On November 21, 2024, the U.S. Office of Foreign Assets Control (OFAC) added more than 30 registrars[1] and several Russian banks, including Gazprombank and its subsidiaries, to the sanctions list (SDN List). Please read our comments below to find out what it means for you.

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The Ozon marketplace has decided to launch its own customs broker and enter a list of participants in foreign trade that are engaged in the delivery and declaration of individuals’ express shipments, the company’s representative told Vedomosti. The goal is to speed up deliveries from China, reduce costs, and improve the transparency of the movement of goods. Ozon is now using the services of other customs brokers.

Companies on the list of participants in foreign trade that deliver and declare individuals’ express shipments may declare goods for personal use purchased as part of online trade and delivered as express shipments.

Operators on this list import goods into Russia, send them to specialized customs warehouses, clear goods, pay customs duties, and then deliver the goods to buyers, Julia Talagaeva, Senior Associated, told the newspaper.

For more information, click here (in Russian).

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Article by Artem Eretenko for the Clerk Magazine

Federal Laws Nos. 287-FZ and 305-FZ[1] introduced several key changes in corporate laws, some of which took effect as early as September 1, 2024. The changes, among other things, have affected the mandatory notarization of corporate resolutions adopted by an LLC on the appointment of a permanent executive body, the holding of remote meetings, and the redistribution of powers between the management bodies in an LLC and a non-public JSC. Since the legislative changes are aimed at improving corporate governance mechanisms, it is necessary to pay special attention to correct paperwork in order to avoid corporate conflicts and difficulties that may arise with the registration authority. However, the new rules will inevitably raise new questions relating to the preparation of corporate documents, and we will try to come up with answers to those questions below.

To what situations do the new rules for executing resolutions on the appointment of the CEO of an LLC apply?

Important changes in the procedure for appointing the CEO of an LLC took effect on September 1, 2024. From now on a resolution on the election or appointment of the CEO of a company requires mandatory notarization[2]. These rules will apply regardless of who adopts a resolution—whether the general meeting of members or the board of directors—and of the form in which a resolution on the appointment of the CEO is adopted. Notarization of resolutions on the appointment of the CEO of an LLC is required even if the company’s articles of association do not require notarization of the adoption of a resolution. The requirements for notarization apply only to the appointment of the CEO—i.e., an individual. These rules will not apply to appointing a collegial executive body or transferring powers to a manager. In practice, this may raise several questions about how the new rules for executing resolutions on the appointment of the CEO of an LLC will apply to various situations.

1. Notarization of a resolution on the appointment of the CEO. First of all, the question remains whether resolutions on the appointment of the CEO upon the formation of an LLC should be notarized, and whether this implies mandatory notarization of any resolutions on the formation of an LLC. On the one hand, applicable laws formally require this, without making exceptions for a resolution on the formation of a company. On the other hand, notaries do not currently require notarization of a resolution on the formation of an LLC, at the time when a resolution on the appointment of the CEO is adopted. One can agree with their approach, because at the time of the adoption of a resolution, a company is not yet considered formed. The notary cannot certify the adoption of such a resolution. This problem also poses a question of whether corporate resolutions can be executed abroad. Notaries, the registration authority, and banks may have questions about a resolution of the general meeting of members that is de facto adopted in the presence of a foreign notary outside Russia. Foreign notaries do not certify the adoption of a resolution, but as a rule, they only certify the authenticity of the signatures affixed by the members to the minutes. Furthermore, the legislation on notaries provides that a certificate[3] is to be issued evidencing the legitimacy of a resolution. Applicable laws do not provide for any alternative methods of certifying resolutions. Therefore, it appears impossible to execute corporate resolutions abroad, including at consulates that do not perform notarial acts to certify corporate resolutions[4].
2. Form of adoption of a resolution on the appointment of the CEO. The notarization requirement applies regardless of form. It should be emphasized that in practice, notarization of the adoption of a resolution at a meeting in the form of absentee voting is not possible, because to perform this notarial act, the notary needs the members to be physically present[5]. However, this does not exclude the possibility of establishing in the future the procedure for notarization of the adoption of a resolution at the meeting in the form of absentee voting.
3. Notarization where the CEO’s powers are extended. In addition, there is another practical question: Will notarization be required to have the CEO’s powers extended? Considering that the extension of powers actually means the re-election of the executive body for a new term, and applicable laws do not recognize the extension of powers as a separate action, the provision on mandatory notarization should also apply to such re-election.
4. Changes in filing applications. In conclusion, as regards the provisions on the election of the CEO, it should be noted that changes have been made to the procedure for filing applications for the state registration of the change of the CEO. While previously, it was the CEO to be appointed that acted as an applicant who would sign an application to be filed with Russian tax authorities, from now on, starting from September 1, 2024, this duty has passed to the notary that acts as an applicant filing documents with Russian tax authorities necessary for the registration of relevant changes in the Unified State Register of Legal Entities (“USRLE”)[6]. It is understood that these changes will help reduce the incidence of illegal appointments in companies, preventing the so-called ‘hostile takeovers’ of companies. However, it remains unclear how to avoid abuse by persons (potential participants/members of management bodies) who may appoint new managers without their knowledge, especially given the fact that starting from September 1, 2024, a new manager is no longer an applicant—i.e., he is not required to visit a notary. In practice, this can create difficulties for persons appointed as CEOs without their consent. These persons will at least need to inform the registration authority that inaccurate data have been entered into the USRLE. Additionally, the risk of emerging so-called ‘abandoned’ companies due to the appointment of nominal directors in them is increasing. As a result, these changes to the procedure for filing applications for state registration are aimed at protecting companies from illegal actions by third parties. However, the new rules raise some questions about the risk of abuse in appointing CEOs without their consent, which requires increased attention to the procedure for appointing such CEOs.

