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Latest legal, business and regulatory framework


Investment laws

Federal Law dated July 9, 1999, No. 160-FZ “On foreign investments in the Russian Federation”

  • sets forth the following definitions: “foreign investor”, “foreign investment”, “direct foreign investment”, “investment project”, “priority investment project”, “investment project payback period”, “reinvestment” “cumulative tax burden”;
  • determines statutory regulation of foreign investments, the mode of activity for foreign investors and commercial entities with foreign investments, provision of benefits, and guarantees for protection of investments;
  • regulates specifics of unfair competition from foreign companies, the rules for creation and liquidation of enterprises with foreign investments, certification of branches and representative offices of foreign legal entities.

Federal Law dated February 25, 1999, No. 39-FZ “On investment activity in the Russian Federation in the form of capital investments”

  • sets forth the following definitions: “capital investments”, “investment project”, “priority investment project”, “investment project payback period”, “cumulative tax burden”;
  • defines relations linked with investment activity in the form of capital investments;
  • defines capital investment objects and subjects;
  • sets forth the rights of investors, the obligations of investment activity subjects, relations between them and sources of financing;
  • establishes principles of state regulation of investment activity in the form of capital investments;
  • defines the specifics of state capital investments;
  • determines state guarantees for the rights of investment activity subjects and for the protection of capital investments, and relations within the framework of local administration.

Federal Law dated April 29, 2008, No. 57-FZ “On the procedure for foreign investment in commercial entities of strategic significance for defense of the country and security of the state”

  • sets forth the following definitions: “threat to the national defense”, “commercial entity of strategic significance”, “controlled and controlling entity”;
  • defines the types of activities and transactions of strategic significance to ensure national defense;
  • sets forth the terms of transactions focused on transferring control over commercial entities of strategic significance to foreign investors;
  • defines the procedure for approval by state authorities of any purchases and acquisitions of any entities of strategic significance by foreign entities;
  • governs control procedures with respect to entities of strategic significance by the competent state inspection authorities;
  • determines legal consequences of infringement of legal requirements.

Law of the RSFSR dated June 26, 1991, No. 1488-1 “On investment activity in the RSFSR”

  • sets forth the following definitions: “investments”, “investment activity”, “investment activity subjects”, “investors”, “investment activity objects”;
  • determines the rights of investors, the obligations of investment activity subjects, relations between them, sources of financing, and interaction of state authorities in the course of investment activity;
  • determines the guarantees for the rights of investment activity subjects and for the protection of investments.

Legal forms

Joint-stock company (JSC)

a joint-stock company is a commercial entity with the authorized capital divided into a definite number of shares, which certify liability rights of the participants of the company (shareholders) to the company;

the shareholders do not bear liability for the obligations of the company and carry the risk of losses within the value of the shares in their possession;

the shareholders are entitled to dispose of any shares they own without any consent from other shareholders and the company (the charter of public companies may set forth a different procedure);

the company bears liability for its obligations with all the property in its possession;

the company does not bear liability for obligations of its shareholders;

the company may establish branches and open representative offices;

the company may have subsidiaries and affiliates acting as legal entities;

the subsidiary does not bear liability for obligations of the parent company;

the company is a legal entity and has independent assets in its possession;

the company may acquire and exercise property and personal non-property rights, incur obligations and be a plaintiff and a defendant in court.

Public and non-public joint-stock companies

Comparison criteria JSC PJSC
May offer shares through open subscription No Yes
Is obliged to disclose information envisaged by the Russian laws on securities No Yes
Needs to obtain consent to dispose of shares Yes No
Has the right of first refusal in purchasing shares from the company and other shareholders Yes No
Needs to agree disposal of shares to third parties with other shareholders Yes No
Is entitled to set other obligations for shareholders in the company’s charter Yes No

(Federal Law dated December 26, 1995, No. 208-FZ “On Joint-Stock Companies”)


Limited liability company (LLC)

  • a commercial entity with the authorized capital divided into shares; its participant do not bear liability for its obligations and carry the risk of losses related to the company’s activity within the value of their shares in the authorized capital;
  • the company possesses independent assets, which are booked on its independent balance, it can purchase and exercise property and personal non-property rights, incur obligations and be a plaintiff and a defendant in court;
  • it may have civil rights and liabilities required to perform all and any types of activity not prohibited by the federal laws;
  • it may perform certain types of activity only based on a special permit (license);
  • the company bears liability for its obligations with all the property in its possession, and it does not bear liability for the obligations of its participants;
  • the company may open branches and representative offices, and have subsidiaries and affiliates acting as legal entities;
  • the company’s authorized capital may not be less than ten thousand rubles;
  • the authorized capital is comprised of the par value of the shares owned by the company’s participants;
  • if the number of the company’s participants exceeds 50, it shall be restructured into a JSC or a PJSC.

