08.01.2016 — What to Expect in 2016: New Rules
Various amendments to the Russian legislation entered into force on January 1, 2016. The key ones are outlined below.
1. Corporate Law
• Practically all transactions involving shares in LLCs will have to be notarised.
• Sales of shares will have to be conducted via a uniform notarised contract. To facilitate the process, the notary will now send the application to register the changes in the company’s ownership structure to the tax authorities in electronic form on his/her own.
• The incorporation procedure will be simplified. Companies will be able to use a model charter instead of drafting a “customised” one (shareholders can opt for this by adopting a relevant resolution).
2. Registration of Legal Entities
• Tax authorities will exercise more control over the registration process. They will be able to verify the information submitted to the Register (EGRYUL) by requesting documents, carrying out inspections, and marking information in the Register as false if it is found to be inaccurate and the company fails to correct it.
• Registration with EGRYUL of corporate information can now be denied on more legal grounds. Authorities will be able to refuse to register the company’s liquidation or reorganisation if the liquidation or reorganisation procedure was violated. Registration of the fact of replacement of a company’s General Director or a shareholder may be denied if the individual’s managerial actions caused the company to suffer adverse consequences within 3 years prior to the application (e.g., resulted in the company’s failure to settle debts to the State).
• The Register will reflect the company’s decision to change its address. Such registration will comprise two steps: registration of the decision to change the address; and registration of the new address itself within 20 days thereafter, based on a separate application supported by documents confirming the right to use the premises.
3. Agency Labor
• Only accredited employment agencies will be able to provide personnel to other companies for full time work under their immediate control and direction (i.e., for agency labor or “outstaffing”). Outsourcing (providing services to another company) should not be affected by the new rules.
• Other legal entities will be able to provide their employees only to affiliated companies or their partners under shareholder agreements.
• The maximum duration and conditions of agency labor, as well as employee guarantees are established. The leased personnel must enjoy the same working conditions as the client’s employees.
4. Administrative Law
• Several amendments aimed at increasing payment discipline in the energy industry (electricity, heating, etc.) will enter into force, such as new administrative fines, e.g. for violating the new obligation to secure overdue payments for energy, while the existing fines are increased.
• The Bank of Russia will no longer separately set the refinancing rate. It will now be equal to the key interest rate, which will affect the calculation of various payments (such as statutory penalties).
• Special tax regimes are established for residents of special economic zones in Vladivostok (no land and property taxes, reduced social payments, etc.) and the Magadan Oblast (no corporate income tax, reduced mineral extraction taxes, etc.).
07.01.2016 — Russia Seeks to Develop Technology and Innovation - New Special Economic Zone to Be Created in Moscow Oblast
Russian Prime Minister Dmitry Medvedev signed a Decree on the creation of a technology and innovation special economic zone (SEZ) ‘Istok’ in Fryazino (Moscow Oblast’), which is located 25 kilometers northeast of the city of Moscow. The Decree can be found at http://publication.pravo.gov.ru/Document/View/0001201601080026.
Pursuant to the Decree, the Ministry of Economic Development shall sign a relevant agreement with the Government of the Moscow Oblast’, so as to create the said zone.
Technology and innovation SEZs are created for the purpose of hi-tech production development. ‘Istok’ has been created pursuant to the Federal Law “On special economic zones in the Russian Federation”, which, among other things, provides for the procedure of becoming a resident of a SEZ. Residents of SEZs enjoy a number of tax and customs preferences.
Currently there are two SEZs in the Moscow Oblast’. ’Dubna’, a technology and innovation SEZ, is already operative. An agreement on the creation of ‘Stupino Quadrat’, an industrial and production SEZ, was signed in September 2015.
‘Istok’ will be created within the boundaries of the land plot owned by JSC "Research and production corporation Istok’’ named after Shokin (key project member), as well as on adjacent land plots.
According to the Russian Government, the creation of ‘Istok’ will attract RUB 45 billion of investment in 2016-2018, and more than RUB 50 billion of investment in 2019-2025. It is planned that more than 50 companies will become residents of ‘Istok’ by 2025.
06.01.2016 — Companies to Disclose and Annually Update Information on Beneficial Owners - State Duma to Consider New Bill Amending Anti-Money Laundering Legislation
The Russian Government has introduced a bill concerning the disclosure of information on beneficial owners of legal entities for consideration of the State Duma. The bill is aimed at amending the Federal Law on Countering Legalisation (Laundering) of Proceeds of Crime and Financing of Terrorism, and it imposes additional duties on legal entities doing business in Russia, obliging them to obtain, store and annually update information regarding their beneficial owners.
