusing to pay it have not yet been determined, and it is still unclear who will determine whether there is a risk to the Target Company and how they will do so, all of this can lead to disputes between purchasers and foreign investors.

The Draft Law has not yet been finalized. It still has to go through several readings in the Russian State Duma when changes and additions may be made.

Still have questions or want to discuss something? Send an email to Julia Talagaeva or Artem Eretenko.

 

Sincerely,

Forte Tax & Law Team

[1] https://sozd.duma.gov.ru/bill/1059849-7#bh_histras

[2] The term “foreign investor” is defined by Federal Law No. 160-FZ dated July 9, 1999 On Foreign Investments in the Russian Federation

[3] The countries that have not been included on the list of so-called “unfriendly countries”, as approved by Directive No. 430-р of the Russian Government dated March 5, 2022

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Effective May 30, 2025, key changes introduced by Federal Law No. 420-FZ[1] will affect the processing and protection of personal data. The law will tighten control over the processing of personal data, introducing new types of offenses and record-high fines of up to RUB 500 million, or up to 3% of a company’s annual revenue. As you may remember, criminal penalties[2] for violating Russian personal data protection laws were established effective from December 11, 2024[3]. Criminalized actions include unauthorized access to, destruction, blocking, or modification of data as computer systems. Examples include hacking a database, deleting a file containing personal data, blocking access to them.

The main changes in administrative liability[4] pertain to compliance with personal data processing requirements. These are:

• For repeated and gross violations relating to the processing of personal data, legal entities will be subject to fines of up to 3% of their annual revenue (or up to RUB 500 million). Currently, this article provides for a maximum fine of RUB 18 million.
• A three-tier scale of liability has been introduced, depending on the amount of unlawfully transmitted data.
• A separate liability has been established for the leakage of biometric personal data and special personal data categories (a fine of up to RUB 20 million).
• A specific liability has been introduced for failure to notify the Russian Federal Service for the Supervision of Communications, Information Technology, and Mass Media (Roskomnadzor) of the intention to process personal data and of a leak. Currently, such violations are covered by the general Article 19.7 of the Russian Code of Administrative Offenses (failure to provide information requested by a government agency) that provides for a minimum fine of up to RUB 5,000 for officials.

Furthermore, state commercial courts will consider cases initiated under Article 13.11 of the Russian Code of Administrative Offenses against companies, their officials, and sole proprietorships (currently, it is justices of the peace that consider administrative offenses relating to personal data).

The new fines are now clearly comparable with the European penalties for personal data protection violations (GDPR). The introduction of new fines is not just a blind regulatory tightening, but a well-thought-out system designed to force data operators to pay more attention to the protection of personal data.

The industries most at risk include IT operators, banks, telecom companies, marketplaces, and any companies that work with personal data.

We recommend conducting an internal audit of the processing of personal data (including biometric data), preparing notices to Roskomnadzor, and implementing technical and organizational protection measures before the changes take effect.

The Forte Tax & Law team stands ready to assist you with risk assessment, audits, and compliance preparations.

Do you have any questions or would like to discuss something? Please send an email to Julia Talagaeva or Ekaterina Belyaeva.

 

[1] Federal Law No. 420-FZ dated November 30, 2024 On the Introduction of Amendments to the Russian Code of Administrative Offenses.

[2] Federal Law No. 421-FZ dated November 30, 2024 On the Introduction of Amendments to the Russian Criminal Code.

[3] Article 272.1 of the Russian Criminal Code.

[4] Article 13.11 of the Russian Code of Administrative Offenses.

 

 

 

 

 

 

 

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On April 18, 2025, a List of Presidential Instructions was published, which includes an instruction to develop a special procedure for the return of foreign companies[1] to Russia, and an instruction to maintain a list of foreign companies that have curtailed or discontinued operations in Russia after February 22, 2022[2].

It is anticipated that a special procedure will be established for the following transactions (operations) involving persons from so-called “unfriendly countries”:

1. Acquisition of real estate by persons from “unfriendly countries” for the purpose of owning, possessing, or using such real estate to conduct business activities in Russia;
2. Acquisition by persons from “unfriendly countries” of the rights to directly or indirectly dispose of shares (interests) in companies, or other rights that would enable them to determine the conditions of management of such companies and/or the conditions of their business activities.

What will happen to the previously granted buyback options?

