Russian counter measures. Recent developments (21 December 2022 update)
Russia has adopted a series of new measures.
Namely, the President introduced new restrictions concerning certain transactions involving credit organizations and joint-stock companies that are not credit organizations.
The Russian Central Bank issued decision expanding the scope of application of type C accounts.
Moreover, the Ministry of Finance issued clarifications on the scope of transactions involving LLCs to be approved by the Governmental Commission.
Additionally, the term of certain counter sanctions initially introduced until the end of 2022, were extended until the end of 2023.
For more information on sanctions targeting Russia, as well as Russian counter measures, please refer to our previous legal alerts.
On 15 October 2022, Russian President issued Decree No. 737 establishing new rules for certain types of transactions.
►Transactions involving financial organizations
Transactions involving more than 1 % of shares in the charter capital of Russian credit organizations, insurance organizations, non-state pension fund, micro-financial organizations are approved by the Governmental Commission, if one of the parties or beneficiaries of the transactions is a foreign person related to the unfriendly states (as defined by the Government).
This rule does not apply to:
- Transactions with shares of the credit organizations included in the list approved by the President;
- Transactions with shares of credit organizations owned by the persons who are not considered as the persons related to unfriendly foreign states. A person can be qualified as not related to unfriendly states, if it is controlled by a Russian person and information on their control has been disclosed to Russian authorities.
►Payments related to decrease of charter capital, liquidation, bankruptcy
Payments related to the decrease of the charter capital, liquidation or bankruptcy proceedings of a resident entity made by the residents in favor of foreign persons related to unfriendly states (as defined
by the Government) are made according to a special procedure to a type C account if the amount exceeds 10 millions rubles per month
The Russian Central Bank (CBR) and the Ministry of Finance may authorize making such payments outside of the established procedure.
►Extension of the procedure established to LLCs to JSCs
According to the Decree transactions involving Russian joint-stock companies between persons related to unfriendly states (as defined by the Government), as well as between persons related to unfriendly states and foreign persons not related to unfriendly states are subject to prior approval of the Governmental Commission.
According to new Federal Law No. 511-FZ amending Russian legislation on currency control, the list of exceptions allowing for operations involving foreign currency between residents will be expanded.
The new law allows payment in foreign currency for monetary claims ceded by the following categories of non-residents:
- Non-residents who transfer goods, provide works, etc. under foreign trade contracts;
- Non-residents who hold monetary claims towards residents under foreign trade contracts or towards residents who are financial agents.
New rules become effective starting 16 December 2022
On 21 November 2022, the CBR issued Decision providing for additional rules regarding the regime of a type C account in relation to obligations within the scope of the Presidential Decree No. 95 dated 5 March 2022 “On Temporary Procedure for the Fulfillment of Obligations Before Certain Foreign Creditors (Decree 95)”.
►A type C bank account opened for a non-resident can be credited with the following funds:
- From residents for operations, transactions and undertakings covered by presidential decrees establishing special regime of such transactions, including Decree No. 95, Presidential Decree No. 254 “On Special Procedure for Corporate Obligations” dated 4 May 2022 (Decree No. 254);
- From residents for operations and transactions authorized by the Governmental Commission for foreign investments;
- Transferred from type C bank accounts, type C brokering accounts, type C special brokering accounts, type C clearing bank accounts, type C trade bank accounts;
- Erroneously deducted from a type C bank account.
►Funds may be debited from a type C bank account opened for a non-resident in order to, namely:
- Pay taxes, duties and other obligatory payments required by the Russian budgetary legislation;
- Make transfers for the purchase of federal sovereign bonds;
- Make transfers to type C bank accounts;
- Make transfers to type C brokering accounts, type C special brokering accounts, type C clearing bank accounts, type C trade bank accounts;
- Pay commissions related to transactions involving securities credited to type C depositary accounts;
- Pay fines to residents for transactions covered by Decree No. 95;
As a reminder, Decree 95 applies to the performance by Russian residents of their obligations exceeding 10,000,000 RUB per month (or currency equivalent) in respect of credits and loans, financial instruments to foreign creditors. Such foreign creditors include foreign persons associated with unfriendly foreign states or persons controlled by such foreign persons associated with unfriendly foreign states, regardless of their place of registration or activity (unless they are registered in Russia). For more information on this decree, please refer to our sanctions’ update dated 10 March 2022.
