Russia creates own offshore zones?

17 December 2018

The Federal law No. 290 “On international companies” (hereinafter — the Law on international companies) and the Federal law No. “On special administrative districts” have come into effect on 3 August 2018. These laws adjusted procedure of redomiciliation and created special administrative districts on the islands Oktyabrskiy and Russkiy.

Redomiciliation means process, where a company changes its registration from one jurisdiction (country) to another.

An international company could be a foreign corporation, which decided to change the jurisdiction (art. 1 of the Law on international companies).

In order to receive the status of an international company, such company should meet the following requirements:

  1. To do business on the territory of several countries, including Russia;
  2. To be incorporated in a FATF or Moneyval member-state;
  3. To apply for entering into the agreement on carrying out activities as a member of the special administrative district;
  4. To undertake an obligation to make investments on the Russian territory as capital investments or investment in the charter capital of a Russian company. A minimal amount of investments is 50 million rubles, and the minimum period of investments is 6 months of the official registration.

Registration procedure of international companies is the same as for Russian companies, but with some particularities. Documents of incorporation should be filed with a management company. The management company shall decide in 2 days either to hand over or deny to hand over documents in the registerar authority. Under the Law on international companies, the Russian Ministry of Economic Development carries out activities of management companies until such management company will be incorporated.

The international company’s registration does not foresee a reorganization or liquidation of the company. Thus, rules on payment of outstanding fees and other rules, which are applicable to reorganization and liquidation procedures, are not applicable. The international company loses its status if it makes a resolution on reorganization. The exception to this rule applies where international company merger to another international company.

The international company could be liquidated voluntarily or compulsorily. Compulsory liquidation could be performed if international company disregards schedules of the Law on international companies during one year. However, compulsory liquidation is not applicable to the international company if such a company carries out activities for three years and more. Also, the international company could change its jurisdiction after the prior approval of the Russian Government, but the Russian Government does not specify how to get this approval.

Another novel — disclosure of information. Under art. 6 of the Law of international companies registering authority can block access to information contained in the National Register of Legal Entities and other public sources upon the application of international company.

International companies have several “benefits”.

In spite of international company is registered on the territory of Russia, it is not recognized as a resident under the Federal law No. 173 “On Currency Regulations and Currency Control” dated 10.12.2003. This rule would allow international companies to perform payments in foreign currency. Also, this rule allows international companies not to open bank accounts in Russian banks.

International companies could perform payment of dividends, avoiding depositaries. Also, international companies could perform placement of bounds and shares outside of Russian territory without getting oblige allowance of Central Bank.

These laws are applicable to companies which were incorporated before 1 January 2018. Within this framework, Russia does not adopt the offshore conception in common meaning. In such manner, it is impossible to say, that policy on deoffshorization of Russian economy had changed, which was performing over the last years. The main reason for adopting the Law on international companies is European and U.S. sanctions, which slapped Russian companies. Adopting this law, Russia creates the new legal instrument, which could use companies to hide information on company participants and executive bodies.

1 Федеральный закон от 22.04.1996 № 39 «О рынке ценных бумаг» ст. 8.7.