New practice of registration authorities when changing the sole executive body

Pepeliaev Group advises of the new practice of registration authorities.

Starting from January 2021 the tax authorities have amended the practice of registering a change of the sole executive body. More and more companies face a suspension of registration activities when changing the sole executive body who is replaced in his/her position by a foreign individual.
Tax inspectorates refer to provisions of Order No. MMV-7-14/72@ of the Russian Federal Tax Service dated 11 February 2016, namely clause 2(2). A formal ground for a suspension is that the applicant provided information which contradicts the information kept by the local inspectorate. In our experience local tax authorities send no requests to the department for migration issues or other state authorities responsible for migration registration of foreign citizens for the purpose of checking whether the information to be included is correct without the applicant’s involvement.

After the decision to suspend registration actions is adopted, the applicant is given time to collect documents and explanations refuting the inspectorate’s presumption that the information submitted for registration is incorrect.
In practice, the incorrectness of information can be refuted by an interview and filling in a protocol of interrogation of a witness under form KND 1165011 approved by Order No. MMV-7-2/628@ of the Russian Federal Tax Service. Unfortunately, our practice shows that submitting additional documents (work permits or other documents confirming the right of the foreign individual to stay in Russia) as well as preliminarily agreeing the candidate for the new sole executive body with the local tax authority do not solve the problem, since the interview can be held only provided that the local inspectorate received a request of the registration authority. This is possible only after the documents are filed for registration.

What to think about and what to do

If you change the sole executive body, you need to take into account the timeframes of registration activities which have increased owing to the current practice and on average take 30 days. This needs to be kept in mind when planning further activity of the company after the change of the sole executive body.
In order to mitigate the risk of a refusal or the adoption of a decision to suspend registration, a foreign individual appointed on the position of the sole executive body is recommended to visit the local inspectorate to advise them that the information being entered in the register with respect to this foreign individual is correct. This should be done simultaneously with filing the documents for state registration. However, we cannot assert that such actions allow the suspension of registration activities to be avoided.

Help from your adviser

Pepeliaev Group’s experts are keeping track of the new amendments in corporate legislation. They are ready to provide legal support and to offer recommendations on how to choose the best solutions for business with respect to any issues of corporate law.

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