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Russia

Security interest law in Russia

Table of contents
  1. Guarantees
  2. Security
  3. Perfection
  4. Enforcement
Russia

Guarantees

1. Can an intercompany guarantee be granted?

1.1 Upstream?

Yes

1.2 Downstream?

Yes

1.3 Lateral?

Yes

2. Can a guarantee be given under foreign law (e.g. English law)?

Yes, if one of the parties is a non-Russian resident.

3. Any special arrangements (e.g. to deal with transfer pricing/corporate benefit)?

Corporate approvals (major and/or interested party transaction (or series of inter-related transactions).

Security

4. Can a security interest be granted in the following type of asset?

4.1 Real property

Yes

4.2 Shares (privately held)

Yes

4.3 Shares (marketable securities)

Yes

4.4 Receivables

Yes

4.5 Bank account 

No, direct debit is used, however such arrangement is not considered a security instrument.

4.6 IP/Trademark

Yes

4.7 Equipment/Plant/Machinery

Yes

4.8 Inventory

Yes

4.9 Insurance

No, third party beneficiary or loss payee concept is used.

4.10 Rights under a contract

Yes

5. Can security interests be granted to a foreign lender?

Yes

6. Can multiple security interests be granted over the same asset?

Yes, however, the security is ranked first or second (subsequent pledge/mortgage).

7. Can a security interest be granted to secure liabilities of a holding company, a subsidiary or any other affiliate?

Yes

Perfection

8. In order to be enforceable against third parties, must a security interest be?

8.1 Notarised? 

Yes, for a pledge of participation interest. 
Yes, if a pledge agreement provides for an out-of-court enforcement procedure.

8.2 Registered?

Yes

8.3 Other? 

N/A

9. Does registration in most cases protect the secured creditor against the debtor’s subsequent dealings with the secured asset?

Yes

10. Is there any stamp or similar tax or duty payable on the security document?

Registration fees for mortgages and enterprise pledges, notarisation fees and state duty fee.

Enforcement

11. For a security interest to be legally enforceable which items must be filed as part of the registration or notarisation process?

11.1 Entire security agreement?

Yes, mortgages.

11.2 Names of pledgor and pledgee?

Yes

11.3 Description of secured asset in general terms?

Yes

11.4 Description of each individual secured asset?

Yes

11.5 Documents concerning ownership of secured asset?

Yes

11.6 Documents concerning debt in respect of which the asset is being secured?

Yes, mortgages and pledges of enterprise.

12. Can a right to enforce security arise:

12.1 When the secured debt is unpaid and due?

Yes

12.2 When there is some other breach of the pledge/security agreement?

Yes

12.3 When the debtor becomes insolvent?

Yes, but only until the supervision stage of bankruptcy proceedings are implemented. During other stages the possibility to enforce is considered by Russian arbitration court.

13. Can the creditor enforce its security interest by taking possession of the asset and selling it without court assistance?

Yes, if the relevant pledge or mortgage agreement was notarised at signing.

14. Is an instrument for direct enforcement necessary/available/market practice?

Optional. However, notarial fees depend on the value of the transaction.

15. Are powers of attorney to the secured party used to facilitate a sale of secured assets in an enforcement situation?

No, authorities are delegated by rule of law.

16. If a sale is permitted without court assistance does it have to be made by public auction?

No

17. Can a transfer of all or part of the debt be made without affecting the security over the assets?

The security interest follows the debt and is transferred together with the main (underlying) obligation.

18. Is there anything else of which a lender should be aware as unusual or particularly difficult?

A bank guarantee may only be issued by a Russian licensed bank. A bank guarantee is an independent security enforceable even if the main (underlying) obligation is invalid. 
A corporate guarantee is usually referred to as “suretyship” under Russian law. It is an accessory obligation to the primary obligation that it secures, and therefore terminates automatically once the primary obligation is terminated.