Government Commission sets an updated list of criteria for coordinating transactions with membership interests and shares

The Sub-Commission of the Government Commission for Overseeing the Making of Foreign Investments in Russia (‘the Sub-Commission’) has approved an updated list of criteria for issuing permissions for transactions with shares, membership interests and deposits (the ‘Assets’) involving foreign parties connected with states taking hostile actions against the Russian Federation.

The decision of the Sub-Commission No. 171/5 of 7 July 2023 (the ‘Decision’)[1] has formalised the approaches developed in the practice of transactions’ settlement over the past 6 months.

Permission to alienate the Assets may be granted under the following conditions:

1. Market valuation of the Asset was carried out by an appraiser recommended by the Sub-Commission;
2. The expert opinion of the SRO of appraisers recommended by the Sub-Commission is attached to the valuation report;
3. The Asset is being sold at a price not greater than 50% of its market value;
4. The Applicant undertook to make a voluntary contribution to the federal budget in the amount of:
   • at least 5% of the Asset market value at a sale price of 10% to 50% of that value;
   • at least 10% of the Asset market value at a sale price below 10% of that value.
5. Placement of up to 20% of shares (block of shares) to on-exchange trading in case of acquisition of PJSC shares and implementation of certain corporate procedures related to the change in the company’s public status, reorganization and liquidation;
6. Key performance indicators for the buyer or the acquired company have been set. KPIs shall be supervised by the sector-specific ministry;
7. The buyback of the Asset (option) by the seller is limited to two years from the date of the transaction and is economically beneficial to the resident buyer;
8. Payment is made to either type “C” accounts,” or in rubles within the banking system of the Russian Federation, or to foreign accounts of foreign persons in installments.

The criteria for issuing permissions by the Ministry of Finance and the Bank of Russia for profits (dividends) payment to foreign creditors without opening type “C” accounts remains the same:

1. The amount to be distributed does not exceed 50% of the net profit for the previous year;
2. The payment should comply with the previous dividend policy;
3. Foreign owners are prepared to continue doing business in Russia;
4. The authorities have set a quarterly KPI;
5. The sector-specific agencies’ and Bank of Russia’s opinions on a company’s significance are factored in;
6. Dividends may also be paid quarterly when the KPI has been met.

Previously used meeting minutes of the Sub-Commission No. 118/1 dated 22 December 2022 and No. 143/4 dated 02 March 2023 have been repealed.

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[1] Extract from Decision No. 171/5 of the Sub-Commission of the Government Commission for Overseeing the Making of Foreign Investments in Russia dated 7 July 2023.