Restrictions have been introduced on the disposal by “hostile” non-residents of shares or membership interests in strategic enterprises, credit institutions and PSA

Pepeliaev Group advises that, starting from 5 August 2022, new requirements were introduced by Decree of the Russian President[1] with regard to transactions in in the most important sectors of the Russian economy.

The above Decree introduced a temporary ban[2] on a number of transactions (operations) with persons from “hostile states”[3] without a special consent from the Russian President. This Decree provides for a fundamentally different procedure for obtaining consent to enter into transactions, in contrast to decrees previously adopted that required the consent of the relevant government sub-commission to be obtained.

In particular, the prohibition extends to the following:

1. Transactions with shares of strategic joint stock companies (the list of these is approved in Decree No. 1009 of the President of the Russian Federation dated 4 August 2004);
2. Transactions with shares / membership interests which form the issued capitals of business entities in which strategic joint stock companies listed in clause 1 above hold shares / membership interests, directly or indirectly;
3. Transactions with membership interests and rights belonging to members of the Sakhalin-1 Production Sharing Agreement and Production Sharing Agreement for the Development and Production of Oil in the Kharyaga Field;
4. Transactions with shares / membership interests in the issued capitals of entities that are producers of equipment for fuel and energy companies, as well as companies that are producers and suppliers of thermal and electric power, and of the refinement of oil and oil stock[4];
5. Transactions with membership interests / shares that form the issued capitals of Russian credit institutions[5];
6. Transactions with membership interests / shares that form the issued capitals of entities that use:

• Subsoil areas located in Russia that contain fields of raw hydrocarbons (at least 20 million tons of oil or at least 20 billion cubic metres of natural gas or at least 35 million tons of coal);
• Subsoil areas located in Russia that are primary diamond deposits and primary deposits of gold, lithium and platinum group metals;
• Subsoil areas located in internal sea waters, the territorial sea and the continental shelf of Russia.

What to pay attention to

Restrictions and bans introduced by Decree No. 520 do not apply to:

• legal relations within the scope of implementing the Sakhalin-2 project, which are regulated by Decree No. 416 of the Russian President dated 30 June 2022;
• legal relations within the scope of transforming branches of foreign legal entities into the legal form of limited liability companies (Federal Law No. 320-FZ dated 14 July 2022).

Transactions that violate the provisions of Decree No. 520 are invalid (void).

If shares / membership interests were received in violation of provisions of Decree No. 520, the persons who purchased those shares / participation interests will not be able to enjoy the corporate rights stipulated for their owners.

Help from your adviser

Pepeliaev Group’s lawyers have significant experience of providing comprehensive legal support with regard to all corporate regulation issues.

Our experts are keeping track on a daily basis of the new amendments in corporate legislation. They are ready to provide recommendations on how to choose the best solutions for business with respect to any issues of corporate law.

---

[1] Decree No. 520 of the Russian President dated 5 August 2022 “On applying special economic measures in the financial and fuel and energy sectors in connection with hostile actions of certain foreign states and international organisations”. The decree came into effect on 5 August 2022.

[2] The ban has been introduced for the period from 5 August 2022 until 31 December 2022 and may be extended further.

[3]The list of “hostile states” is set out in Decree No. 81 of the Russian President dated 1 March 2022.

[4] The list of such entities is to be approved by the Russian President, when it is submitted by the Russian Government within 10 days after Decree No. 520 of the President comes into force.

[5]The list of credit institutions is to be approved by the Russian President, when it is submitted by the Russian Government, such list also being approved by the Bank of Russia.