Doing Business in Russia

Company law Liabilities (i) Parent liabilities In general, a shareholder's liability is limited to the amount of capital that the shareholder invested in the company, including as-yet unpaid amounts. However, in the event of bankruptcy, a company's creditors have the right to hold the "parent" liable for the debts of its bankrupt subsidiary if the actions of the parent caused the subsidiary company's insolvency. The parent company is also liable for any deals by its subsidiary that were concluded on instructions issued by the parent company or with its approval. (ii) Controller liabilities The term "controller" is broadly defined, and its definition includes control not only via ownership, but also via contractual or other relationships that allow a person / entity, including a parent company, to take decisions on behalf of a company, or otherwise influence a company's activities. Registration Registration of a legal entity by the appropriate authorities takes three business days from the moment that documents are submitted. Registration of a JSC requires up to an additional six weeks to register the issued shares with the Securities Market and Commodity Market Department at the Bank of Russia. Foreign investors are required to have certain documents legalised, translated or notarised, which can significantly lengthen the registration period. It is possible to find adverts for 'Express' company creation services, but caution is advised when using such services. These 'express companies' are often not registered in accordance with official procedures, with many steps in the process being missed out. These missing steps often become apparent only when a change to the company's constituent documents is required, and the change is rejected by the tax authorities due to the authorities' discovery of earlier violations in the registration process. Resolving these issues at a later date can be more time consuming and costly than simply undertaking the standard company registration route. "Off the shelf" companies are also available, although it is not advisable to purchase one. There are inherent risks, including potential liabilities (e.g. tax liabilities) involved in acquiring a company that could have been previously used for undisclosed purposes. Additionally, to successfully change the ownership of a company (involving more than 25% of voting shares in a JSC and more than 1/3 of participation interests in an LLC), sometimes prior approval from the Federal Antimonopoly Service is required. In all cases, any change in ownership must be registered, and this can take as much time as forming a new company. Krasnoyarsk Doing Business in Russia 15 12 1 ©2016 KPMG. All rights reserved.

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