What do you need to know about holding meetings remotely and doing related paperwork?

The changes related to holding general meetings of shareholders (members) remotely will take effect on March 1, 2025. Effectively, these changes will incorporate in the Law On Limited Liability Companies[7] and the Law On Joint-Stock Companies[8] the provisions that have previously existed in the general civil law provisions, but in a more detailed form. As you may remember, now a company may hold a general meeting of members (shareholders) remotely, if that is provided for by law or its articles of association. This option is now available to all companies, regardless of their legal form. Furthermore, LLCs and non-public JSCs have the right to set out in their articles of association their own rules for holding general meetings remotely that may differ from generally accepted statutory rules, provided that those rules do not deprive eligible voters of the opportunity to participate in adopting resolutions and receive information about the meeting[9]. The key adopted provisions governing holding general meetings remotely include:

1. Identification of participants (members) of a body of a legal entity. From now on the articles of association may provide for methods of identification of participants in the bodies of a legal entity and for methods of signing ballots for electronic voting as long as these measures do not impose any restrictions on persons who have a right to vote as regards participation in adopting resolutions and receiving information about meetings to be held. Effective from March 1, 2025, a notice of a meeting must, among other things, include information on the procedure for accessing remote participation, including methods of identification. Effective from September 1, 2027, remote participants may be identified using an enhanced qualified electronic signature (EQES). However, before that date, the articles of association can provide for the use of an enhanced unqualified signature, identification through the Russian Public Services Portal (Gosuslugi) or the Unified Biometric System. Proxies will be required to be identified and present a power of attorney or another document of his authority in electronic form in machine-readable form. The law provides that in case of remote participation in a meeting, the notary will confirm the identity with the use of an EQES with trusted timestamping, and the powers of a proxy and his right to participate in a meeting, through the verification of electronic documents signed with an EQES that are sent to the notary through the notary’s unified information system[10]. This brings up a question: Will the notary be able to notarize a resolution adopted at a remote meeting, if the participants do not have an EQES? It is understood that the notary will not be able to do so, because now the law does not provide for any other methods of identification and submission of documents (without the use of an EQES).
2. Broadcasting of meetings. All persons who have a right to vote should be able to participate in a meeting in real time via broadcast.
3. Voting information. The company’s articles of association may provide for mandatory access to information about the voting process in real time to all participants in a meeting.
4. Keeping of records. Companies are required to keep records of broadcasts of meetings along with their minutes, and the law does not establish requirements for any medium on which to keep such records. It should be noted separately that the rules for holding general meetings remotely will also apply to meetings of the board of directors and the management board.

Transfer of powers in LLCs and non-public JSCs: What is important to know and how to formalize it correctly?