Among other things, the Russian President has instructed to develop a special procedure for the sale of buyback options for Russian assets sold on non-market terms after February 22, 2022. The Russian government appears to be sending a message that the return of such assets will be scrutinized more closely by the Russian regulatory agencies and will probably require separate additional approval and compliance with some requirements that have yet to be developed.

However, it is a well-known fact that there is already a formal procedure for approving transactions (operations) involving real estate, shares (interests) in Russian companies with the participation of foreign “unfriendly” persons. Therefore, it is likely to be about the development of certain conditions for foreign companies to enter the Russian market.

We will be monitoring the situation closely and keep you informed as soon as there are any changes to the legislation.

Still have questions or want to discuss something? Send an email to Julia Talagaeva or Artem Eretenko.

 

[1] The term “foreign companies” means companies from so-called “unfriendly countries”, a list of which was approved by Directive No. 430-р of the Russian Government dated March 5, 2022

[2] http://www.kremlin.ru/acts/assignments/orders/76722 (in Russian)

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New rules on the use of SIM cards by foreign citizens start to apply in Russia from January 1, 2025. Foreign citizens are now required to undergo additional identification to keep their access to mobile communications and banking services. Those who will not confirm their mobile numbers by June 30, 2025 risk losing their communications, because mobile operators will stop servicing unregistered SIM cards.

Who are the new rules for?

The requirements apply to all foreign citizens using Russian SIM cards. This includes those who live in Russia and those who visit Russia from time to time. This innovation is especially important for those foreign citizens who use Russian SIM cards for their mobile banking applications, online banking systems, and other services that require SMS verification codes.

What do you need to do?

 To keep your mobile number, you must take the following steps **by June 30, 2025**:

1. Obtain a SNILS (Individual Insurance Account Number).
2. Create and confirm an account on the Russian Public Services Portal (Gosuslugi).
3. Register in the Unified Biometric System by submitting your biometric data (photo and voice).
4. Confirm your SIM card either at your mobile operator’s outlet or through the Gosuslugi

The same rules apply to new SIM cards purchased after January 1, 2025.

What happens if you don’t do it?

 If you do not complete this procedure on time, your mobile operator will suspend the service of your mobile number. As a result, you may lose access to your banking and other online services.

We will be pleased to advise you on the confirmation of your SIM card and on any migration matters that you may have.

Do you have any questions or would like to discuss something? Please send an email to Julia Talagaeva or Alexandra Yudina.

Sincerely,

Forte Tax & Law Team

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The Law On Limited Liability Companies allows for situations where a shareholder’s share may be transferred to the company for one reason or another, and the shareholder ceases to hold a share in the company. In such a case, the company must pay the shareholder the actual value of the shareholder’s share. For example, this situation arises in the following cases[1]:

• if a shareholder is permitted to withdraw from the company (as is expressly provided for in the company’s charter), and the shareholder has applied for withdraw;
• if a shareholder requires the company to acquire the shareholder’s share, provided that the company’s charter prohibits a shareholder from withdrawing from the company and from selling his share to a third party, and the other shareholders have refused to purchase the shareholder’s share;
• if the company’s charter provides that the heirs of a shareholder may not become shareholders of the company, or other shareholders’ consent is required to do so, and such consent has not been given; or
• if, at the request of creditors, the share, or a portion thereof, owned by a shareholder of the company becomes the subject of execution proceedings.

The actual value of the share corresponds to a portion of the value of the company’s net assets that is proportional to the size of the shareholder’s share. The value of the company’s net assets is calculated on the basis of the company’s financial statements. For this reason, the actual value of a share may differ from its market value. Often it may be lower.

There have been previously court disputes  in which the plaintiffs have attempted to bring the actual value of a share closer to its market value. The courts in a number of cases have argued that the market value of real estate, rather than its accounting residual value[2], should be used to calculate the value of the company’s net assets and the actual value of a share.

At the end of March 2025, a draft law was submitted to the Russian State Duma, according to which the actual value of a share is to be determined and paid at its market value, if the person, to whom the actual value of a share, or a portion thereof[3] is to be paid, so declares. An appraiser will be engaged to determine the market value of a share. At the same time, the draft law states that if the person, to whom the actual value is to be paid, requests that the market value of a share be paid, it will not be permitted to use any value, except the market value.

