Update on permissions and requirements for selling shares in Russian companies

The sale of shares in Russian companies belonging to foreign persons from “unfriendly” states, or to persons under the control of such foreign persons, is possible only with permission granted by the Governmental Commission for Control over Foreign Investments in the Russian Federation. This governmental commission publishes from time to time the Extracts from the Minutes of its meetings containing and updating the necessary criteria to obtain this permission (e.g., Extracts No. 118/1 of 22.12.2022, No. 171/5 of 07.07.2023, No. 193/4 of 26.09.2023).

Currently the following criteria must be met to obtain permission for the above kind of share purchase agreement (SPA):

1. There should be an independent appraisal report on the market value of the shares prepared together with an expert opinion, and the relevant appraiser should be from the Governmental Commission’s recommended list;
   
   
2. The shares should be sold at a discount of at least 50% of the market value;
   
   
3. The voluntary contribution, or the so-called “exit tax” of at least 15% of the market value of the shares, should be paid to the Russian budget by one month from the transaction date;
   
   
4. The price may be paid if the target company complies with the key performance indicators (KPI) determined during application process – for example, a certain number of employees, or a certain amount of payroll payments, taxes, or turnover, etc.;
   
   
5. A specific payment procedure should be followed – e.g. payment in instalments to foreign accounts;
   
   
6. Permissions from other state bodies (e.g. the Russian Antitrust Service), if required, should be obtained beforehand.

If the parties to the SPA agree on a buy-back option, permission is also required, and the term of validity for such an option may not exceed two years from the date of the transaction for the sale of shares. The buy-back price must correspond to the market value of the shares at the time of exercising the option, and must be economically beneficial for the Russian seller. 

There are further conditions which are not formally stipulated, but should be considered to gain the permission, such as the absence of debts of the target company towards the foreign shareholder being the seller of the shares, and fixing the SPA price in Russian rubles. Fulfilling these informal conditions may increase the chances of obtaining the permission of the Governmental Commission.

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Valeria Khmelevskaya is a Partner, Lawyer and Tax Consultant admitted to practice in Russia. She has over 20 years of experience of consulting in matters of Russian and international tax law. She is also the Deputy Head of the Management Board and the Chair of the Committee for Taxes and Financial Reporting of the German-Russian Chamber of Commerce (AHK) and recommended attorney of the Austrian Foreign Trade Centre Moscow (Advantage Austria).