A credit organization must obtain the preliminary permission of the Bank of Russia for:
• placement of its shares among non-residents; or
• for an alienation of its shares to non-residents.
Resident shareholders of a credit organization must also obtain consent from the Central Bank for an alienation of their share to non-residents. Failure to obtain such permission will lead to the invalidity of the transaction.
Similarly, an insurance company must obtain prior consent from the Federal Service for Insurance Supervision to increase their share of the registered capital formed out of non-resident resources, for an alienation of their stocks to non-residents, and resident participants for an alienation of their stocks to non-residents. Such consent will not be given to insurance companies, the subsidiaries of foreign entities, or those with more than 49 per cent foreign shareholding, or those who obtain such participation as a result of the transaction if the quota of foreign capital in the insurance system has been reached. Currently the quota is 25 per cent.
The Russian legislation restricts the purchase by foreign persons of the shares of domestic enterprises in certain areas. For example, no more than 20 per cent of ordinary shares of gas companies can be sold to foreign entities. Foreign companies and individuals or Russian companies with more than 50 per cent of foreign shareholders may not own agricultural land. Federal Law No.57 of April 29, 2008 restricts foreign investments in those Russian companies operating in certain “strategic” areas, such as construction, production and the trade of arms and military equipment, and technologies and space related activities. Strategic areas also include construction, manufacturing and the repair of aircraft, TV and radio broadcasting and other telecommunication services (excluding the internet), research and exploration of natural resources (on lands of “federal significance”), printing if the enterprise in question can print more than 200 million pages per month and publishing houses with a circulation of over 1 million copies per edition.
On the other hand, Russian legislation provides that a foreign company, at least 25 per cent of shares in which is possessed by a Russian resident (10 per cent if Russian residents are in possession of total 50 per cent of its’ shares) is deemed to be a controlled foreign entity. The income generated by a controlled foreign entity is subject to taxation in Russia if such income exceeds RUR 10 million (EUR 109,140). Nevertheless, such companies may be relieved from taxation in Russia if tax rates for corporate income tax in country of domicile of such entity exceeds 75 per cent effective average rate of Russian CIT, the entity is an active foreign company, holding or sub holding company, operates a new marine hydrocarbon field, participates in mining projects under product-sharing agreements, concession agreements, licensing agreements or other risk-based agreements (contracts) and in some other cases.
Financial services
RUS-425
There are a number of legal Acts regulating the stock market, banking and investments. The principal legal Act for the stock market and securities is the Federal law on the securities market of April 22, 1996, and the Federal law on protection of rights and legitimate interests of investors on the securities market of March 5, 1999. Investment funds are regulated by the Federal law on the investment funds of November 29, 2001.
