1. Introduction
    1. Political and administrative structure
    2. Legal environment
  2. Common forms of business structures for foreign investors
    1. Main types of structure
    2. Registration, liquidation and reorganisation of business structures
    3. Shareholders’ and participants’ agreements
    4. Strategic industries
  3. Anti-monopoly issues
    1. General legal and regulatory framework
    2. Scope of application of the Competition Law
    3. Anti-competitive practices and restriction of competition
    4. Liability
  4. Tax system
    1. General approach
    2. Corporate taxation
    3. Incentives
    4. Special tax regimes
    5. Taxation of individuals
    6. Double taxation treaties
  5. Customs regulations
    1. General approach
    2. Trade between EEU and non-EEU countries
    3. Mutual trade between the EEU members
  6. Currency control
    1. Foreign currency transactions
    2. Consequences of breach/Penalties
  7. Lending in Russia
    1. Lending documents and governing law
    2. Jurisdiction
    3. International finance transactions and repatriation requirements
    4. Security interests
    5. Recognition of security trusts
    6. Syndicated loans
    7. Enforcement
    8. Suretyships and guarantees
    9. Bankruptcy considerations
    10. Other lending related issues
  8. Employment and migration
    1. Formalising the employment relationship
    2. Managing employment relationships
    3. Terminating an employment agreement
    4. Specifics of employing foreign nationals
  9. Personal data protection
    1. General approach
    2. Scope of the Data Protection Law
    3. Liability
    4. Right to be forgotten
  10. Intellectual property
    1. General approach
    2. Contractual aspects of intellectual property rights
    3. Rights over the results of intellectual activity
    4. Company names, trade names, trademarks and appellations of origin
    5. Intellectual property rights infringements
    6. IP Court
  11. Advertising issues
    1. General approach
    2. Scope of application of the Advertising Law
    3. Violations of the Advertising Law
    4. Liability
  12. Anti-corruption and compliance
    1. General approach
    2. Legal framework
    3. Compliance requirements for companies
    4. Concept of corruption in Russian law
    5. Possible targets of bribery
    6. Liability and penalties for corruption
    7. Example of sector-specific anti-corruption measures
  13. Real estate and construction
    1. Rights to real estate
    2. Real estate transactions
    3. Resolution of real estate disputes
    4. Planning and construction issues
  14. Corporate bankruptcy
    1. Insolvency criteria
    2. Stages of bankruptcy proceedings
  15. Import substitution and production localisation in Russia
    1. Measures affecting goods importation and current import substitution legislation
    2. Localisation incentives
    3. Sector-specific impact of import restrictions and localisation requirements
  16. Banking sector
    1. Legislative and regulatory framework
    2. Licensing and operations
    3. Deposit insurance
    4. The anti-money laundering law
    5. Bank secrecy
    6. FATCA and CRS
  17. Environment, energy efficiency and renewables
    1. Environment
    2. Energy efficiency
    3. Renewables
  18. Infrastructure and public private partnerships
    1. General approach
    2. Key PPP legislation
    3. Russian PPP environment
    4. Financing
    5. Legal issues
    6. Prospects for infrastructure projects
  19. Oil & gas
    1. Legislative framework
    2. Ownership and licensing
    3. Restrictions on foreign investors
    4. Licences
    5. PSAs

Common forms of business structures for foreign investors

General approach

Russian legislation provides for several types of business structure, of which the most commonly used are limited liability companies, joint-stock companies, representative offices and branches. A basic description of each of these is set out in Part I of the Civil Code of the Russian Federation (the “Civil Code”). Some other specialised structures also exist but are not commonly used by foreign investors. An individual is also entitled to conduct commercial activities in Russia, provided that he/she has the legal status of an individual entrepreneur. Foreign nationals can only register as individual entrepreneurs when they hold a temporary or permanent residence permit. The legal framework for individual entrepreneurs is also set out in the Civil Code.

Key contacts

Contact
Zenin Vladimir
Vladimir Zenin
Partner
Head of M&A
T +7 495 786 40 30

Strategic industries

 

The Foreign Investment Law1, together with Federal Law No. 57-FZ “On Procedures for Foreign Investment in Companies of Strategic Significance for National Defence and Security of the Russian Federation” dated 29 April 2008 (the “Strategic Industries Law”), provides for a strict regulation of all transactions or agreements involving the participation of foreign investors in any entities engaged in activities in those sectors of Russia’s economy which are deemed strategic for Russia’s defence and security.

Under the Strategic Industries Law, 45 sectors of the economy have been defined as strategic, including:

  • military technology, nuclear power, aircraft and the space industry;
  • natural monopolies, such as pipelines, the maintenance of ports and airports (with limited exceptions);
  • companies with a dominant market position in certain markets in Russia;
  • communication services, including fixed-line telecommunications, but excluding Internet access services;
  • television and radio broadcasting; and
  • subsoil use.

The Strategic Industries Law does not affect foreign investments which are already governed by other federal laws or by international conventions ratified by Russia.

Restrictions on foreign investors

Under the Strategic Industries Law, transactions that result in foreign investors or Russian corporate groups with a foreign element gaining control over a strategic company must be cleared by the specifically appointed Governmental Commission (the “Strategic Approval”).

In June 2018, important changes to the Strategic Industries Law came into force. These changes introduced the amended definition of a “foreign investor” for the purposes of the Strategic Approval. This definition now includes those types of investors mentioned in a comprehensive list provided by the Strategic Industries Law.

The procedure for obtaining a Strategic Approval is lengthy and cumbersome; however, if the Strategic Approval is not obtained for a transaction requiring such approval, the respective transaction is void under Russian law.

If prior approval is obtained, the transaction should be conducted within the timeframe set out in the respective approval.

Foreign investors are deemed to “gain control” over a company if they are acquiring:

  • directly or indirectly more than 50% of the voting shares in a Russian company operating in a sector deemed to be of strategic importance (a “Strategic Company”) which does not conduct geological surveys on the subsoil and/or explore and extract minerals on subsoil plots of federal significance (i.e. not “operating federal subsoil plots”);
  • directly or indirectly less than 50% of the voting shares in a Strategic Company that is not operating federal subsoil plots, if the acquirer gains effective control over the company;
  • directly or indirectly 25% or more of the voting shares of a Strategic Company operating federal subsoil plots; or
  • control of a Strategic Company as a result of a change in the number of voting shares in that company.

It should also be noted that certain transactions require post-transaction notification, which must be made within 45 days of the change of control taking effect. One example of this is when foreign investors acquire at least 5% of the shares in a Strategic Company.

Restrictions on state and international organisations and non-disclosing entities

The Strategic Industries Law prohibits foreign states, international organisations and organisations controlled by them, as well as the companies that do not disclose information about their beneficial owners and controlling persons (“non-disclosing entities”), from gaining control over a Strategic Company.

It also provides that foreign states, international organisations, organisations controlled by them and non-disclosing entities must obtain prior approval from the FAS when acquiring:

  • directly or indirectly more than 5% of the voting shares of a Strategic Company operating federal subsoil plots; or
  • directly or indirectly more than 25% of the voting shares of a Strategic Company that is not operating federal subsoil plots or otherwise acquiring the right to block decisions of that company’s management bodies.

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"Foreign investors in Russia mostly use the limited liability company and the private joint-stock company forms for their activity in Russia."


[1] Federal Law No. 160-FZ “On Foreign Investment in the Russian Federation” dated 9 July 1999. Back ↑

Key contacts

Zenin Vladimir
Vladimir Zenin
Partner
Head of M&A
T +7 495 786 40 30