The Central Bank initiated the institution of the Unified Pledges Database that is intended to accumulate data from different sources containing information on pledge of movable and immovable property. The Unified Pledges Database is expected to be introduced by the end of 2017. Unification of the pledge registers, on the one hand, will simplify the procedure for obtaining information on pledges; however, on the other hand, its practical implementation is disputable from technical and financial standpoints.

At the moment the system for registering pledge differs depending on the type of encumbered property. Particularly, the pledge of immovables is registered in the Uniform State Register of Immovable Property, while the pledge of movables may be registered with the public notary, the pledge of participatory interests and shares is registered in the Uniform State Register of Legal Entities and in the share registers, maintained by private registrars, respectively.

The Central Bank has repeatedly expressed its intention to institute a unified system of pledges of movable and immovable property altogether that would be a database accumulating all the information on pledges from various sources. Yet, the practical implementation of this initiative will require filing huge arrays of information to the new database, therefore the stage-by-stage implementation of the new system is being considered. Banking institutions also have concerns in respect of the financial and labor costs of its implementation, which will amount to approximately RUB. Mln. 100-150, what may be an unbearable burden for some banks.

The Ministry of Economic Development suggested that the legal provision that only a warning (but not a fine) shall be issued to a company committing the violation for the first time, shall also apply to large enterprises. Nowadays this provision is only applicable to small and medium-sized businesses. Fines will be imposed only if the company commits the offence for the second time. At the moment the initiative of the Ministry of Economic Development is under consideration of other competent authorities, and will be later discussed by the Russian Government. Following the discussions, the Ministry will formalize this initiative as a bill.

The legislation in effect provides that small and medium-sized enterprises will be imposed liability in the form of a warning if the violation was committed for the first time. In July 2016 amendments were introduced to Article 4.1 of the Code of Administrative Offences, which establishes the general rules of administrative punishment. The Russian Union of Industrialists and Entrepreneurs repeatedly argued for the need to extend the scope of application of this provision to be applicable to large enterprises, and the Ministry of Economic Development has put forward this long awaited initiative on 17 August.

According to the Ministry of Economic Development, issuing warnings instead of imposing fines will enable large enterprises to avoid fines for the violations committed for the first time that did not cause any significant harm. This proposed legal development appears to be reasonable, because in most cases the violations committed for the first time are explained by the companies’ unawareness of the numerous legislative amendments or inconsistent practice of application of law. This new legal development, if adopted, will enable to reduce administrative pressure on business.

The state land control was included in the list of the state control types, where risk-oriented approach is applied. The risk category will be assigned to the land plots depending on the coordinates of their boundaries, the land category and permitted use, the registered title and rights and the information on their actual use. The frequency of the land inspections will be determined according to the assigned risk category. In particular, the land plots of medium risk category will be inspected once every 3 years, the land plots of a moderate risk will be inspected once every 5 years, and there will be no scheduled inspections for the land plots of a low risk.

Within the framework of introduction of the general concept of risk-oriented approach in the state control sphere, in the beginning of August 2017 the Russian Government introduced amendments to the Regulation on the State Land Control. These new amendments introduce the risk-oriented approach for the state land control.

The amendments determine the criteria for assignment of the category of risk to land plots and the periodicity of scheduled inspections. The land plots of medium risk category (will be checked every 3 years) include:

• land plots designated for garage and housing construction;
• land plots designated for waste disposal, burial grounds and adjacent to them.

The land plots of moderate risk category (will be checked every 5 years) include:

• land plots adjacent to the lands designated for forest area, territories and objects of special protection and reserve lands;
• land plots designated for urban construction and adjacent to the land plots for agricultural use;
• land plots designated for industrial use, energy industry, transport, telecommunications and other special-purpose use and adjacent to the land plots for agricultural use;
• land plots designated for agricultural use and adjacent to them.

All other land plots are assigned low risk category, and therefore, no scheduled inspections are conducted. 

The Moscow Chamber of Commerce and Industry made up an annual summary of the tax inspections in the last year and analyzed their results. In particular, in 99,9% of cases as a result of the tax inspection the tax authorities make tax reassessment and charge additional tax for the relevant period and impose tax liability on the companies. At that in 80% of cases the entrepreneurs’ attempts to challenge the decisions and actions of the Federal Tax Service in court are fruitless: the courts rule in favor of the state budget.

The experts of the Moscow Chamber of Commerce and Industry noted that despite the general tendency of reduction of the amount of tax inspections in the last years, the total amount of additional taxes charged is on the rise. In particular, in the last 5 years it has raised from RUB Mln. 311 in 2012 to  RUB Mln. 349 in 2016. Such statistics evidences that the tax control has been strengthened dramatically, and the tax authorities implement the early declared policy on making the business step out of the shadow.

In the opinion of the experts, the main reasons for the unfortunate results of the tax inspections for the companies are the financial illiteracy of the taxpayers and the use of the tax evasion schemes, which are well known to the tax authorities. The low percentage of successful challenging of the decisions of the tax authorities by the taxpayers is explained by the fact that the tax authorities have built an effective system of sharing experience, what promotes for the establishment of consistent court practice in support of their stance throughout the country. The increased efficiency of the tax authorities is also explained by the implementation of the new information resources, which facilitate revealing tax violations by the inspectors, e.g. the automatic system of control for VAT payment (ASC VAT-2).

The Supreme Court adjudicated a case, in which a participant of the liquidated company claimed that the court declares his ownership right to residual immovable property and releases it from pledge. The immovable property in question had been earlier owned by his company, which had been liquidated. The responsible state authority refused to terminate the pledge and noted that only the pledgeholder has the right to file the respective application. However, the Supreme Court ruled for the claimant and pointed out that since the pledgeholder has not filed his claim during the company’s liquidation process, the residual property has passed to the company’s participants by the virtue of law free from any encumbrances.

In a case adjudicated by the Supreme Court the sole participant of the liquidated company claimed that the court declares his ownership title to the non-residential premises, which have been previously owned by the company, and that the pledge in respect of the premises is terminated. The court of the first instance ruled for the participant and declared that he is the owner of the respective premises, and the pledge is terminated. Still, the appellate court disagreed with this view and indicated that the law does not stipulate that the fact that the company was taken off the register is the basis for the origin of the companies’ participants’ ownership title to the property of the liquidated company or for the termination of pledge.

However, the Supreme Court disagreed with the decision of the appellate court. In the Supreme Court’s view, the residual property of the liquidated company shall pass to the company’s participants by virtue of law. The Supreme Court also emphasized that in the case at hand the pledgeholder also had dissolved, and the statutory limitation of claims period had expired, what evidenced that there were no claims in respect of the property. Therefore the Supreme Court declared that the ownership title to the residual property has passed to the company’s participant after the company’s liquidation, and the previously existing encumbrances have terminated (see Decision of the Judicial Chamber for Civil Cases of the Supreme Court dated 18.07.2017, case No. 78-KG17-46).