On 7 July 2023 a Subcommission of the Government Commission for the Control of Foreign Investments in the Russian Federation issued a decision that established a number of new conditions necessary for the approval of transactions (operations) with shares of Russian companies owned by participants (shareholders) resident in unfriendly countries as well as paying profits (dividends) to them.
There is a number of conditions that have already been discussed in previous extracts from the minutes of the Subcommission meetings, but some changes are completely new.
Transactions (operations) with assets – shares of Russian companies owned by unfriendly countries' residents
Together with the package of documents it is necessary to submit the following documents to the Government Commission:
Report on an independent valuation of the market value of assets carried out by an appraiser included in the list of appraisers (appraisal companies) recommended by the Subcommission for such an assessment;
An expert opinion prepared by experts of a self-regulatory organisation of appraisers (SRO), included in the list of the SROs recommended organisations by the Subcommission.
Discount on the sale of assets and voluntary contribution to the budget
When selling assets, it is necessary to make a discount of at least 50% of their market value indicated in the independent valuation report.
Obligation to voluntarily transfer funds to the federal budget is counted in the amount of:
not less than 5% of the market value of the relevant assets indicated in the independent valuation report – when selling at a discount of less than 90%;
not less than 10% of the market value of the relevant assets indicated in the independent valuation report – when selling at a discount of more than 90%.
Key Performance Indicators (KPIs)
KPIs can be set for buyers and (or) the company acquired by them and should include, among other things:
maintaining technological potential and the main type of economic activity;
preservation of jobs;
fulfillment of obligations under concluded contracts.
Control over the achievement of KPIs will be carried out by the federal executive body on the recommendation of the Subcommission.
Repurchase of an asset (option)
The option is available at market value on the date that the option is exercised;
There must be an economic benefit to the owner of the asset who is Russian.
As a rule, limitation of the term of the option is no more than two years from the date of the implementation (execution) of the initial transaction (operation).
Public Joint-Stock Companies (PJSC)
In case of acquisition of PJSC shares, it is necessary to place on organised auctions up to 20% of the purchased block of PJSC shares, while:
the period of commencement of such placement is not more than one year from the date of the execution (execution) of the transaction (operation), and the period of its conduct cannot exceed three years from the date of commencement of such placement;
in case of reorganisation of a business entity in the form of a merger with a PJSC, the placement of shares of the PJSC, to which the merger was realised*, is carried out within three years from the date of implementation (execution) of a transaction (operation).
*amounting to up to 20% of the shares of the merged company, taking into account the conversion ratio of shares of such companies upon merger.
In case of termination of the public status of the JSC or its liquidation as a result of the implementation (execution) of a transaction (operation), it is necessary to place on organised auctions up to 20% of the shares of the PJSC (newly created or as a result of the acquisition of the public status by the JSC). While the period for acquiring the public status of the JSC and such placement is not more than three years from the date of implementation (execution) of the transaction (operation).
Settlements of transaction
Or transfer of funds when making transactions (operations) to unfriendly states’ residents must be carried out to accounts of type “C”;
Or making settlements on transactions (operations) in rubles in the banking system of the Russian Federation without transferring funds outside the Russian Federation;
Or instalment payment in case of transfer of funds under transactions (operations) with foreign persons, to the accounts of such persons opened in banks and other financial market organisations located outside the Russian Federation.
Other requirements
The applicant should have all other permits provided for by the legislation of the Russian Federation necessary for the implementation (execution) of the transaction (operation), information on which is provided by the applicant.
Payment of dividends to residents of unfriendly countries
Maximum payout
The amount of paid profit (dividends) is not more than 50% of the net profit for the previous year.
Terms of approval
When making a decision on approval, the results of a retrospective analysis of the payment of profits (dividends) for previous periods are taken into account;
It is necessary to confirm the readiness to continue commercial activities in the Russian Federation of participants (shareholders), who are foreign creditors;
The positions of the federal executive authorities and the Bank of Russia on the assessment of the organisation's activities significance and the impact of these activities on the technological and industrial sovereignty, the socio-economic development of Russia* are taken into account;
A necessary condition is also the fulfillment by the applicants of their obligations to meet KPIs, confirmed by the federal executive authorities (the Bank of Russia).
*subjects of the Russian Federation
Periodicity
It is possible to pay profits (dividends) on a quarterly basis (subject to the achievement of established KPIs).
Marillion experts are ready to advise you on the approval of transactions and dividend payments by the Government Commission. Please kindly contact us for more detailed clarifications regarding the up-to-date agenda.
Education: Financial University under the Government of Russia, Accounting & Audit
Alexey has over 15 years of experience in tax advisory and tax manager practical experience in one of the top Japanese pharmaceutical companies. 12 years of experience in a Big4 company.
In September 2018 Alexey joined Marillion as the Head of Tax and Legal, and now he acts as a Senior Partner of the department.
More than 20 years of experience in tax and legal advisory.
The main areas of activity:
Tax burden management and assistance with receipt of tax benefits
Re-structuring of Russian and international companies
Management of projects in Russian TP compliance
Participation in audit engagements under RAP, IFRS, US GAAP
Education: Moscow University of the Ministry of Internal Affairs of Russia, Law
Professional Experience:Lubov has more than 17 years of legal experience in the field of migration support for foreign citizens, corporate support, including the establishment and liquidation of legal entities, as well as support for the reorganisation of legal entities, purchase and sale of shares (M&A), corporate governance structuring, as well as advising clients in the field of labor law, including the structuring of employment contracts, local acts of the employer and problematic dismissals.
Experience inlegal advisory: since 2007
The main areas of activity:
Corporate support of companies
M&A structuring
Liquidation
Migration support of expatriates in Russia
Support of international corporate structuring and M&A projects
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