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Russia : COVID-19 : Consequence of new russia measures for business

David Lasfargue

MEASURES TO SUPPORT BUSINESS

Article 8 of Ordinance No. 2020-306 (“Time Limits” Ordinance) thus establishes an automatic and generalised suspension of the time limits imposed by the administration, in accordance with the law and regulations, granted to any person to carry out inspections and work or to comply with requirements of any kind.

In short, administrative procedures (whatever their form, in particular acts, formalities, registration, etc.) whose failure to complete within the period initially prescribed could produce particular legal effects (such as a penalty, a prescription, etc.), but which could not be completed during the period of a state of emergency plus one month, may be completed at the end of that period within the period normally provided for, and at the latest within two months following the end of that period.

On 1 April 2020 Federal Law No. 102-FZ “On amendments to the Russian Tax Code” entered into force. It provides for a number of anti-crisis measures and gives the Russian government additional powers.

  • The Government of the Russian Federation is granted the right to issue regulations providing for: suspension, cancellation or postponement of tax inspections; extension of terms for paying taxes, levies, and social contributions; extension of terms for submitting tax returns, accounting (financial) statements and other documents; additional grounds for tax deferral in 2020; grounds and conditions for non-application of tax liability.
  • From 1 April 2020, social contributions for small and medium-sized enterprises[1] will be reduced from 30% to 15%. The reduced rate will apply to the amount of monthly salaries exceeding the minimum wage per month.

Federal Law No. 98-FZ “On amending certain legislative acts of the Russian Federation concerning the prevention and liquidation of emergency situations” became effective on 1 April 2020. The Federal Law provides, inter alia, for the following support measures:

  • The Russian Government was authorized to introduce a moratorium on bankruptcy filings. By virtue of such power, the Russian Government adopted Regulation No.428 dated 3 April 2020 on the introduction of such a moratorium for a 6 months’ term for the most affected economic sectors, as well as for the organizations included into the lists of systemically important organizations, strategic enterprises, as well as strategic joint-stock companies and organizations.
  • The landlord is obliged to conclude an additional agreement to the lease contract, providing for deferred payment of rent for 2020, within 30 days from the date of the tenant’s request. The parties to such contracts may, by mutual agreement, change the amount of rent at any time during 2020. Besides, the lessee may require reducing the rent for 2020 due to its inability to use the property pursuant to the above-mentioned decision of the regional authorities. The Regulation of the Russian Government No. 439 dated 3 April 2020 provides for deferred payment of rent in case the tenant operates in most affected economic sectors, the leased property is both privately or publicly owned, the lease agreement was concluded before the introduction of high-alert or emergency situation regime in the relevant Russian region (please note that high-alert regime was introduced in Moscow on 5 March 2020 pursuant to the Order of the Moscow’s Mayor No.12-УМ). The deferral is granted from the date of introduction of high-alert or emergency situation regime till 1 October 2020. During high-alert or emergency situation the tenant shall be exempt from paying the rent (except for utility and other costs stipulated by the lease agreement) and once such regime is cancelled the tenant shall pay 50% of the rent till 1 October 2020. The tenant shall repay the rent arrears not earlier than 1 January 2021 but no later than 1 January 2023, the repayment shall be made on a monthly basis in equal instalments whose amount shall not exceed 50% of the rent per month. Some experts believe that in case the landlord avoids entering into an additional agreement on rent deferral, the tenant may request the court to oblige the landlord to do so.
  • From 1 April till 31 December 2020 small and medium-sized enterprises are exempt from any inspections provided for by the law. An exception will be made for inspections that are launched due to causing or the threat of causing harm to the life and health of citizens or the occurrence of natural and man-made emergencies. The Government may also provide for other exceptions to this rule.

[1] Pursuant to Federal Law No. 209, small and medium-sized enterprises (SMEs) include medium-sized and small enterprises, as well as microenterprises, in which at least 51% of the charter capital shall be held by individuals or other SMEs. The share of other companies, not being SMEs, shall not exceed 49%, and the share held by the state, region or non-profit organizations shall not exceed 25%. Besides, the requirements on the number of employees and amount of revenue are to be complied with. Microenterprises shall not employ more than 15 persons, while their revenue shall not exceed RUB 120 mln. Small enterprises shall not employ more than 100 persons, and their revenue shall not exceed RUB 800 mln. Medium-sized enterprises shall not employ more than 250 persons, while their revenue shall not exceed RUB 2 bln. Please note that all SMEs shall be included in a relevant register.

