Coordination of transactions with foreigners

Mar, 13 2024

The complexity of making transactions with foreigners in Russia has become a significant aspect of the business environment since the introduction of the requirement for coordination with the Cabinet of Ministers. Since that time, entrepreneurs have to face additional procedures and restrictions, especially in the case of transactions with persons from unfriendly countries.

It is important to note that not all transactions are subject to mandatory approval. For example, if a resident acquires assets from the spouse or close relative of a foreigner from an unfriendly state, then the permission of the Cabinet of Ministers is not required. However, in most cases, especially when dealing with large assets such as real estate or securities, coordination with government authorities becomes a necessary step.

It should be borne in mind that the approval process can take a long time, up to 12 months, depending on the complexity of the transaction and other factors. In some cases, the refusal of approval may be due to the fact that another person has already applied for the same transaction.

An important aspect when considering transactions is the buyer’s ability to maintain the stability of the enterprise at the level achieved by the previous owner. It is necessary to provide evidence that the buyer has the financial resources and competencies for the development of the company.

Despite these difficulties, experts say that the parties, as a rule, avoid submitting applications without confidence in a successful outcome in order to avoid unnecessary costs and time delays. In general, despite the increase in administrative procedures, the rules for approving transactions with foreigners in Russia contribute to protecting the interests of the state and reducing possible risks for business.

Difficulties in making transactions with foreigners since 2022, requiring the consent of a special subcommittee of the Cabinet of Ministers, have become a noticeable aspect of Russian business. This step is aimed at controlling investments from unfriendly countries and enabling government agencies to actively intervene in the regulation of such transactions. According to the Central Bank’s financial stability review, from March 2022 to March 2023, about 200 transactions were concluded for the sale of Russian subsidiaries by foreign investors, while some of them were of significant scale, exceeding the amount of $ 100 million. However, the lack of permission from the Cabinet of Ministers may lead to the cancellation of such transactions, which jeopardizes their legal validity and financial stability of the parties.

It is important to note that in the process of approving transactions with foreigners, criteria determining the need for approval, such as transactions with persons from unfriendly countries and changes in rights with respect to Russian companies, play a key role. However, there are exceptions to the general rule, for example, transactions for the gratuitous purchase of real estate from spouses or close relatives of foreign persons. It is important to remember that the status of a resident is determined in accordance with the norms of currency legislation, which may affect both citizens living abroad and Russian citizens with other citizenship.

In addition, it should be borne in mind that the duration of the approval process can reach up to 12 months, which significantly complicates the planning and implementation of transactions. It is also important to note that refusals to issue permits may be related to various factors, including the presence of other applications for the same transaction and the buyer’s inability to ensure the stability of the enterprise. This underlines the importance of thorough preparation and proof of financial capabilities when negotiating deals with foreign investors.

Author of the article
Coordination of transactions with foreigners
Valentina Khlavich
Managing Partner
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