(Federal Law dated February 8, 1998, No. 14-FZ “On limited liability companies”)

Investment partnership (a collective investment vehicle)

  • under an investment partnership agreement, two or more entities (partners, not more than 50) undertake to joint their contributions and jointly perform investment activity without incorporation of a legal entity to generate profit;
  • in the investment partnership agreement, two or more partners (managing partners) conduct their joint business on behalf of all partners;
  • each partner may obtain a part of the profit from its participation in the investment partnership agreement proportionately to the value of its contribution in the joint business under the investment partnership agreement;
  • the managing partner is entitled to obtain remuneration for conducting joint business of the partners;
  • the managing partner is entitled to deposit the funds included in the common property of the partners under bank deposit agreements, and grant loans from these funds;
  • the managing partner may, using the partners’ common property, acquire and dispose of securities of Russian issuers, securities of foreign issuers, other financial instruments, shares (interests, equity units) in authorized (joint-stock) capitals of Russian and foreign entities, investment units of unit investment trusts, shares in the ownership right to the partners’ common property;
  • the terms of the investment partnership agreement are confidential and are protected under Federal Law dated July 29, 2004, No. 98-FZ “On commercial secret”;
  • the term of the investment partnership agreement may not exceed fifteen years;
  • the partners are jointly and severally liable for common obligations, which do not arise out of the agreement (except for tax obligations);
  • the partners are liable for common tax obligations with all the property in their possession;
  • each contributing partner is liable for common contractual obligations related to the joint investment activity performed by the partners proportionately to and within the value of its share in the ownership right to the partners’ common property, and does not bear liability with any other property in its possession. If the value of the partners’ common property is insufficient to satisfy creditors’ claims on their joint contractual obligations related to the joint investment activity performed by the partners, managing partners, jointly and severally, bear subsidiary liability with all the property in their possession.

(Federal Law dated November 28, 2011, No. 335-FZ “On investment partnership”)

Economic partnership

  • a commercial entity created by two or more persons (not more than 50), the activity of which is controlled by the partners and other persons within the scope and limits set forth in the partnership management agreement;
  • the partners do not bear liability for obligations of the partnership and carry the risk of losses related to the partnership’s activity within the value of their contributions;
  • the partnership bears liability for its obligations with all the property in its possession;
  • the partners shall not disclose the confidential information about the partnership’s activity;
  • the partnership cannot be a founder (participant) of other legal entities, except for unions and associations;
  • the partnership management agreement may stipulate the partners’ right to participation in partnership management not proportionate to the value of their shares in the joint-stock capital, including the right of veto on certain matters, and the rights for non-proportionate distribution of profit, reimbursement of expenses and various costs related to the partnership’s activity.

(Federal Law dated December 3, 2011, No. 380-FZ “On economic partnerships”)

Representative office

  • is a standalone unit of a legal entity located outside of its principal place of business;
  • represents and protects the interests of the legal entity;
  • is not a legal entity;
  • is vested property by the incorporating legal entity;
  • acts based on the regulations it approved;
  • cannot perform activity directly focused on profit generation;
  • the functions of the representative office are limited by representing interests of the incorporating company, conducting negotiations, and managing work with counterparties;
  • the heads of the representative office are appointed by the legal entity and act based on the power of attorney issued by it;
  • it is registered in the unified state register of legal entities;
  • if the representative office provides services or execute works related to the internal functioning of the main enterprise, it shall be restructured to a branch;
  • the representative office of a foreign legal entity in the territory of the Russian Federation is created based on the resolution of the foreign legal entity;
  • the representative office of the foreign legal entity is opened through its certification.

(Civil Code of the Russian Federation (Part One) dated October 21, 1994, No. 51-FZ, Federal Law dated July 9, 1999, No. 160-FZ “On foreign investments in the Russian Federation”)

Branch

  • a standalone unit of the legal entity located outside of its principal place of business and performing all or a part of its functions, including the functions of a representative office;
  • is not a legal entity;
  • is vested property by the incorporating legal entity;
  • acts based on regulations approved by the legal entity;
  • shall be included in the unified state register of legal entities;
  • the heads of the branch are appointed by the legal entity and act based on the power of attorney issued by it;
  • the branch of a foreign legal entity in the territory of the Russian Federation is created based on the resolution of the foreign legal entity;
  • the branch of the foreign legal entity is opened through its certification.

(Civil Code of the Russian Federation (Part One) dated October 21, 1994,

No. 51-FZ, Federal Law dated July 9, 1999, No. 160-FZ “On foreign investments in the Russian Federation”)



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