Transactions with residents from unfriendly countries. How to work with foreign partners in 2022?

Contents:

• The procedure for conducting transactions with firms from unfriendly countries
• Permission to deal with persons from unfriendly countries
• The procedure for filing and the period of consideration of the application
• Transactions with LLC shares from unfriendly countries
• Restrictions on transactions with entities from unfriendly countries
• Question-answer

Unfriendly countries are foreign states that commit actions of an unfriendly nature against Russians and Russian companies. According to the state authorities of the Russian Federation, these actions consist in the introduction of economic and political sanctions, the expulsion of diplomats, the tightening of visas for Russian citizens and other prohibitive or restrictive measures.

For the first time, the concept of “unfriendly country” appeared in the domestic legal field in 2018 with the approval of the federal law “On measures to influence (counter) unfriendly actions of the United States and other foreign states.” Then the first list of countries disloyal to us was determined. Since then, this register has been updated periodically. According to current data for the second half of 2022, the lists of countries disloyal to us include 48 states, including Australia, Albania, Andorra, the Bahamas, Great Britain and a number of territories controlled by it, Iceland, Canada, Liechtenstein, Micronesia, Monaco, New Zealand, Norway , Republic of Korea, San Marino, North Macedonia, Singapore, USA, Taiwan, Ukraine, Montenegro, Switzerland, Japan, as well as all EU member states.

What does having such a list mean for our international trading companies? Namely, the existence of a number of limiting factors for the implementation of transactions in order to prevent the outflow of capital to states that are disloyal to us. In this material, we will examine in detail the nuances of conducting transactions with unfriendly countries.

The procedure for conducting transactions with firms from unfriendly countries

The main documents regulating partnership activities with corporations from countries disloyal to us are presidential decrees No. 81 and No. 95 of March 1 and 5, 2022, respectively. First of all, the documents introduce the practice of obtaining permission to sign contracts with entities from the above countries. In real life, this means that any domestic person will have to obtain permission from the relevant commission before signing a contract with a foreign counterparty.

Presidential decrees establish two types of approval for transactions with counterparties from unfriendly countries. The first is the mandatory execution of permits for working with any foreign counterparty. This list includes agreements related to:

• With the issuance of a loan or loan in foreign currency to a foreign partner.
• With the transfer of dollars, euros or currencies of third-country banks to accounts registered with financial institutions under the jurisdiction of countries disloyal to Russia.
• Transactions of funds through foreign electronic transfer systems.

The second type of permission relates to transactions with companies from unfriendly countries. The mandatory procedure applies to:

• The issuance of loans or credit funds to a partner from a disloyal state, subject to the transfer of money in rubles.
• Purchase of assets from among stocks, bonds, real estate and other property. The rule also applies to the acquisition of shares or bonds from a citizen of a country disloyal to us at official auctions.

It is important to note here that under the concept of “partner from an unfriendly state”, Russian legislators mean a company, individual entrepreneur or individual related to a disloyal country. The listed entities can be registered, conduct business or production activities, and also earn money within an unfriendly state.

A significant clarification is being introduced in relation to real estate transactions between non-resident citizens and Russians. Before signing the contract of sale, there is no rule on obtaining permission.

Permission to deal with persons from unfriendly countries

The Russian authorities reserve the right to control transactions between Russian business entities and counterparties from foreign unfriendly countries.

The Ministry of Finance of Russia is responsible for issuing permits for transactions with unfriendly states. For its registration, the interested person must apply to the department with the appropriate application.

It is important to keep in mind that there is no special form for obtaining approval for transactions with unfriendly countries. This means that the text is drawn up in a simple written form, but with the obligatory indication of a number of facts:

• Purpose, subject and content of the future contract.
• The main circumstances of the future transaction.
• Approximate period of validity of the permit to be issued.
• If the contract relates to the acquisition of a share in a legal entity or company shares, then indicate the number of votes that relate to voting interests.

Also, the applicant must submit a package of official papers, which is the same for legal entities and individual entrepreneurs. Yes, you need to provide:

• A document confirming the registration of a legal entity (an extract from the Unified State Register of Legal Entities) or an identity document.
• Constituent papers.
• Latest accounting report or book value statement for acquirers of assets.
• Data on the beneficiaries who control the foreign company, as well as their assets, subject to real estate transactions.

It is worth noting that if it is impossible to provide any data, the applicant can verbally tell where you can get the missing information.

The rules for providing documents when agreeing on transactions with unfriendly countries are strictly regulated. The list of conditions includes:

• All official papers are submitted for consideration by the commission in the native language or upon the provision of a translation certified by a notary.
• Official papers must be stamped (applies to legal entities and individual entrepreneurs).
• All papers must be bound.
• Citizens put a notarized signature on documents.
• In addition, an inventory of business papers must be attached.
• The list of documents containing commercial or other secrets must be indicated on a separate sheet.
• Data relating to secrets protected by law are submitted to the authorized body in accordance with the rules of law.

In case of changes in the data, the Ministry of Justice must be informed about them within three working days in a written notification.

The procedure for filing and the period of consideration of the application

All official papers can be submitted in several ways:

• To the email address podcom@minfin.gov.ru.
• By registered mail to the address 109097, Moscow, st. Ilyinka, 9.
• When contacting in person at the address above.

In the case of remote filing, each document must have an electronic digital signature (EDS), personal appeal – notarization.

The maximum period for consideration of an application for a transaction with a foreign counterparty is not established. The exact time will depend on the number of applications accepted for consideration.

It is also important to know that the members of the commission will independently set the period of validity of the permit, depending on the objectives of the conclusion of the contract, prescribed in the application.

Transactions with LLC shares from unfriendly countries

The restrictive procedure for making transactions affected the purchase of shares in the authorized capital in domestic corporations by future LLC participants from countries that are disloyal to us. From now on, any such acquisition can only be approved by the government commission for the control of foreign investment. Withdrawal of foreign investors from the founders or shareholders of the company is also possible by special permission.

Starting from 2022, Russian participants in corporations that are fully or partially engaged in the development or extraction of minerals in our country may not share data on the activities of a legal entity with those co-owners who represent states that are unfriendly to us.

Restrictions on transactions with entities from unfriendly countries

If we summarize all of the above, then for most objects of trade – products, goods and equipment – a permit from a special commission is not required. However, the presidential decree partially or completely prohibits the export of goods of a number of categories to states that are disloyal to us. Thus, restrictions are imposed on the export of wood, shavings and other logging objects.

The temporary ban will affect a number of categories of goods:

• Pharmaceuticals.
• Cooperage goods.
• A number of metal products – pipes, tanks, boilers.
• Reactors.

Currently, subject to the availability of a permit from a special commission, it is possible to export agricultural machinery, industrial equipment, vehicles, as well as equipment for laboratory, geological exploration and mining work outside of Russia.

Question-answer