Decree No. 618 introduced a restriction on transactions with shares of Russian LLCs owned directly or indirectly by unfriendly residents, entailing directly and (or) indirectly the establishment, change or termination of the rights of ownership, use and (or) disposal of shares in authorized capitals of limited liability companies (with the exception of credit institutions and non-credit financial institutions) or other rights that make it possible to determine the conditions for managing such limited liability companies and (or) the conditions for their entrepreneurial activities. The list of unfriendly states was approved by Decree No. 430-р. Permit to make transactions specified in Decree 618 shall be issued by the Government Commission for Control of Foreign Investments in the Russian Federation in accordance with the Rules approved by Decree No. 295 of the Government of the Russian Federation dated March 06, 2022.

22.12.2022 Decree No. 942  has been published. The Government received the right to issue temporary permits for transactions, which are listed in Decree No. 252 dated May 03, 2022.

30.12.2022 The criteria for permitting the sale of shares and the withdrawal of dividends by shareholders and owners from unfriendly states were published (transactions listed in Decrees No. 254 dated May 03,.2022 and 618 dated September 08, 2022). An extract from the protocol is published on the website of the Ministry of Finance.

Sale of real estate by financial organizations

The Government Commission for Control of Foreign Investments in the Russian Federation decided to allow residents that are credit institutions and non-credit financial institutions, subject to the transfer of funds for these transactions (operations) in full to a bank account opened with a Russian credit institution (correspondent account) (including in cases where the said transactions (operations) are made (executed) on behalf of credit institutions and non-credit financial institutions by third parties), to perform (execute) transactions (operations) for the disposal of real estate:

  • to foreign legal entities associated with unfriendly states;
  • to legal entities that are under the control of foreign entities associated with unfriendly states, regardless of the place of their registration or the place of their primary business activities.

The permit shall be valid without a time limit.

Extract from the protocol No. 85 of the meeting of the subcommittee of the Government Commission for Control of Foreign Investments in the Russian Federation dated September 07, 2022 (brought to the attention by the Ministry of Finance of Russia on September 13, 2022, No. 05-06-10/ВН-46769)

Payment of dividends

How to pay dividends: requirements, procedures and documents.

Decrees from 05.03.2022 № 95 and from 04.05.2022 № 254 established a special procedure for paying dividends to JSCs and distributed profits of LLCs in favor of foreign members (shareholders). The procedure involves making payments through a special account of type “C”, if the amount of obligations exceeds RUB 10 mln per calendar month. Payment of dividends in a different way consequently requires a permit. According to the extract from the minutes of the subcommittee of the Ministry of Finance, the requirements for subsidiaries to obtain permits to pay dividends and the approaches of the commission for issuing these permits are as follows:

  • “the amount of paid profit is not more than 50% of the total net profit of the previous year;
  • a retrospective analysis of the payment of dividends for previous periods is carried out;
  • foreign owners are ready to continue commercial activities in Russia;
  • federal executive authorities (depending on the subsidiary’s industry profile) have provided criteria for the significance of the company’s activities and an assessment of its impact on Russia’s technological and industrial sovereignty;
  • relevant departments have set quarterly key performance indicators (KPIs) for these organizations;
  • it is possible to pay dividends on a quarterly basis, subject to the achievement of the set KPIs.”

Permit to sell shares in companies

Criteria for resolving on the permit to sell shares by foreigners “associated with unfriendly states”:
• “availability of an independent assessment of the value of assets;
• availability of payment by installments for the buyer for one or two years or payment of a voluntary contribution to the federal budget equal to at least 10% of the transaction amount.
• sale of an asset at a discount of at least 50% of the value determined in the course of an independent appraisal;
• establishment of key performance indicators (KPI) for new shareholders (owners).”
Thus, before resolving on the sale of assets in the Russian Federation, it is necessary to obtain an independent assessment of the value of assets and take into account that in order to obtain the permit, the price and structure of the transaction will have to meet the specified criteria (discount, installment plan, contribution to the federal budget).
Please note that the extract from the minutes informs about the approaches and criteria that the Ministry of Finance is guided by when issuing permits, but does not establish strict procedures and requirements, therefore:
1. even full compliance with the specified criteria does not guarantee that the permit will be obtained
2. the permit may be obtained even if all four criteria are not fully met. In this case, we recommend supporting the application with convincing grounds and arguments, attaching (if possible) the relevant documents

Procedure for obtaining a permit to sell shares

A subcommittee of the Ministry of Finance shall issue permits for transactions falling into the categories specified in this document. The procedure for submitting applications and the list of required documents can be found in the Decree № 295 от 06.03.2022 (Clauses 4-15).

Applications can be filed one of the following ways:

  1. by email
  2. by post 109097, Moscow, Ilyinka, 9
  3. by courier : Moscow, Ilyinka, 9, entrance 5, office 121 (entrance from Bolshoy Cherkassky pereulok)
  4. through the ministries supervising the areas in which legal entities whose shares are the subject of transactions, operate

Our services

Our specialists are ready to provide services for the preparation of assets for sale: :

  • Conduct an independent valuation of assets
  • Calculate the required KPI for new shareholders (owners)
  • Help prepare the necessary set of documents
  • Submit an application for a permit to the Ministry of Finance of the Russian Federation
  • Provide legal and advisory services on all additional issues related to obtaining permits

Contact us for advice on the best course of action for your situation.