State Duma Legalizes Multi-tier Corporate Ownership Structures

The State Duma has finally approved a law lifting the ban on multi-level business ownership structures where one company is fully owned by another, which in turn owns a third company, and so on.

Key Changes

Amendments to the Civil Code now allow business entities to have another company as their sole participant, even if that company is also owned by a single owner.

Reasons for Adoption

Experts believe the changes will help businesses:

1. Adapt faster to sanctions
2. Modify ownership structures more flexibly
3. Facilitate the return of foreign capital to the Russian market

Background

The ban on such schemes had been in place for nearly 30 years. Its introduction was aimed at combating:

• Tax evasion
• Concealment of ultimate beneficiaries
• Avoidance of subsidiary liability

Potential Consequences

The new rules may:

• Simplify business reorganization
• Make corporate structures more transparent
• Enhance the attractiveness of the Russian market

The bill now proceeds to further consideration. Its adoption could significantly alter corporate practices in Russia.

The changes will remove outdated restrictions, giving businesses more room to maneuver in current economic conditions”

Stay updated to understand how this will impact the business environment.