Amendments to the Government Commission Approval procedure

In accordance with the recently introduced amendments to the Government Decree No. 295 dd. March 6, 2022, establishing the rules for issuance of the Government Commission Approvals aimed at control of foreign investments in the Russian Federation and implementation of additional temporary economic measures to ensure the financial stability of the Russian Federation, the list of requirements to transactions conducted in regard to securities and shares of authorized capitals of Russian companies has been updated.

The amendments re-confirmed the requirements that had earlier been specified in the Minutes of the Subcommittee of the Government Commission for the control of foreign investments in the Russian Federation No. 171/5 dd. July 7, 2023, whereas the latter made important clarifications to the procedure of application for a Government Commission Approval, inter alia for intra-group transactions and transactions between persons from “unfriendly” states.

The actual general requirements for a transaction conducted in regard to securities and shares of authorized capitals of Russian companies and involving foreign persons from “unfriendly states” are as follows:

1. provision of a report on independent appraisal of the market value (hereinafter “Report”) supplemented by an expert opinion thereon, whereas both are arranged by a qualified appraiser included in the list of the appraisers recommended by the Government Commission;
2. sale of assets with a discount of at least 50% of the market value of the relevant assets specified in the Report;
3. payment of the exit tax 15 % (amount updated by the Minutes of the Meeting of the Subcommittee of the Government Commission for the control of foreign investment in the Russian Federation dd. September 26, 2023 No. 193/4);
4. in case of acquisition of shares constituting the authorized capital of a public joint stock company (hereinafter “PJSC”), placement of up to 20% of the acquired of shares at an organized auction (placement not later than 1 year from the date of the transaction, with the placement lasting for not more than 3 years; in case of reorganization in the form of a company joining a PJSC, placement of shares of the PJSC at an organized auction in the amount equivalent up to 20% of the shares of the company joined);
5. in case of termination of the public status of a joint stock company (hereinafter “JSC”) or its liquidation as a result of implementation of a transaction, placement of up to 20% of shares of a PJSC (newly created or as a result of a JSC becoming PJSC) at an organized auction;
6. establishment of key performance indicators and their target values in regard to the party purchasing the securities\shares;
7. repurchase of an asset at market value on the date of realization of an option concluded, presence of economic benefits for the owner of the asset (being a resident) and limitation of the validity period of the Government Commission Approval (as a general rule – 2 years);
8. use of the type “C” account in terms of the transfer of funds to the party being a person from an “unfriendly” state, or conduct of transactions in rubles with the use of the banking system of the Russian Federation without transferring funds outside the Russian Federation, or availability of installment payments in case of transactions being conducted to the bank account located outside the Russian Federation;
9. availability of other permits if so provided for by the legislation of the Russian Federation.

NOTE: provision of the documents as per the pp. 1 and 6 is not required for intra-group transactions and transactions conducted between foreign “unfriendly” persons, making such transactions also not subject to the 50% discount from the asset value and 15% exit tax Commission requirements.