As you may remember, as set forth in the JSC Law, as a general rule, matters that fall within the competence of the general meeting of shareholders may not be transferred to the executive body (management board) for consideration. However, the Russian Civil Code allows certain powers to be transferred to the board of directors or the management board. The latest changes are aimed at eliminating it, allowing the delegation of some of the powers to the board, including:

• Paying (declaring) dividends based on the results of the first quarter, the first six months, and the first nine months of the reporting year;
• Approving the company’s annual report and annual financial statements;
• Adopting a resolution for the company to participate in financial and industrial groups, associations, or other groupings of commercial organizations.

The changes also establish that the delegation of powers to the board of directors or the management board will deprive shareholders of the right to demand the redemption of their shares by the company. As you may remember, shareholders will have this right, e.g., if changes are made to the company’s articles of association that restrict the rights of shareholders, and where the general meeting of shareholders adopts resolutions on the reorganization of the company, the approval of a major transaction, the delisting of shares in the company or the termination of the public status of the company. In relation to an LLC, the changes have expanded a list of powers that may not be transferred to the board of directors, including, inter alia:

• Transferring additional rights and additional obligations for participants (including their termination);
• Approving monetary valuation as part of paying for interests in the statutory capital;
• Approving a major transaction if the value of the assets under such a transaction exceeds 50% of the company’s assets.

The matters that may not be transferred to the board of directors in accordance with the amendments may not be transferred to the collegial executive body of the company, either. It is planned that certain powers may be transferred to the board of directors (management board) of LLCs and non-public JSCs or excluded from the competence of those management bodies under a resolution adopted by the general meeting of members (shareholders) of the company unanimously. Furthermore, the provisions related to such a transfer may be provided for by company’s articles of association upon its formation or included in the articles of association by making appropriate amendments.

Conclusion

There has been a positive trend in the development of corporate laws. The changes are aimed at adapting the laws to modern realities. The regulation of remote meetings should clarify the procedure for decision-making by the management bodies of the legal entity. The delegation of certain powers at non-public companies should make it more flexible to take managerial decisions and to provide for the mandatory notarization of resolutions on the appointment of executive bodies at LLCs. At the same time, special attention should be paid to the preparation of documents taking into account the above changes so as to mitigate potential risks that may arise if documents are executed incorrectly.

[1] Federal Law No. 287-FZ dated August 8, 2024 On the Introduction of Amendments to the Federal Law On Joint-Stock Companies and Certain Legislative Acts of the Russian Federation and Federal Law No. 305- FZ dated August 8, 2024 On the Introduction of Amendments to Articles 48 and 66 of the Federal Law On Joint-Stock Companies and Certain Legislative Acts of the Russian Federation.

[2] This provision does not apply to companies that are lending institutions, non-lending financial institutions, or specialized companies formed under the applicable Russian laws on securities (para. 2 of Article 40(1) of Federal Law No. 14-FZ dated February 8, 1998 On Limited Liability Companies).

[3] para. 1 of Article 103.10, para. 1 of Article 103.10-1 of The Fundamentals of the Notarial Legislation of the Russian Federation.

[4] para. 2 of Order No. 20795 of the Russian Ministry of Foreign Affairs, Order No. 209 of the Russian Ministry of Justice dated September 29, 2022 On the Approval of Instructions for Consular Officials on How to Perform Notarial Acts.

[5] Article 67.1(3)(2) of the Russian Civil Code and para. 6.1 of Letter No. 2405/03-16-3 of the Russian Federal Chamber of Notaries dated September 1, 2014 On the Distribution of the Guidelines on the Notarization by a Notary of the Adoption by a General Meeting of Members of a Company of a Resolution and of the Composition of the Members of the Company who were Present at the Time of Adoption Thereof.

[6] para. 13 of Article 103.10, para. 3 of Article 103.10-1 of The Fundamentals of the Notarial Legislation of the Russian Federation.

[7] Federal Law No. 208-FZ dated December 26, 1995 On Joint-Stock Companies.

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

[9] Articles 52(5) and 66.3(3)(5) of the Russian Civil Code, Article 32(1) of Federal Law No. 14-FZ dated February 8, 1998 On Limited Liability Companies.

[10] para. 1 of Article 103.10 of The Fundamentals of the Notarial Legislation of the Russian Federation.

