Earlier, the Bank of Russia confirmed to a number of business publications that in order to prevent the withdrawal of funds from the Russian financial market and to maintain financial stability, transfers from Russian accounts of non-residents (legal entities and natural persons from a number of countries) to accounts abroad were temporarily suspended from March 1 to March 31, 2022
Such an innovation has a significant impact on the activities of branches and representative offices of foreign companies in Russia (from the point of view of their status they belong to foreign currency non-residents of the Russian Federation), which will not be able to transfer funds to foreign accounts while the specified restriction is in effect. Therefore, a possible option in the current circumstances may be to close a branch or a representative office and open a subsidiary through residents of states that are not included in the list of unfriendly countries approved by the Government of the Russian Federation. As a rule, these are Asian countries.
Many foreign companies have recently made transfers to the accounts of their branches and representative offices in Russia in order to cover the costs of the local office for the next 3-6 months. Transfers are often made to multiple bank accounts to reduce risks. Usually one is a state-owned bank; the other is a private foreign or a global bank.
Foreign companies that did not have a Russian office and worked directly with Russian distributors may consider opening such a subsidiary to continue selling in the Russian market, since in the face of changes, many Russian distributors take contracts directly with foreigners very seriously, in particular because of high-risk restrictions on payments. The goal of opening a local company is to create a large volume of inventory that can be released to distributors or customers within a long time period (for example, a year), while the import of new batches can be limited or frozen.
An effective option is to review the chains of trade operations. For example, companies can change commodity-money flows in order to import goods to Russia through other EAEU countries. In addition, it is possible to replace suppliers of goods - from European companies to Asian ones.
The counter-sanctions imposed by Russia are now more of a defensive nature and are aimed primarily at curbing the outflow of foreign currency. In particular, restrictions were imposed on the amount of cash withdrawals by resident companies, on the issuance of loans by residents to non-residents in a foreign currency, a ban was introduced on the crediting of foreign currency by residents to their foreign accounts (with some exceptions), an obligation was introduced to sell a part of foreign exchange earnings under foreign trade agreements.
At present moment, there are no obstacles for foreign companies to continue doing business in Russia. For non-public companies, the possibility of paying dividends to foreign participants remains. Payment transactions under foreign trade contracts, including for the import of goods and services also remain available to residents.
It's necessary to understand that the Russian regulatory authorities will carefully monitor that companies, which have publicly announced the suspension or termination of activities in Russia, do not violate the rights of employees and fulfill their obligations to counterparties. This may relate, for example, to liability for delayed wages, wrongful dismissals, deliberate and fictitious bankruptcies, non-payment of taxes, etc. Since some of the offenses are criminal, the heads of the Russian offices of foreign groups of companies need to be especially careful while respecting the interests of the head office, local office and their own personal interest in complying with Russian laws.
We should also note the accelerated development of the draft law "On the External Administration for the Management of an Organisation", aimed at preventing the deliberate withdrawal of foreign companies from the Russian market, according to which it is planned to promptly make decisions by the arbitration court on the appointment of an external administration to manage the "leaving" foreign companies (no later than the working day following the day of receipt of the relevant application). At the same time, the court will take interim measures prohibiting the disposal of shares of the organisation, dismissing employees at the initiative of the employer, terminating contracts that are essential for the company activities, as well as making certain transactions.
The draft law indicates two grounds, in the presence of at least one of which an external
administration will be introduced:
- termination of management of the organisation by its head or other management bodies, including participants and shareholders after February 24, 2022;
- implementation by the same bodies of the organisation after February 24, 2022 of actions that lead to unjustified termination of activities, liquidation or bankruptcy.
A member of the organisation board of directors, as well as government agencies, will be able to submit an application and itself initiate the procedure. The procedure can be adopted only in relation to large and medium-sized businesses (relevant criteria have been established for the size of assets and the number of employees). In the current version, the draft law retains only two ways to exclude the introduction of external administration - the alienation of the organisation shares (stakes in the authorized capital) or their transfer to trust management of persons who are not associated with the unfriendly countries. All other actions can be regarded as an attempt to unlawfully terminate the activities of the company.