New Restrictions on Transactions with Foreign Persons From “Unfriendly” States

19 October 2022
Kirill Evstifeev
Junior Associate
Julia Korablyova

The President signed the Decree No. 737 On certain issues related to execution (performance) of several types of deals (transactions) dated 15.10.20222 which introduces additional restrictions on transactions with persons from “unfriendly” states (“Decree”).

1.The list of transactions possible for execution only via special type “C” account is expanded

The Decree specifies new way for making payments in favor of persons from “unfriendly” states within the following procedures:

  • reduction of an charter capital of a Russian company
  • liquidation of a Russian company
  • bankruptcy of a Russian company

From now on such payments are made via type “C” account in accordance with the procedure established in paragraphs2-9 of the President Decree No. 95 dd 05.03.20221.

Kindly note, that payments can be made without type “C” account if a relevant consent (license) of the Central Bank was issued in respect to credit and financial organization or is such consent was given by the Ministry of Finance in respect to other types of residents2.

2. New restrictions regarding transactions with shares and interests (contributions) in financial organizations

The Decree stipulates that new rules apply to transactions relating to disposal of over 1% of shares and/or interests (contributions) in the authorized capital or over 1% of voting shares and/or interests (contributions) in credit organizations, insurance organization, non-state pension fund, microfinance company or management company of the SICAV, UIF or non-state pension fund3.

If a party or a beneficiary of such a transaction is a foreign party related to an “unfriendly” state or is controlled by a person related to an “unfriendly” state – the transaction should be licensed by the Government Commission4.

Inter alia, the restrictions do not apply if one of the following criteria is met:

  • credit organizations are included to the special list, approved under paragraph 2 (b) of the President Decree No. 520 dd 05.08.20225
  • shares, interests (contributions) belong to persons controlled by legal entities from “friendly” states and this control was established before 01.03.20226
  • shares, interests (contributions) belong to persons with ultimate beneficiary owners being Russian individuals or entities and information about them was revealed to tax authorities7.

3. New order of closing deals with shares of Russian joint-stock companies

The Decree established that the President Decree No. 618 dd 08.09.2022 should be applied to the transactions with shares of the Russian joint-stock companies. The transactions on disposal of shares in Russian joint-stock companies are allowed with preliminary consent of the Government Commission8.

Such restrictions apply to transactions carried out by:

  • foreign persons from “unfriendly” states
  • foreign persons from “unfriendly” states and foreign persons not related to them

Despite aforementioned the Decree authorizes the Central Bank to issue permits for transferring currency and other financial instruments outside of Russia in the amount exceeding USD 10 000. The procedure and criteria for obtaining this permission will be established by the Board of Directors of the Central Bank in the nearest future9.

The Central Bank is also authorized to issue clarifications regarding application of the Decree10.

1 Paragraph 3 of the Decree
2 Paragraph 4 of the Decree
3 Paragraph 1 of the Decree
4 Paragraph 1 of the Decree
5 Paragraph 2 (a) of the Decree
6 Paragraph 2 (b) of the Decree
7 Paragraph 2 (b) of the Decree
8 Paragraph 5 of the Decree
9 Paragraph 6 of the Decree
10 Paragraph 8 of the Decree