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Generally, the M&A market of Saint Petersburg and Leningrad Region has been following all-Russian trends. Regional businesses are looking for access to international markets, adapting to local demand, and are expanding to other Russian regions.

Businesses are also developing and redistributing the assets inherited from the foreign companies that have left and are still leaving the Russian market, but this is rather a fading trend. Modern challenges have also had their impact on the M&A market—e.g., digitalization, which manifests itself, in particular, in the interest in IT companies that has sparked in recent years.

Among the notable transactions in the M&A market in Saint Petersburg and Leningrad Region, experts name the purchase of the assets of the Finnish Metsä Group by Vologodskiye Lesopromyshlenniki Group. As Delovoy Peterburg reported in May, the transaction encompassed the lease base of Metsä Forest Podporozhye LLC with logging operations and a sawmill, Metsä Svir LLC, and Metsä Forest Podporozhye LLC. The new owner’s plan is to restart the Metsä regional plant. According to experts, the transaction value, with account taken of the discount, could be up to €10 million.

Traditionally, a significant number of Finnish, German, and Swedish investors were present in the forestry industry of Russia’s North-West.

“The sale of Russian assets by these investors reached its peak in 2023,” said Julia Talagaeva. “But even now, the remaining foreign holdings may decide to leave due to increased pressure on them from the European Union and the United States, and the risk of introducing external administration on their Russian assets.”

The activity of foreign sellers is affected by the tightened conditions for obtaining authorizations from the Russian Government Commission for transactions. In October, the minimum discount for the sale of a company was once again upped from 50% to 60% of the market value, and a voluntary contribution payable for the sale of a company was increased to 35% of its market value, as compared to 15% earlier.

“In view of this, foreign sellers, in addition to the financial terms of transactions, are paying more and more attention to a potential buyer’s ability to obtain authorization from the Russian Government Commission (the buyer is more likely to obtain such authorization, if the buyer operates in in the same or related industry) and the buyer’s waiver of the seller’s guarantees in relation to the company after the closing of the transaction,” said Julia Talagaeva.

For more information, click here (in Russian).

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The Russian Federal Tax Service has published Methodical Recommendations on the Tax Amnesty for Business Splitting (in Russian) that explain how the tax amnesty will work by answering FAQs.

As you may remember, Law No. 176-FZ dated July 12, 2024[1] granted an amnesty to taxpayers that are willing to abandon business splitting schemes—i.e., dividing a single business activity among several formally independent persons, which will be controlled by the same persons, that is solely or primarily aimed at understating taxes by applying special tax regimes. It is understood that the tax amnesty will apply to the obligation to pay taxes for the tax periods of 2022 to 2024, the relevant penalties and fines for offenses related to business splitting, provided that the taxpayer abandons its intention to split the business in relation to the tax periods of 2025 to 2026. In simple terms, if the taxpayer is applying a business splitting scheme now, then, subject to abandonment of its intention to split the business, starting from 2025, the past periods—i.e., 2022 to 2024—will fall under the amnesty.

Russian courts and tax authorities often qualify splitting a business as one of the ways to obtain an unjustified tax benefit (Article 54.1 of the Russian Tax Code). This risk arises when a single business is divided into several non-independent legal entities so that all or some of the participants in the ‘splitting’ scheme can retain the right to apply a special tax regime. According to the Russian Federal Tax Service, in the period from 2018 to 2023, Russian courts heard 643 cases of business splitting for the purpose of tax evasion, with additional tax assessments totaling RUB 506 billion. Considering that not all cases end up in the court, actual additional tax assessments for this reason were even higher.

If Russian tax authorities discover a business splitting for the purpose of tax evasion, the taxpayer will be additionally assessed:

• taxes under the general taxation system (income tax at a rate of 20%, VAT at a rate of 20%) based on the amount of income of the participants in the splitting;
• late fees for the years, for which additional taxes are assessed; and
• a fine at 40% of the amount of additional tax assessments.

Accordingly, the tax amnesty mechanism provided for in Law No. 176-FZ dated July 12, 2024 enables the taxpayer to abandon its effort to split the business without suffering any tax losses.

A list of ways to voluntarily abandon to split a business is not limited. Importantly, a voluntary abandonment will not entail a mandatory tax audit.

