Doing Business in Russia

16 Doing Business in Russia Number of shareholders or participants It only takes one participant (individual or legal entity) to establish an LLC and/ or a JSC. However, LLCs and JSCs cannot be established by another solely- owned legal entity. The maximum number of participants in an LLC is limited to 50 people. If the number of participants in an LLC exceeds 50, then the LLC should be reorganised into a JSC or a production cooperative within one year. The number of shareholders in a JSC is not limited by law. Managing directors The statutory minimum charter capital for an LLC is RUB10,000 (approximately USD153). Payment of capital For an LLC, 100% of the charter capital should be paid within 4 months from the date of its registration with the state. Alternatively, at the discretion of the founder, the charter capital can be paid in full or partially before the LLC is state registered. If this option is chosen, a temporary account should be opened by the founder(s) in a Russian bank. Upon registration of the LLC, this account should be closed and the funds transferred to current accounts that have been opened. For a JSC, 50% of the charter capital must be paid within three months of its state registration, and the balance must be paid in full within the year following state registration. Charter capital contributions can be made in monetary form or in-kind. Monetary contributions should not be any less than the statutory minimum charter capital. In-kind contributions require independent appraisal (irrespective of their value). Bank accounts Rouble and foreign currency accounts can be opened after registration, though they must meet certain government and bank requirements. Establishment costs (LLC, JSC) A shareholder (participant) in an LLC or JSC must pay a state registration fee of RUB4,000 (approximately USD62), which is payable at the moment the registration documents are filed. In addition, if a JSC wants its share issue to be registered, there is a registration fee of up to RUB200,000 (approximately USD3,080). There are additional fees for translating and notarising documents. Professional fees for document collection, the preparation of an organisation's documents, and document submission range from USD7,000 to USD 10,000 for an LLC and from USD 13,000 to USD16,000 for a JSC (fees for having the entity established in Moscow). Net assets position If an LLC's or JSC's net assets on its balance-sheet fall below its charter capital as of the end of the financial year, with the exception of the first two financial years, the company must undertake one of the following actions: (1) Increase its net assets; or (2) Reduce its charter capital to an amount not exceeding its net assets (but not lower than the statutory minimum amount of charter capital). If, for the same period as indicated above, an LLC or a JSC has net assets worth less than the minimum charter capital required by law, the company is subject to being liquidated. In the event that voluntary liquidation is not undertaken by the shareholders or participants, then the government authorities are likely to petition a court for liquidation, and creditors are likely to demand early termination or the fulfillment of obligations and compensation for losses. In practice, forced liquidation is rare if a company meets its obligations (including taxes). If, for two consecutive years, an LLC or a JSC has net assets less than the minimum charter capital required by law, the company is subject to being liquidated. A low/negative net asset position can be rectified through capital injection in the form of gratuitous financing or asset contributions (available only for an LLC). In practice, an increase in charter capital can also recover a low/ negative net assets situation if it is done with an additional premium to a negative position (including a debt-to- equity conversion). Moscow KPMG ©2016 KPMG. All rights reserved.

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