Doing Business in Russia

10 Doing Business in Russia acting as the accreditation agency since 1 January 2015. The Federal Tax Service accredits ROS and the branches of all foreign companies, except for foreign banks and foreign civil aviation companies (for these entities, their ROs are (respectively) accredited by the Central Bank of Russia and the Federal Aviation Service). Any FLE intending to open an RO or branch in Russia must pay a state fee of RUB 120,000 (USD1,850). Once accredited, the RO's or branch's term is unlimited. The Federal Tax Service reviews the application for accreditation within 25 business days, and once certified (via the issuing of an accreditation certificate by the Federal Tax Service), the FLE should file an application for tax registration with the local tax authorities, and register its RO or branch with the Federal State Statistics Service and social security funds. Bank accounts can be opened after the RO or branch has been accredited with the accreditation authority and registered with the tax authorities and the Federal State Statistics Service. In total it takes approximately 6-9 weeks to set up an RO or branch after all the necessary documents have been submitted to the registration authorities. As the setting up process requires the preparation, approval, and, in many cases, notarisation and apostillation (legalisation) of a large number of documents, the total time required is likely to exceed the period mentioned above. An RO is authorised to conduct certain "preparatory and auxiliary" activities for its head office. A branch, on the other hand, is able to conduct all of the activities that the head office itself performs, including the signing of sales contracts. Depending on the exact scope and nature of activities, both ROS and branches can be used to create a taxable presence in Russia for their company. Russian subsidiary An FLE can choose to establish a presence in Russia via creation of a Russian subsidiary. The most common business structures in Russia are Limited Liability Companies (LLC) and Joint Stock Companies (JSC). In an LLC (Russian abbreviation, OOO), the participation units attributable to shareholders (participants) are not considered as securities under Russian securities legislation. Shares in a JSC, on the other hand, are considered to be securities and are subject to registration with the Bank of Russia's department governing admittance to financial markets. A JSC can be either public (its shares are publicly traded) or non- public. Foreign companies often use LLCs to conduct their wholly-owned business in Russia. LLC law has many similar provisions to those in JSC law; however, there are certain distinctions. Generally, only one participant (individual or legal entity) is required to establish an LLC or JSC. However, a solely-owned legal entity cannot establish another LLC or JSC as a subsidiary (i.e. one that would be 100-percent owned by the legal entity). Joint Stock Companies A JSC is a legal entity that issues shares to generate capital for its activities. A shareholder is not generally liable for the JSC's obligations and a shareholder's losses are limited to the value of their shares. Different classes of shares are permitted. For each share in one particular class, the dividends and voting rights are equal. Both forms of joint stock company - public and non-public - have the right to issue common or preferred shares and bonds. Both forms are subject to statutory reporting requirements and regulatory restrictions, but the requirements for public disclosure are less rigorous for non-public companies. Recent changes to Russian corporate law allow shareholder agreements in which participants can, among other things, determine voting obligations at general shareholder meetings, coordinate voting options with other shareholders, determine the price at which shares can be sold, and coordinate other actions related to the JSC's management, activities, reorganisation and liquidation. The governing bodies of a JSC are the general shareholders meeting, the board of directors and the executive body (a sole individual or a group). The executive body manages the JSC's day-to-day affairs and reports to the board of directors and the general shareholders meeting. The shareholders meeting, upon a proposal from the board of directors or at its own discretion, can delegate the powers of the executive body to an external commercial company or to an individual manager. Limited Liability Company The provisions in LLC law are similar to those in JSC law. An LLC's participants are not liable for the LLC's obligations, and any losses the participants may experience are limited to the value of their respective participation units. LLC charters are likely to restrict the participants in an LLC from transferring their participation units to third parties. If this is the case, a participant has the right to withdraw from an LLC at any time and require that the LLC (or the remaining participants) give the withdrawing participant a portion of the LLC's net assets commensurate with the proportion of participation units the participant owned. LLC charters can limit the transfer of participation units or require that the other participants' or the LLC's approval is gained first before transferring the units. Economic partnership This legal form is designed for companies involved in innovative activities (including those providing venture capital). A partnership can KPMG ©2016 KPMG. All rights reserved.

View entire presentation