Russian Federation

Russian Federation

Compulsory conversion of branches of foreign companies into limited liability companies

25 Jul 2022

On 06 July 2022, by the Law No.320 the Russian Parliament established a legal framework for compulsory conversion of branches of foreign companies into limited liability companies. These provisions apply in the following circumstances: (a) companies that hold a license for subsoil development or own gas transmission infrastructure; (b) companies in which at least 25 per cent of shares belong to the Russian shareholders; (c) when the foreign company is connected to a foreign state included in the list of “unfriendly states”. Upon conversion, the rights of foreign owners may be limited, including suspension of their voting rights, dividend payments, payment of the distributed parts of net profit etc.

Among the legal grounds justifying the conversion and the associated limitations can be the decision by the company to terminate "contracts significant for its operation", or a public announcement by the company of the suspension of its activities; significant staff reduction; or a suspension of the contracts due to the sanctions. The law entered into force on 25 July 2022.

  • Type:
    • Entry and establishment (Other)
    • Treatment and operation (Company laws and corporate governance)
  • Industry:
    • Primary (Mining and quarrying)
  • Sources: