From June 02, 2023, the Official Clarification of the Bank of Russia dated June 02, 2023, No. 3-OR, which defines the criteria for classifying a business entity with strategic importance as a controlled foreign company ("CFC"), has come into effect.
According to the Official Clarification of the Bank of Russia, a business entity with strategic importance (excluding entities engaged in the use of subsoil plots of federal significance and/or fishing) is considered a CFC if it has one of the following characteristics:
1) the controlling person has the right to directly or indirectly dispose of more than 50% of the total number of votes attributable to voting shares (stakes) that make up the authorized capital of the controlled entity;
2) the controlling person has the right to determine the decisions made by the controlled entity, including the conditions for carrying out entrepreneurial activities by the controlled entity;
3) the controlling person has the right to appoint a sole executive body of the controlled entity;
4) the controlling person has the right to appoint more than 50% of the composition of the collegial executive body of the controlled entity;
5) the controlling person has an unconditional ability to elect more than 50% of the composition of the board of directors or other collegiate management body of the controlled entity;
6) the controlling person exercises the powers of a management company of the controlled entity;
7) the controlling person has the right to directly or indirectly dispose of less than 50% of the total number of votes attributable to voting shares (stakes) that make up the authorized capital of the controlled entity, subject to the following condition. The ratio of the number of votes attributable to voting shares (stakes) that the controlling person has the right to dispose of and the number of votes attributable to voting shares (stakes) that make up the authorized capital of the controlled entity and belong to other shareholders (participants) of the controlled entity is such that the controlling person has the ability to determine the decisions made by the controlled entity. The basis for disposal, as in the case of disposal of more than 50% of the total number of votes attributable to voting shares (stakes) that make up the authorized capital of the controlled entity, is a trust management agreement, a simple partnership agreement, an agency agreement, or other transactions. At the same time, the ability to block decisions based on the law, the charter, or the agreement cannot be considered as a sign of being under control.
The Official Clarification of the Bank of Russia applies for the purposes of implementation:
- Clause 1 of the Decree of the President of the Russian Federation dated March 01, 2022, No. 81 "On Additional Temporary Measures of an Economic Nature to Ensure the Financial Stability of the Russian Federation";
- Clause 1 and sub-clause "a" of Clause 12 of the Decree of the President of the Russian Federation dated March 05, 2022, No. 95 "On the Temporary Procedure for Fulfilling Obligations to Certain Foreign Creditors",
- Clause 1 of the Decree of the President of the Russian Federation dated May 04, 2022, No. 254 "On the Temporary Procedure for Fulfilling Financial Obligations in the Field of Corporate Relations to Certain Foreign Creditors";
- Clause 1 of the Decree of the President of the Russian Federation dated October 15, 2022, No. 737 "On Certain Issues of Implementation (Execution) of Certain Types of Transactions (Operations)";
- Sub-clauses 11 and 12 of the Decree of the President of the Russian Federation dated March 03, 2023, No. 138 "On Additional Temporary Economic Measures Related to the Circulation of Securities".