Decree No. 618 of the Russian President introduces new restrictions on transactions with the shares in Russian LLCs if a party to a transaction is a foreign person associated with countries that enacted sanctions against Russia. Such transactions now require the prior approval of the Government Commission for the Control of Foreign Investment in the Russian Federation. The Decree also introduces a number of other measures. In particular, it allows Russian banks subject to foreign sanctions to perform obligations related to foreign currency accounts (deposits) in Russian rubles.

Under Decree No. 618 dated 08 September 2022 (“Decree No. 618”) prior approval of the Government Commission for the Control of Foreign Investment in the Russian Federation is required to execute transactions with the shares in Russian limited liability companies (“LLCs”) if a party to the transaction is a foreign person associated with countries that enacted sanctions against the Russian Federation, such as the EU countries, the UK, Canada and the US (“Foreign Party associated with the Covered States”). The new requirement is worded as broadly as possible and applies to any type of transactions which directly or indirectly lead to establishment of control, change of control or cessation of control over an LLC (except for credit organizations and non-credit financial organizations) or relate to other rights that allow a party to manage an LLC or influence its business decisions.

Foreign Parties associated with the Covered States are also defined broadly and include (i) persons that are citizens of a Covered State, (ii) entities that are incorporated in a Covered State, have a principal place of business in a Covered State or derive profits primarily from business in a Covered State, and (iii) persons controlled by any Foreign Parties associated with the Covered States, even if their place of incorporation or principal place of business is not in a Covered State (this may be interpreted as covering Russian entities that are affiliated with Foreign Parties associated with the Covered States).

Therefore, the prior approval requirement may apply to virtually any transaction with the shares in Russian LLCs that are owned directly or indirectly (such as through another Russian entity) by Foreign Parties associated with Covered States. It has been reported that Decree No. 618 is a part of the package of measures taken to stabilize the Russian economy in view of the withdrawal of a number of foreign companies from Russia.

At the same time, the requirement to obtain approval in accordance with the Decree No. 618 does not apply to transactions in fuel-energy and financial industries. These transactions are subject to a different regulation, namely Decree of the Russian President No. 520 dated 05 August 2022. Furthermore, according to Decree No. 618, LLCs, shares in which are owned by entities that are deemed strategic subsoil operators, are now allowed under Russian law not to disclose information on their business activities to shareholders that are Foreign Parties associated with the Covered States.

In addition, Decree No. 618 also allows Russian banks subject to foreign sanctions to perform their obligations related to foreign currency accounts (deposits) of the Russian companies in Russian rubles at the rate of the Russian Central Bank as at the date of payment.