If you are planning to acquire a company in Russia…
The ongoing far-reaching reform of Russian corporate and contract law, commenced in 2009-2010, provides to market players more remedies and operational freedom; but, at the same time, the tasks of negotiators are becoming more complicated, and success requires more attention to detail at all stages of transactions, starting from the term sheet discussions. We recommend to execute all the agreements pertaining the acquisition under English law where applicable, keeping in mind you will be operating a russian entity which has to comply with Russian laws.
Here are the details on services we offer to foreign investors in terms of conducting due-diligence:
– Target company profile
– Pre-acquisition valuation of a given target, or a range of targets which can be selected by our team
– Legal due diligence (corporate structure, statutory documents, title to shares and assets, agreements with customers & suppliers etc.)
– Analysis of minutes of board meetings, shareholder meetings, all working groups and committees in relation with Corporate Governance Code
– Analysis of economic and moral rights of shareholders, background checks on senior management
– Representations and warranties check
– Intellectual property and trademarks due diligence
– Compliance with applicable regulatory requirements, lawsuits and other claims
– Personnel and labor relations (including collective agreement or other agreement between with staff)
– Analysis of contracts with key suppliers and customers
– Analysis of lease of premises and other assets: types, volumes, duration, the pricing mechanism, the possibility of termination and / or renegotiation on excellent terms.
– Rights to real estate and other assets
– Financial due diligence (analysis of loans, guarantees, different types of bills and obligations, creditworthiness, bankruptcy risks, going concern risk assessment)
– Tax due diligence
– Commercial and market due diligence
– Exports & Imports Due Diligence
– Company formation in offshore jurisditions
To conduct an M&A transaction with shares in a Russia-located target company, it is essential for the parties to duly consider all the provisions of the Russian law which are mandatory and applicable to the SPA, as follows:
– Corporate procedures should be observed by the seller and the purchaser prior to the SPA execution (due notification to the target company and shareholders, obtaining due corporate consents, observance of pre-emptive right / obtaining waiver of right from a target company and shareholders);
– The SPA should be made in the form prescribed by the law, otherwise the SPA will be void (the written form of the SPA, notarized form of the SPA in respect of the interest in an LLC, etc.);
– The Russian law prescribes when title to the shares will be deemed transferred to the purchaser, and prescribes for the due certification of the title of the new owner of the shares;
– Collaterals under the SPA should be granted as per the Russian law;
– The requirements for the state control over M&A transactions should be duly observed, otherwise the deal is at risk of being disputed by state authorities, and the parties can be deemed liable for an administrative offence.
Russian law provides no limits for the parties to select the applicable governing law for the SPA. However, as seen from the above, there are significant arguments for the parties to execute the SPA under Russian law, since there are many factors and terms which will be otherwise obligatory. Moreover, for M&A transactions in respect of an interest in a Russian LLC, it is best to have the SPA governed by Russian law to comply with notary requirements as notary officers are not familiar with foreign law and may not notarize the SPA.
If you are planning to set up a company in Russia…
It takes about two weeks to have the legal entity registered and another two weeks to have it registered with Tax Inspection, Social Security, Pentiod Fund, etc. agencies. Legal entity registration is well described by Federal Tax Service of Russia on its web-site, – here is the short version of that:
“When foreigners start a business in Russia there are several different legal ways available, which are explained hereafter. There are essentially three legal structures for doing a business.
1. If you are already doing a main business abroad it maybe reasonable setting up and registering in Russia the branch or the permanent establishment (PE) of the foreign company.
2. It is also possible to form a legal entity with participation of the foreign capital, or
3. Registering as an individual enterpreuner, who is running a business without formation of the legal entity.
Whether you are a foreign citizen, a person without citizenship, or a representative of a foreign company you can register a legal entity by yourself.
The steps to register a legal entity are follows.
1. Deciding on a business legal structure.
2. Forming the foundation documents.
3. Preparing the set of the required documents for registering.
4. Filing the required documents to the register office.
5. Receiving the incorporation documents.
6. Manufacturing the seal.
7. Opening a bank account.
Wishing you successful business!”
We recommend using professional services to register a legal entity, even because the Federal Tax Service web site doesn’t mention registration with local Tax Inspection office in their list of actions 🙂
Our firm provides company registration service as well as deregistration service which is mandtory in Russia.
If you are planning to close a company in Russia…
The steps to deregister (closing operations) legal entities are follows.
1. Deregistration of accreditation with the Federal Tax Inspection
2. Obtaining the information sheet with a closure record of subsidiary/representative office
3. Obtaining a notice of removal of the company from the books of RF Pension Fund.
4. Obtaining a notice of removal of the company from the books RF Social Insurance Fund.
From foreign companies all non-Russian documents are only acceptable by the registrar if they have original consulate legalization marks or an apostile and a notarized translation into Russian or a translation legalized by consulate abroad.
To see member States and status “Convention of 5 October 1961 Abolishing the Requirement of Legalisation for Foreign Public Documents” please follow link below…