Are there any exchange control or currency regulations?

Russian law does not establish excessive currency and exchange regulations and restrictions. The Law on Currency Control requires banks to issue transaction passports for currency payments between residents and non-residents, if their value exceeds US$50, 000 (as at 1 November 2011, US$1 was about EUR0.7). generally, all payments made within the Russian Federation must be in Russian roubles. All payments between legal entities in excess of RUB100, 000 (as at 1 November 2011, US$1 was about RUB30) must take place through bank transfers between accounts.

What grants or incentives are available to investors?

Municipal bodies can provide financial and administrative support for investors if they deem it necessary. Support can come in the form of:

Tax deductions and credits.

Deductions on the lease of property.

A pledge of municipal property.

Creation of favourable infrastructure.

Federal support is available for companies with foreign investment qualifying as small- or medium-sized enterprises (Law on Development of Small and Medium Size Enterprises).

Federal incentives for investors also exist (for example, foreign companies with accreditation in Russia do not have to pay VAT on leasing their representative offices). Particular incentives (mostly in the form of tax preferences) apply to residents of special economic zones. Companies engaged in projects deemed to be a high priority by the Russian state (like the Sochi 2014 Olympic Games, APEC 2012 Summit in Vladivostok and the Skolkovo Project) enjoy various additional preferences in tax and customs areas.

Top

Business vehicles

What is the most common form of business vehicle used by foreign companies in your jurisdiction, and what are the main applicable formalities, rights, restrictions and liabilities?

Foreign companies use the limited liability company (LLC) (Obschestvo S Ogranichennoi Otvetstvennost'yu (OOO)) or the private (closed) joint stock company (CJSC) (Zakrytoe Akcionernoe Obschestvo (ZAO)).

Registration formalities

The process of state registration is limited to five working days on submission of a full set of incorporation documents. The documents may be filed in person or by registered mail. The firm name of the company must indicate its organisational form (for example, LLC or JSC (for joint stock companies)) and cannot contain offensive language, incite racial hatred or infringe other companies' intellectual property rights. The use of the words " Russia" and " Russian" in a company name is restricted and subject to a specific permit procedure. There is a state duty for registration of RUB4, 000.

Share capital

The minimum share capital is RUB10, 000. There is no maximum share capital.

Non-cash consideration

Company members can use non-cash methods to contribute to the share capital. If the face value of non-cash contribution exceeds RUB20, 000, an independent evaluator must assess the true value of the contribution.

Rights attaching to shares

Restrictions on rights attaching to shares. The restriction of rights can be connected to the amount of shares the shareholder holds in the company. The articles of association may contain a threshold before certain actions can be taken, for example a re-organisation of the company or requests for information.

Automatic rights attaching to shares. Rights automatically attaching to shares include:

Proprietary rights (to receive a dividend and to receive a distribution of property on dissolution of the company).

Information rights.

Management rights.

Voting rights, which automatically attach to ordinary shares. Preference shares are generally non-voting, unless the vote influences the rights of the preference shares or a re-organisation or dissolution of the company is being voted on.

Foreign shareholders

Generally there are no restrictions on foreign shareholders except in certain regulated industries where foreign investors holding more than 25% of the share capital is subject to state approval.

Management structure

A company is usually run by the:

General meeting of participants (shareholders/members).

Board of directors.

General director.

Management committee.

The participants have the most powers. The board of directors acts as a bridge between the decision-making and executive bodies (general director and management committee). The members of the board are not entitled to represent the company. The general director is the sole executive body authorised by the company's participants to represent and govern the company.

Management restrictions

There are no restrictions on foreign managers except for immigration issues (see Question 8).

Directors' and officers' liability

The directors and officers are liable for:

Failing to act in the interests of the company.

Acting in bad faith or unreasonably.

Any damages incurred by the company as result of the directors' fraudulent actions, excluding normal business risk.

Parent company liability

A subsidiary is not liable for parent company debts (clause 2, article 105, Civil Code). If a parent company gives instructions to its subsidiary, it bears joint liability for transactions that were concluded under the instructions. Some liability in cases of a subsidiary's bankruptcy can also apply.

Reporting requirements

The company must file balance sheets at three, six and nine months as well as annual balance sheets. A profit and loss report is also filed. An LLC is not subject to any public disclosure of accounts, unlike open JSCs.

Top

Employment

Laws, contracts and permits