These changes could result in significant risks to joint ventures if a shareholder withdraws, as the market value of a share may be much higher than its actual value, which could create significant risks to the very existence of the company.

We recommend reviewing your company’s charter to determine whether it prohibits a shareholder from withdrawing from the company and making other changes to the charter that will protect your company’s activities if a shareholder decides to withdraw.

We will be happy to draft amendments to your company’s charter for you that will meet your needs and minimize the risks associated with the withdrawal of shareholders.

Do you have any questions or would like to discuss something? Please send an email to Anton Kabakov or Alexandra Yudina.

[1] Article 23 of Federal Law No. 14-FZ dated February 8, 1998 On Limited Liability Companies.

[2]Resolution No. 15787/04 of the Presidium of the Russian Supreme State Commercial Court dated June 7, 2005 in Case No. А53-15243/02-С4-11, Resolution No. 5261/05 of the Presidium of the Russian Supreme State Commercial Court dated September 6, 2005 in Case No. А50-10328/2004-Г25, Resolution No. 16191/11 of the Presidium of the Russian Supreme State Commercial Court dated April 17, 2012 in Case No. А40-18600/05-134-138, and Ruling No. ВАС-5228/13 of the Russian Supreme State Commercial Court dated May 6, 2013 in Case No. А54-329/2010.

[3] Draft Federal Law No. 876952-8 On the Introduction of Amendments to the Federal Law ‘On Limited Liability Companies’.

 

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Forte Tax & Law would like to remind you of the importance of holding an annual meeting of shareholders (members) of your company and of drawing up minutes of the meeting. This year, meetings are to be held in accordance with the updated rules, which requires more attention to avoid mistakes.

LLCs must hold an annual meeting by April 30, 2025, and JSCs must do so by June 30, 2025. Failure to hold a meeting or to meet the deadline could potentially result in substantial fines.

The mandatory matters to be decided at the annual meeting are:

• the approval of the balance sheet and the statement of financial performance;
• the approval of a company annual report.

Depending on the structure of your company’s management bodies and the provisions of the charter, the annual meeting must also adopt resolutions, in particular, on the formation of the board of directors and on any other matters, for example, on the distribution of dividends, approval of transactions, conduct of an audit, etc. The notice of the meeting must contain all matters proposed for discussion at the general meeting of shareholders (members), along with the relevant documents.

If your company’s charter (relevant for LLCs and non-public JSCs) has not been amended to allow annual meetings to be held fully in absentia, these meetings must be held in person—i.e., in the joint presence of shareholders (members) or in person/absentia (when some participants are present in person while others are in absentia). Where shareholders (members) are to be represented by proxies in a meeting, it is essential that these proxies must be issued with powers of attorney that can prove their authority. Powers of attorney issued in foreign countries must be apostilled or legalized and accompanied by a Russian translation.

In addition to the in-person format, an annual meeting can also be held remotely.

All the results of the meeting must be recorded in minutes signed as required by the charter. Please note that if the meeting elects an executive body, such a resolution must be notarized, irrespective of the provisions of the charter.

We would be pleased to assist you with holding meetings and drawing up all necessary documents as prescribed by the new rules.

If you have any questions or you would like to discuss something, please send an email to Julia Talagaeva or Alexandra Yudina.

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Letter No. 27-01-21/11349 of the Russian Ministry of Finance dated February 10, 2025 was recently published, which is another attempt to clarify the procedure for including dividends in the customs value of goods.

The Russian Ministry of Finance, like the Russian Supreme Court before it, points out that in a situation where goods are imported as part of transactions between members of the same group of companies, and the income (revenue) of a Russian buyer is primarily derived from the sale of imported goods, the decision to pay dividends is solely at the discretion of the foreign group of companies, which creates a risk of manipulation of the customs value.

If the customs authorities find that the payments described as dividends are such only in form, but in essence ensure that the seller, which is a member of the same group of companies with members of the company, receives part of the income (revenue) due to it from the sale of imported goods, such payments will be included in the customs value of the goods pursuant to Article 40(1)(3) of the EAEU Customs Code.

