Russian compliance update: January / February 2015

This legislation newsletter summarizes selected changes to Russian law already in effect or at least in safe expectation that might be of interest for professionals dealing with compliance issues:

• In early 2015, a draft bill that introduces numerous changes to the Federal Law on the Protection of Competition was introduced for public discussion. In particular, it proposes to list nine types of unfair competition – for example, “creating the impression of being involved in the operations of another firm“, misrepresentation and incorrect comparison.


• The Law on Foreign Investment in Strategic Companies was updated and now also covers acquisitions of assets in strategic companies. If the value of these assets exceeds 25 per cent of the total value of the company's assets, such transactions now require prior approval by the Governmental Commission. Earlier, such approval was only required for acquisition of shares in strategic companies.


• Furthermore, it is proposed to update the corporate law. All companies are obliged to disclose information about their beneficial owners and will have to bear the risk of criminal liability for false information entered into the Russian Trade Register of legal entities.

FAS to clarify the types of unfair competition

The Federal Antimonopoly Service of Russia introduced a draft bill for public discussion that proposes numerous changes to the Federal Law on the Protection of Competition.
One of the most significant changes the draft bill deals with, is listing individual types of unfair competition. It has been submitted to introduce nine new articles specifying individual types of unfair competition (among others: defamation, misrepresentation, incorrect comparison, disorganization of the operations of a business entity, etc.).
Another material change suggested, is that the Federal Antimonopoly Service of Russia may review decisions made by the local antimonopoly bodies. For this purpose, the Federal Antimonopoly Service of Russia will form special collective bodies that will be in charge of summarizing the practice of antimonopoly bodies, give clarifications, as well as review decisions made by the local bodies. Complaints against a decision made by a local body may be filed within a month after the decision was issued. The procedure for examining antimonopoly cases is also subject of several modifications..
Along with tightening administrative liability for unfair competition, these modifications are aimed at facilitating the more effective investigation of violations of antitrust laws. 
Draft Bill

Amendments to Regulation of Foreign Investments in Strategic Companies

Amendments have been passed to the Federal Law on the Procedure for Foreign Investments in the Business Entities of Strategic Importance for National Defence and State Security.
According to these amendments, transactions are excluded from the scope of the law’s applicability for in case a foreign investor or a group of persons may dispose directly or indirectly of more than 75 percent of equity interests (shares) in strategic companies that use federal plots of subsoil resources.
However, an obligation has been imposed to obtain the prior consent of the Government Commission on Monitoring and Control over Foreign Investments in transactions involving the acquisition, possession, or use of the fixed production assets of a strategic company where the value of such assets is 25 percent or more of the book value of its assets.
These modifications came into force on 6 December 2014.
Federal Law No. 343-FZ dated 4 November 2014

Disclosure of Beneficial Owners

The draft amendments to the Federal Law on Counteraction to the Legalization (Laundering) of the Proceeds of Crime and the Financing of Terrorism that have been developed by the Federal Financial Monitoring Service of Russia are currently undergoing public discussion. It has been proposed to obligate all companies to disclose their beneficial owners as requested by competent authorities. The procedure and the time limits for disclosing beneficial owners and for the measures taken to establish beneficial owners will be determined by the Russian Government. A company may be fined up to RUB 500,000 if the disclosure is missing. As set forth in the draft bill, companies will be obliged to take any possible measure to establish their beneficial owners (including requesting these details from their shareholders) and to constantly update and store these information.
Draft Bill

Criminal liability for entering false information into the Unified State Register of Legal Entities

Another bill that compliance professionals should pay attention to, intends to establish criminal liability for submitting to the registration authority documents that contain knowingly false information and the submitting party is aware of the invalidity. These offences will be punished by imprisonment for up to one and a half years and a monetary penalty of up to RUB 50,000.
In addition, it has been proposed that the Criminal Code should be amended to include the definition of a “straw party”, meaning a party that is a shareholder or a management body of a legal entity that has no purpose of managing that legal entity or receiving profits from its lawful operations.
The amendments to the Russian Code of Administrative Offenses will introduce liability (the disqualification of an official for up to three years) for a repeated failure to submit or the submission of false details of a legal entity or an individual entrepreneur.
Draft Bill No. 613254-6