LABOUR-RELATED ISSUES

After addressing the nation for the second time, President Putin signed on 2 April 2020 a decree on the extension of “paid non-working days” during the period from 4 April until 30 April 2020. The list of employers and employees to whom the “non-working period” does not apply was extended as compared to that prescribed by the President’s Decree dated 25 March 2020 and now includes: (i) organizations working without interruption; (ii) medical organizations and pharmacies, (iii) organizations providing the population with food products and essential goods, (iv) organizations performing urgent works in emergency situations and in cases threatening life, health and normal living conditions of the population, (v) organizations performing urgent repairs and loading operations, (vi) financial institutions fulfilling urgent functions (mainly, rendering payment services), (vii) other organizations as determined by the head of the region depending on the epidemiological situation in a particular Russian region. If the situation with the spread of coronavirus improves, the period of “non-working days” will be shortened. The Ministry of labor issued clarifications for the employers providing that:

  • The introduction of “non-working” days shall not serve as a ground for reducing salaries to the employees. Besides, a “non-working” day shall not be regarded as a day-off or a public holiday, thus, the employees who continue working shall be paid at a normal rate.
  • The employees working remotely may continue their work in such a regime during the “non-working” period in case such regime has been agreed with the employer, in particular, by means of electronic document exchange.
  • The employees who are not working in accordance with the President’s Decree shall not have their annual vacations reduced by the number of “non-working” days.
  • In case the employee is on vacation during the “non-working” period, the vacation shall not be extended by such “non-working” days.
  • The employers not targeted by the President’s Decree may dismiss their employees under the regular procedure prescribed by the Labor Code.
  • Non-compliance with the President’s decree may entail administrative liability for the employers, in particular, fines for legal entities of up to RUB 50 000.

In case the employer is entitled to continue its operations in accordance with the President’s Decree dated 2 April 2020 or if the employer has issued an internal order on remote work for its employees, the employer might consider the following options in order to deal with the COVID-19 pandemic challenges:

  • Paid/unpaid holidays or leaves. Please note that the employer cannot oblige its employees to take either paid or unpaid holidays or leaves since the term and the duration of both paid and unpaid leaves shall be agreed with the employee. Paid holidays shall in principle be taken according to a preliminary established schedule for all the staff which shall be approved by the employer no later than two weeks before the beginning of the calendar year. At the same time, employers may try to negotiate with their employees the option of paid/unpaid leave due to the COVID-19 pandemic. A vacation taken by the employee voluntarily and not under coercion will not constitute violation of the Russian labor legislation. Please note that should the employee gets ill during a paid leave the employer will have to either extend the leave or reschedule it for another period.
  • Part-time work. Shifting employees to part-time work does not require prior notification subject to the employee’s consent to new working schedule and entering into an additional agreement in this respect. Otherwise, a special procedure shall be strictly complied with: the employer shall issue a respective order (“prikaz“) specifying the reasons for new working schedule, notify the employment agency, give a 2 months’ notice to the employee, offer appropriate vacancies. Upon the expiration of a 2 months’ term the employee may be dismissed in case of refusal to work under new working schedule. The procedure for shifting the employees to part-time work is different in case there is a threat of massive staff reduction.
  • Staff reduction. The employer may at its own discretion decide on staff reduction. However, in this case a special procedure should apply, namely: the employer shall notify the employees, as a rule, two months in advance (or earlier subject to their consent and the payment of amounts due), as well as the employment agency and the labor union (if any), offer them suitable vacancies, and if they do not exist or the employees refuse to be transferred, dismiss them after paying all the amounts due.
  • Downtime (“prostoi“). The option providing for the introduction of downtime (“prostoi“) due to economic, technological, technical or organizational reasons during the “non-working” period may be challenged unless the state of emergency is declared by the Russian authorities.
SUSPENSION OF BUSINESS ACTIVITIES

According to the Order of the Moscow Mayor dated 4 April 2020, the suspension of operation of the businesses mentioned by previous Mayor’s orders is prolonged till 1 May 2020. Besides, this order provides that the organizations and individual entrepreneurs are not obliged to suspend their activities in Moscow unless it is required under the President’s decisions, the Mayor’s orders and other regulations. The organizations and individual entrepreneurs in whose respect there is no prohibition from being visited by citizens under the law, shall provide the Moscow authorities with the information on the number of employees who continue working at their usual workplaces, who are switched to distance work, and who are not working under the President’s Decree.

The President’s Decree dated 2 April 2020 also provides that regions may expand the list of companies that are not required to suspend their activities from 4 April until 30 April 2020.

NEW LIST OF SYSTEMICALLY IMPORTANT ORGANISATIONS

On 20 March 2020, the Government Commission for improving the stability of the Russian economy reviewed and approved a new list of systemically important organizations whose financial condition will be monitored by the authorities in the context of the collapse of oil prices and the COVID-19 pandemic and, if necessary, provided support. Now, the list includes 646 companies, however, the final list is expected to be prepared by 10 April 2020 taking into account the suggestions made by regional authorities. Please note that the President’s Decree dated 2 April 2020 on the “non-working period” from 4 April until 30 April 2020 may still apply to systemically important organizations subject to approval by the Russian Government.

We expect further clarifications on the aforementioned measures from Russian authorities

We are actively following the developments related to those issues and are fully prepared to advise our clients.