In this new letter, the Russian Ministry of Finance describes the circumstances that the declarant must confirm for the declared customs value of the imported goods to be recognized as valid. The Russian Ministry of Finance states that the declarant is required to confirm that the price actually paid or payable for the goods was formed in the ordinary course of trade—i.e., the goods were purchased under competitive market conditions. Simply put, the importer must show that any person can purchase the goods at the same price and under the same conditions as the importer that pays dividends, but without a shareholder relationship and without the payment of dividends. In practice, this can be quite difficult in a situation where the sale of goods is arranged through the importer’s own network of local subsidiary distributors.

What is interesting about the new clarifications is that in the letter the Russian Ministry of Finance takes the position that dividends should also be included in the customs value of goods:

• if the declarant fails to provide information on the exporter’s pricing methodology; or
• if there is no evidence of the market level of the price, including due to a limited number of buyers of such goods.

In practice, when the customs authorities check for the inclusion of dividends, they often (but not always) disregard the declarant’s arguments that the price of the imported goods corresponds to the market price level.

Therefore, the new clarifications of the Russian Ministry of Finance give hope that in the future, when conducting inspections, the customs authorities will take into account the fact that the price of the imported goods corresponds to the market level and, consequently, there is no manipulation of the price, no understatement of the customs value and no reasons for revising it.

Furthermore, it is the declarant that bears the burden of proving the market level of the price, the method of its formation, taking into account the usual market factors, the submission of transfer pricing documentation, and the calculation of such price elements as  the production cost, the markup that covers expenses and provides a market markup for a relevant product, etc. In this regard, it will be crucial to prepare a detailed response to the very first request from the customs authorities.

If you have any questions or you would like to discuss something, please send an email to Julia Talagaeva.

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On January 21 and 29, 2025, the Russian State Duma passed in the first reading draft laws clarifying the rules for exercising a preemptive right to purchase an interest in a limited liability company (the “Draft Laws”) .

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The Russian Constitutional Court heard a case[1] of an employee who had been dismissed from his principal place of work due to redundancy. The employer paid the employee a severance allowance, but refused to pay the employee’s average monthly earnings for the period of finding a new job [2]. The employer believed that the employee was a dual job holder and, therefore, such an employee was not entitled to a guarantee in the form of payment of his average monthly earnings. The courts sided with the employer in a dispute with the employee.

However, the Russian Constitutional Court ruled that such a reading of the law was inconsistent with the Constitution. Upon dismissal from the principal place of work, an employee loses part of the total labor income (which may be significant). This leads to the need to find a new job. Moreover, dismissal from the principal place of work does not transform a dual job employment contract into a principal one. Therefore, taking into account these factors, it is impossible to deprive dual job holders of guarantees in the form of payment of average monthly earnings for the period of finding a new job.

Thus, the Russian Constitutional Court held that the failure to pay average monthly earnings to a dual job holder upon dismissal from the principal place of work due to liquidation or downsizing/redundancy is contrary to the Constitution. This means that the employer is obligated to pay such an employee average monthly earnings for the period of finding a new job, even if the employee has another paid job with another employer.

What are the implications of this ruling for employers and employees?

First, until changes are made to applicable Russian laws, the employer will be obligated to follow the position of the Russian Constitutional Court. Second, an employee may apply to the employer asking for the payment of the employee’s average monthly earnings, if such earnings have not been paid. And the employer will be obligated to pay them. Third, there is a high risk that valid decisions on similar disputes between employees and employers will be overturned. These are decisions that contradict the position of the Russian Constitutional Court.

The Forte Tax & Law team will be pleased to advise you on labor law issues and the resolution of labor disputes.

If you have any questions or you would like to discuss something, please send an email to Julia Talagaeva or Ekaterina Beliaeva.

[1] Ruling No. 54-П of the Russian Constitutional Court dated November 22, 2024 In the case of the verification of the constitutionality of parts two and three of Article 318 of the Russian Labor Code in connection with the complaint filed by citizen V. V. Sergeev.

[2] Average monthly earnings can be paid for up to six months.

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On January 18, 2025, the Russian Ministry of Finance announced that a double tax treaty with the UAE had been initialed—i.e., the text of the double tax treaty with the UAE has been finalized.

Withholding tax on dividends, interest, and royalties under this treaty are proposed to be 10%. Moreover, according to Deputy Finance Minister Alexey Sazanov, who participated in the initialing, the treaty will have “sufficiently standard” terms. The parties plan to sign the treaty soon and will make every effort to ensure that it enters into force on January 1, 2026.

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