On September 4, 2023, a new Federal Law № 470-FZ "On the specifics of the regulation of corporate legal relations in corporations that are economically significant companies" (hereinafter – the law) came into force.
This law allows:
A foreign holding company is a foreign legal entity associated with a foreign state that commits unfriendly actions against the Russian Federation and owns at least 50% of the stocks (shares) in the charter capital capital of the economically significant company.
An economically significant company is a corporation that is essential for ensuring the economic sovereignty and security of the Russian Federation. Thus, the turnover of the group of companies should exceed 75 billion rubles, the number of employees should exceed 4000, the value of assets should exceed 150 billion rubles, and the amount of taxes paid should exceed at least 10 billion rubles.
The law was adopted in connection with the refusal of foreign participants who don’t fulfill their duties to the economically significant company, recalling the restrictions related to the sanctions introduced against the Russian Federation. According to this law, foreigners have the right to receive compensation on market conditions when leaving the Russian market. Previously, it was envisaged that foreign beneficiaries leaving Russia should receive compensation at a discount.
If a foreign holding company performs unfriendly actions, that is, it hinders the management of the economically significant company or refuses to fulfill the duties of shareholders, their rights may be suspended by the arbitration court. In this case, a foreign holding company may apply for compensation. According to the law, it is entitled to had in an application for suspension of the exercise of rights:
A foreign holding company at any time during the period of suspension of the exercise of rights has the right to apply to an economically significant company with a claim for compensation in the amount of the market value of the stocks (shares in the chapter capital) of an economically significant company that haven’t been apportioned persons who have entered into direct ownership of the relevant stocks (shares in the chapter capital). The procedure for determining the amount and payment of such compensation is established by the Government of the Russian Federation.
The stocks (shares in the chapter capital) of an economically significant company owned by a foreign holding company and transferred to an economically significant company are apportioned to persons who have the right to take direct ownership of the stocks (shares in the chapter capital) of an economically significant company, in proportion to the share of their indirect ownership in the chapter capital of an economically significant company.
To implement the procedure for determining the amount and payment of compensation to a foreign holding company in case of the suspension of the exercise by a foreign holding company of corporate rights in respect of an economically significant company was established a draft of the decree of the Government of the Russian Federation "On approval of the procedure for determining the amount and payment of compensation to a foreign holding company in connection with the suspension of the exercise by a foreign holding company of corporate rights in respect of an economically significant company" (prepared by the Ministry of Economic Development of the Russian Federation on August 10, 2023).
In fact, the beneficiaries (in particular from unfriendly countries) have the right to leave the economically significant company on market conditions.
Earlier in 2022, the State Commission for the Control of Foreign Investments established a condition for companies from unfriendly countries for leaving from Russian assets – a sale with a discount of at least 50% of their market value.
This law allows:
- to exclude foreigners from the shareholders of economically significant companies;
- to obtain direct ownership of stocks (shares) of economically significant companies under the control of a foreign holding company by Russian beneficiaries from foreign holding companies from unfriendly countries.
- to receive direct payment of dividends (profit) of economically significant enterprises by Russian beneficiaries from the foreign holding companies.
A foreign holding company is a foreign legal entity associated with a foreign state that commits unfriendly actions against the Russian Federation and owns at least 50% of the stocks (shares) in the charter capital capital of the economically significant company.
An economically significant company is a corporation that is essential for ensuring the economic sovereignty and security of the Russian Federation. Thus, the turnover of the group of companies should exceed 75 billion rubles, the number of employees should exceed 4000, the value of assets should exceed 150 billion rubles, and the amount of taxes paid should exceed at least 10 billion rubles.
The law was adopted in connection with the refusal of foreign participants who don’t fulfill their duties to the economically significant company, recalling the restrictions related to the sanctions introduced against the Russian Federation. According to this law, foreigners have the right to receive compensation on market conditions when leaving the Russian market. Previously, it was envisaged that foreign beneficiaries leaving Russia should receive compensation at a discount.
If a foreign holding company performs unfriendly actions, that is, it hinders the management of the economically significant company or refuses to fulfill the duties of shareholders, their rights may be suspended by the arbitration court. In this case, a foreign holding company may apply for compensation. According to the law, it is entitled to had in an application for suspension of the exercise of rights:
- the federal executive authority authorized by the Government of the Russian Federation;
- shareholders (participants) of an economically significant company regardless of the number of shares owned by them (the amount of the shares in the charter capital);
- the individual executive organ or member of the Board of Directors (board of supervisory directors) of an economically significant company;
- persons who indirectly own stocks (shares in the charter capital) of an economically significant company, who belong to a foreign holding company and are citizens of the Russian Federation and (or) residents of the Russian Federation, provided that the share of their direct and (or) indirect participation in a foreign holding company is more than 50%, or more than 30%, if at the last meeting of the supreme management body of the foreign holding company, before submitting the application for suspension of the exercise of rights, such persons had the opportunity to determine the decision of the supreme management body of a foreign holding company, or more than 20% (paragraph 5 part 4 Article 2 of the Law).
A foreign holding company at any time during the period of suspension of the exercise of rights has the right to apply to an economically significant company with a claim for compensation in the amount of the market value of the stocks (shares in the chapter capital) of an economically significant company that haven’t been apportioned persons who have entered into direct ownership of the relevant stocks (shares in the chapter capital). The procedure for determining the amount and payment of such compensation is established by the Government of the Russian Federation.
The stocks (shares in the chapter capital) of an economically significant company owned by a foreign holding company and transferred to an economically significant company are apportioned to persons who have the right to take direct ownership of the stocks (shares in the chapter capital) of an economically significant company, in proportion to the share of their indirect ownership in the chapter capital of an economically significant company.
To implement the procedure for determining the amount and payment of compensation to a foreign holding company in case of the suspension of the exercise by a foreign holding company of corporate rights in respect of an economically significant company was established a draft of the decree of the Government of the Russian Federation "On approval of the procedure for determining the amount and payment of compensation to a foreign holding company in connection with the suspension of the exercise by a foreign holding company of corporate rights in respect of an economically significant company" (prepared by the Ministry of Economic Development of the Russian Federation on August 10, 2023).
In fact, the beneficiaries (in particular from unfriendly countries) have the right to leave the economically significant company on market conditions.
Earlier in 2022, the State Commission for the Control of Foreign Investments established a condition for companies from unfriendly countries for leaving from Russian assets – a sale with a discount of at least 50% of their market value.