According to the bill, legal entities doing business in Russia will not only be obliged to provide information regarding their beneficial owners upon the request of empowered authorities (the list is to be determined by the Russian Government), but also support such information with relevant documentation. The information shall be updated at least annually.
Notably, the term ‘beneficial owner’ includes individuals who directly or indirectly own more than 25% in the legal entity’s charter capital, or can control its activities.
The bill also proposes to amend the Russian Administrative Code and introduces penalties for breach of the said obligations. Thus, a fine of up to RUB 50.000 can be imposed on the company’s official, and a fine of up to RUB 500.000 can be imposed on the company itself.
According to the explanatory notes, the bill is aimed at increasing the transparency of legal entities’ activities, decreasing the risk of their involvement in unlawful activities, including those connected with money laundering and financing of terrorism.
At the moment the bill is a proposal submitted for consideration by the State Duma, and therefore it may be substantially amended. We will keep our readers informed of its development.
05.01.2016 — Drastic Currency Changes Trigger Rent Rate Review - Moscow Arbitrazh Court Renders Controversial Decision
The Moscow Arbitrazh Court held that the decision of the Russian Central Bank to employ a floating exchange rate regime and the subsequent devaluation of the ruble shall be considered grounds for reviewing contractual terms if the contract price is established in a foreign currency. This decision may potentially affect all lease agreements where the rent is established in EUR or USD.
The Moscow court came to this conclusion in the case No. А40-83845/15. Vimpelkom (a mobile network operator), referring to Article 451 of the Russian Civil Code, asked the court to terminate the contract made with its counterparty Tizpribor, or, alternatively, change its terms due to a fundamental change of circumstances. Vimpelkom sought to recalculate the rent, which was established in USD.
According to Vimpelkom’s representative, the company could not predict the change of the Central Bank’s policy back in 2009, when it was negotiating contractual terms. It alleged that the decision of the Russian Central Bank to employ a floating exchange rate regime in 2014, and the subsequent devaluation of the ruble, should be considered a fundamental change of circumstances, and therefore could be seen as a ground for the alteration or termination of the contract.
The court refused to terminate the contract, but satisfied Vimpelkom’s claim regarding the alteration of the contractual terms. In the operative part of its decision (which has been published) the court fixed the foreign currency exchange rate within a certain range so as to protect both, the lessee and the lessor, from currency fluctuations. Thus, on the facts, the court rectified the contract amending the rent calculation formula. According to the decision, the rent shall be calculated at the exchange rate of 30 USD/RUB even if the exchange rate is below 30 rubles to the US dollar. On the other hand, if the exchange rate exceeds 42 USD/RUB, the rent will still be calculated at the exchange rate of 42 USD/RUB.
It is yet to be seen how the higher courts will tackle the ruble devaluation issue, should the decision be appealed. The full range of consequences can be assessed only after the court’s decision will be made public in full. What is clear, however, is that the decision can have an impact on lease agreements where the rent is established in a foreign currency.
04.01.2016 — Sanction Order in Action - Turkish Companies Whitelisted and Blacklisted by Russian Government
Further to the Executive order imposing sanctions on Turkey signed by Vladimir Putin on November 28, 2015, the Russian Government has published a list of companies that are exempt from the ban to hire from January 01, 2016 nationals of the Republic of Turkey, and a list of specific works that cannot be performed in Russia by Turkish companies.
The list of companies is set forth in the Resolution of the Russian Government No. 1458 dated December 29, 2015. It includes 53 companies and branches, or representative offices, of Turkish companies based in the Republic of Bashkortostan, Crimea, Krasnodar Krai, Kaluga, Moscow and the Moscow Oblast, Nizhny Novgorod, Samara, Saint Petersburg, Tatarstan, Tyumen Oblast, Vladimir, and the Yamal-Nenets Autonomous Okrug. These entities will be able to hire Turkish citizens starting January 1, 2016, while maintaining the number of Turkish employees employed before this date.
The list of works is published in the Resolution of the Russian Government No. 1457 dated December 29, 2015. It sets forth specific works that cannot be performed in Russia by Turkish companies, as well as by legal entities controlled by Turkish citizens and (or) Turkish legal entities, from 1 January 2016. The list includes the following types of activities: construction of buildings and engineering structures and specialised construction works; carrying out architectural projects and engineering-technical designs, technical tests, research and analysis; the activities of travel agencies and other organisations providing services in the area of tourism; running of a hotel business; the execution of works and the provision of services for state and municipal needs; timber processing. Notably, the Resolution does not affect contracts signed prior to its enactment, and therefore such contracts will remain effective for the term of their duration.