Such a voluntary abandonment may be carried out without changing the business structure or by refusing to apply any special tax regimes or transferring activities to one of the persons of the group. Abandonment may also be carried out by changing the business structure through merging or selling companies. In our practice, we encounter situations where business splitting is used not to devise any tax optimization schemes. Sometimes, as the business grows, companies are set up that are responsible for certain lines of business activities, but have a single decision-making center, and they often share their staff. And for ‘historical reasons’, companies are not always willing to revise their approach to doing business, even if they understand the tax risks involved. That is why we hope that the tax amnesty for business splitting will enable us to safely abandon complex structures both in terms of management and tax administration, and continue to develop the business without fear of claims from the Russian tax authorities.

We would be pleased to help you assess your tax risks and the possibility of applying the tax amnesty. Please send an email to Anton Kabakov or Robert Gurdyumov.

[1]Federal Law No. 176- FZ dated July 12, 2024 On the Introduction of Amendments to Parts I and II of the Russian Tax Code, Certain Legislative Acts of the Russian Federation, and the Invalidation of Certain Provisions of Legislative Acts of the Russian Federation.

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As expected, the Russian Government Commission has tightened the conditions for issuing authorizations for transactions with respect to shares/interests in companies.

Now, the discount must be at least 60% of the market value of an asset. Previously, it was at least 50%.

A voluntary contribution has been increased to 35% of the appraised market value of shares/interests and will have to be paid as follows:

• 25% within one (1) month from the transaction date;
• 5% within one (1) year from the transaction date; and
• 5% within two (2) years from the transaction date.

Previously, a voluntary contribution was 15% of the appraised market value of shares/interests.

Furthermore, selling or buying any assets valued at more than RUB 50 billion will require approval from the Russian President.

As you may remember, some transactions, such as the sale of interests in limited liability companies or shares in joint-stock companies where one of the parties is a person, whether an individual or a legal entity, from the approved list of ‘unfriendly’ countries, will require an authorization from the Russian Government Commission on Control over Foreign Investments in the Russian Federation that is issued subject to a number of conditions.

We would be pleased to advise you on how to obtain authorizations from the Russian Government Commission in more detail.

If you would like to discuss this matter further or have any questions, please write to Anton Kabakov or Alexandra Yudina.

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Extensive changes to Russian migration laws[1] will take effect from February 5, 2025. They will, inter alia, affect the following.

 A register of controlled persons is to be introduced.

 The Russian Ministry of Internal Affairs will maintain a special online register of foreign citizens who are staying in Russia, but do not have any legal grounds for it. The Russian Ministry of Internal Affairs will, inter alia, include a foreign citizen in this register:

 

• where a visa is cancelled;
• where a decision is made on the reduction of the duration of temporary stay, deportation, undesirable stay (residence) in Russia, and the denial of entry to Russia; and
• upon the expiration of 72 hours of a foreign citizen’s stay as a passenger on board a cruise ship or ferry that holds a passenger transportation permit.

 

The Russian Ministry of Internal Affairs will independently identify such citizens and include them in the register. It should be noted that the Russian Ministry of Internal Affairs will not notify foreign citizens of their inclusion in the register. A foreign citizen will be considered to have been notified of his or her inclusion in the register from the time his or her details are entered into the online register. If the grounds for inclusion of a foreign citizen in the register are no longer valid, the Russian Ministry of Internal Affairs will exclude that foreign citizen from the register, of which he or she will not be notified, either.

Please note that from the time a foreign citizen is entered into the register, the following restrictions will apply to that foreign citizen:

• a ban on the state registration of legal entities and individual proprietorships;
• a ban on the purchase of real estate, motor vehicles, self-propelled vehicles, and other types of machinery;
• a ban on the state cadastral registration of real estate and/or the state registration of ownership rights;
• a ban on the state registration of motor vehicles, self-propelled vehicles, and other types of machinery;
• restrictions on the use of the right to drive motor vehicles;
• a refusal to admit to exams for the right to drive motor vehicles, to issue (replace, exchange) of a Russian national or international driver’s license;
• a refusal to open a bank account and make other banking transactions, except for money transfers to make compulsory payments stipulated by Russian laws, and money transfers to the bank account of a controlled person and the withdrawal of cash to a controlled person in the amount of not more than RUB 30,000 per month;
• a ban on marriage;
• a ban on the change of the place of residence or stay in Russian without permission from the Russian Ministry of Internal Affairs;
• a ban on travel outside the constituent entity of Russia, the municipality, in which a controlled person is staying (residing), except for departure from Russia; and
• other restrictions.

