The government commission has updated the list of conditions for issuing permits to foreigners from unfriendly states to engage in transactions with shares and stakes of Russian companies

The Ministry of Finance of Russia has published an excerpt from the decision of the subcommittee of the Government Commission on Control over Foreign Investments in the Russian Federation dated July 7, 2023, No. 171/5, which updates the list of conditions for issuing permits to foreign nationals from unfriendly states to conduct transactions involving the sale of shares and stakes in Russian companies.

Specifically, the updated conditions now include:

Presence of a report on the independent assessment of the market value of the assets being sold, prepared by an appraiser included in the list of appraisers recommended by the Subcommission to conduct such assessment;
Presence of an expert opinion regarding the aforementioned report, prepared by an expert from the self-regulatory organization (SRO) of appraisers included in the list of SROs recommended by the Subcommission to prepare such expert opinion;
Sale of assets with a discount of at least 50% of the market value of the corresponding assets indicated in the independent assessment report;
An obligation to voluntarily transfer to the federal budget at least 10% of half the market value of the assets indicated in the independent assessment report (when selling assets with a discount of less than 90% of the market value), or at least 10% of the market value of the assets indicated in the independent assessment report (when selling assets with a discount of more than 90% of the market value). The voluntary contribution to the Russian budget must be made within 3 months from the date of the transaction;
If the transaction involves shares of a joint-stock company (PJSC), the buyer is obligated to offer up to 20% of the acquired share package on organized auctions (the start of the placement should be no later than one year, and the duration of the placement should not exceed 3 years from the start date);
In case of the termination of the public status of the joint-stock company or its liquidation as a result of the transaction, 20% of the shares of the public joint-stock company (either newly created or resulting from the acquisition of the public status by the joint-stock company) should be placed on organized auctions. The acquisition of the public status by the joint-stock company and the conduct of such placement should not exceed three years from the date of the transaction;
Establishment of key performance indicators for buyers and/or the acquired economic entity:
1. Preservation of the technological potential and the main type of economic activity of the economic entity;
2. Preservation of jobs;
3. Fulfillment of obligations under concluded contracts;
If the transaction includes an option for the seller to buy back the asset, the conditions for the buyback must stipulate:
- The buyback of the asset at the market value on the date of exercising the option;
- The existence of an economic benefit in having the option for the resident owner of the asset;
- A limitation on the validity period of the permission for the buyback (usually not exceeding two years from the date of the initial transaction);
Conducting the transaction settlement:
1. Using accounts of type “C”; or
2. In rubles within the banking system of the Russian Federation without transferring funds beyond the borders of Russia; or
3. By transferring funds to the seller’s account in a foreign bank, but with a deferred payment option;
The applicant must possess other permissions required by the legislation of the Russian Federation for conducting the transaction (e.g., approval from the antimonopoly authority for the transaction).