Foreigners from unfriendly countries are now required to obtain permission from a government commission for all transactions with LLC shares

Previously, such permission was required for foreigners from unfriendly countries when selling stakes in a Russian LLC with assets in the real estate, energy, and financial sectors. Now this requirement has been extended to all transactions involving the sale of shares in LLCs by foreigners from unfriendly countries.

Presidential Decree No 618 of 08.09.2022 established rules of transaction with shares in authorized capital of LLC with persons from unfriendly countries.

The procedure established by the Decree applies to the following transactions:

1) Transactions entail directly and (or) indirectly the establishment, change or termination of rights of possession, use and (or) disposal of shares in the authorized capital of LLC or other rights that allow to determine the terms of management of such LLC and (or) the terms of their business activities;

2) The party to the transaction is a person of a foreign state, committing unfriendly acts in relation to the Russian Federation. Thus, the procedure stipulated by the Decree applies to transactions with the following subject composition:

a) transactions between residents and persons of foreign states committing unfriendly acts;

b) between persons from unfriendly states;

c) between persons from unfriendly states and persons from other foreign states

Also with respect to these transactions applies clause 12 of Presidential Decree № 95, which does not recognize persons from unfriendly countries who simultaneously meet the following requirements:

A) They are controlled by Russian legal entities or individuals, including if this control is exercised through foreign persons related to such foreign states;

B) Information on control over them has been disclosed to the tax authorities of the Russian Federation by Russian legal entities or individuals controlling the relevant person from a non-friendly state.The Government of the Russian Federation shall approve the procedure for issuance of permits for transactions within 10 days from the date of issuance of the Decree.

This procedure does not apply to transactions in the fuel and energy and financial sectors.

The Ministry of Finance of the Russian Federation has the right to give official clarifications on the issues related to the application of the present Decree.

Nadmitov, Ivanov & Partners law firm actively advises clients on corporate law and M&A transactions, including transactions with LLC shares with the participation of foreigners.