We recommend monitoring of whether or not a foreign citizen has been included in this register, especially if any significant events, transactions or other actions are planned that require the involvement of government agencies.

If, for any reason, a foreign citizen has been included in the register, we will be pleased to offer our recommendations on how to exclude that foreign citizen from the register and provide any assistance as may be necessary to do so.

 Procedure for migration registration of foreign citizens is to change (migration registration).

From February 2025, a foreign citizen can be registered with migration authorities for a maximum of 1 year (migration registration). Previously, foreign citizens could be registered with migration authorities for the entire period of validity of their visas (for example, for three (3) years at once). The registration period has now been limited to one (1) year, even if the visa is valid for a longer period.

If you would like to discuss this matter further or have any questions, please write to Julia Talagaeva or Alexandra Yudina.

[1] Federal Law No. 260-FZ dated August 8, 2024 On the Introduction of Amendments to Certain Legislative Acts of the Russian Federation.

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On September 20, 2024, at Hotel Kostas, the Russian-German Chamber of Commerce held one of the key events of the fall—CFO Conference 2024. It brought together leading financial management experts, enabling participants to discuss current trends, innovative approaches, and development strategies in a modern environment.

Key industry speakers spoke at the conference, including CFOs of large Russian and German companies, representatives of consulting firms and government agencies. The topics discussed included digital transformation in the financial sector, risk management, tax reform, and effective budget planning in the face of uncertainty.

Julia Talagaeva, Senior Associate at Forte Tax & Law, took part in the second panel discussion. She covered the topic ‘Current Practice of Customs Inspections: Dividends, Royalties, VAT, and Customs Value’.

“In 2024, customs audits have shown a considerable growth in efficiency, especially when it comes to the understatement of customs value by importers and inaccurate data on the classification code of goods. Among the risk factors are the payment of dividends and license fees and payment for agents’ services to make payments under foreign economic transactions,” Julia pointed out.

During the event, representatives of Forte Tax & Law shared their experience with their colleagues from other organizations, took part in the discussions, and even received some valuable recommendations that they can later use to implement their clients’ financial strategies.

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Article by Anton Kabakov for RBC Pro

The law on a tax amnesty for business splitting took effect in July 2024. The law has caused a flurry of claims against the wording of concepts, a lack of detail, and an unclear mechanism of a ‘voluntary abandonment’ of business splitting schemes, which serves as a prerequisite for relieving of liability for any past offenses. Legal circles have voiced concern that the amnesty may miss the mark or seriously stall due to a lack of elaboration and incomprehensibility for taxpayers.

The article will consider the possibilities that will enable you to take advantage of the amnesty. To read the article on the RBC Pro portal (a subscription is required to access it), please follow the link (in Russian).

If you still have questions about obtaining a tax amnesty, please send an email to Anton Kabakov.

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There has been an intense discussion lately about increasing the amount of a voluntary contribution payable upon the sale of shares/interests in companies up to 40% of their market value.

As you may remember, where shares/interests in companies are sold involving entities/individuals from so-called ‘unfriendly’ countries, a voluntary contribution must be paid to the Russian budget, the amount of which is now at least 15% of the market value of the relevant assets as specified in a report on an independent appraisal of those assets. In other words, an authorization for the sale/purchase by such entities/individuals of shares/interests in companies is granted subject to payment to the Russian budget of 15% of the market value of the company, the shares/interests in which are being sold.

There have been more and more proposals put forward to increase the amount of a voluntary contribution to 40% of the appraised market value of shares/interests. We do not know whether this proposal will be realised in practice, but it is likely that the amount of a voluntary contribution may indeed be increased in the near future.

For this reason, we recommend that you should not delay submitting documents to the Russian Government Commission so that you may be able to obtain an authorization for the transaction before the amount of the voluntary contribution is increased.

We would be pleased to advise you on how to obtain authorizations from the Russian Government Commission in more detail.

If you would like to discuss this matter further or have any questions, please write to Anton Kabakov or Alexandra Yudina.

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