Decree No. 254 applies to the payment of profit in limited liability companies, partnerships, production cooperatives, etc.
On 13 October 2022, the Ministry of Finance issued clarifications, including the clarification of the scope of the transactions that shall be subject to approval of the Governmental Commission. They include:
- transfer of a share in the charter capital of a limited liability company to one or more shareholders or to a third party;
- acquisition by a limited liability company of a share in its charter capital;
- withdrawal of a shareholder from a limited liability company by way of alienation of its share to the company or demand for the acquisition of the shares by the company;
- transfer of a share in a limited liability company to an investment fund;
- agreement with a commercial organization or an individual entrepreneur on the transfer of powers of the sole executive body of a limited liability company;
- shareholders agreement;
- convertible loan agreement;
- pledge agreement for a share of a limited liability company;
- a pledge management agreement for a share of a limited liability company;
- voluntary reorganization of a limited liability company;
- simple partnership agreement (agreement on joint activities), concluded by a limited liability company;
- trust management agreement, assignment and (or) other agreement, on the exercise of rights certified by the shares of limited liability companies;
- other transactions involving shares in the charter capital of limited liability companies or other rights that allow determining the conditions for managing limited liability companies and (or) the conditions for their entrepreneurial activity.
Additionally, the Ministry of Finance approved the form of application to be filed specifically for transactions involving Russian LLCs.
Extension of existing measures
Presidential Decree dated 23 November 2022 No. 845 prolonged measures on certain currency transactions first established in March 2022.
It is prohibited until 31 December 2023 to complete operations on:
- payment by a resident of a share, contribution, share in the property of an entity that is a non-resident;
- on contribution by a resident to a non-resident within the agreement on joint activities.
The ban does not apply in the following cases:
- Authorization by the CBR;
- Transfer of funds in rubles or in the currency of the state not committing unfriendly actions (as defined by the Government);
- Transfer of funds in the currency of the state committing such unfriendly actions, if the amount of the transfer does not exceed 15 million rubles or equivalent according to the official rate of the CBR at the date of payment.
On 26 October 2022 amendments were introduced to Presidential Decree No. 100 dated 8 March 2022 on export- and import-related restrictions.
The Decree limits or restricts import and export of raw materials defined by the Government until the end of 2023.
As a reminder, on 9 March 2022, the Government provided a list of goods and materials that had been imported to Russia and temporarily cannot be exported outside of Russia. These list includes technological, medical, telecommunication equipment, vehicles, agricultural equipment. Such equipment can only be exported to the countries of Eurasian Economic Union subject to an authorization received from a competent authority.
Additionally, import restrictions involving a ban of import of certain foods, products and raw materials introduced back in 2014 were extended for another year until 31 December 2023.
On 5 December 2022, Russian President issued Decree extending the ban of certain transactions involving Russian entities until 31 December 2023.
The ban was initially introduced by Presidential Decree No. 520 dated 5 August 2022. The ban extends to assets owned by persons from unfriendly states (as defined by the Government). Banned transactions include those involving:
- shares of strategic JSCs;
- shares in the charter capital of the companies associated with the fuel and energy complex. The list of said companies was published on 9 November 2022.
- shares in the charter capital of Russian credit institutions approved by the president. The list was published on 26 October 2022.
As a reminder, the initial ban was effective until the end of 2022. For more information on this limitations please refer to our August sanctions’ update.
We are actively following the developments related to those issues and are fully prepared to advise our clients.