Exit conditions and dividend permits — the base decision of the Sub-commission

What it says⧉

Paragraph 1 — exits. When an investor from an unfriendly state sells shares or participatory interests in a Russian company, the Sub-commission as a rule requires: an independent valuation by an appraiser from its recommended list, reviewed by a self-regulatory organisation of appraisers; key performance indicators for the buyer (keep the business, jobs and contracts); a buy-back option only at market value and usually for no more than two years; payment to a type C account, in roubles inside Russia, or by instalments if paid abroad; and, for public companies, a placement of up to 20% of the shares on the exchange.

Paragraph 2 — dividends to foreign creditors above the monthly cap: no more than 50% of last year's net profit, a review of past payouts, readiness to keep doing business in Russia, the view of the responsible ministries, KPIs met; quarterly payouts are possible. Paragraph 3 repealed Minutes No. 118/1 and No. 143/4.

Status, October 2026⧉

In force, except two terms of paragraph 1: the budget contribution (subparagraph 4) was replaced by Minutes No. 193/4 (15%), and the discount (subparagraph 3) together with the contribution by Minutes No. 268/1 (60% and 35%). Later minutes refer to this decision as “Minutes No. 171/5 of 14 June 2023”.

Unofficial translation⧉

Unofficial translation by BCA Unternehmensberatung UG. Only the Russian text is authoritative: Russian original on usd.bcaun.com · publication of the Ministry of Finance ↗. Lapse notes are editorial and not part of the extract.

Paragraph 1⧉

1. Taking into account the discussion held, and in pursuance of paragraph 2 of the List of Instructions of the President of the Russian Federation following the meeting of 11 April 2023 on the strategy for dealing with assets owned by foreign persons and on improving the regulation of transactions (operations) between residents and non-residents (No. Pr-1114 of 4 June 2023), the Sub-commission unanimously decided that, when considering the issue of permits to be granted by the Sub-commission for the performance (execution) of transactions (operations) aimed at the alienation of securities, including shares, and of participatory interests (contributions) in the authorised (share) capital of Russian business companies (the “assets”) by foreign persons associated with foreign states that commit unfriendly actions against the Russian Federation, Russian legal entities and individuals (including where such foreign persons are citizens of those states, or those states are their place of registration, their principal place of business or the principal place where they derive profit from their activities), or by persons under the control of such foreign persons, irrespective of their place of registration or principal place of business (the “persons of foreign states that commit unfriendly actions”), it shall as a rule proceed from the expediency of establishing the following conditions for the performance (execution) of such transactions (operations):

#1) a report on an independent valuation of the market value of the assets, prepared by an appraiser in private practice included in the list of appraisers (valuation organisations) recommended by the Sub-commission for such valuation, or by an appraiser employed under an employment contract by a legal entity included in that list (the “independent valuation report”);

#2) in addition to the independent valuation report, an expert opinion prepared by an expert or experts of a self-regulatory organisation of appraisers in accordance with Article 17.1 of Federal Law No. 135-FZ of 29 July 1998 “On Valuation Activities in the Russian Federation”, that organisation being included in the list of self-regulatory organisations of appraisers recommended by the Sub-commission for the preparation of expert opinions in accordance with Article 17.1 of that Federal Law;

#3) sale of the assets at a discount of not less than 50% of their market value stated in the independent valuation report;

#4) an undertaking to make a voluntary payment to the federal budget of not less than 10% of half of the market value of the assets stated in the independent valuation report (where the assets are sold at a discount of less than 90% of that market value), or of not less than 10% of the market value of the assets stated in the independent valuation report (where the assets are sold at a discount of more than 90% of that market value), within three months of the date of performance (execution) of the transaction (operation);

#5) where shares constituting the share capital of a public joint-stock company are acquired, placement on organised trading of up to 20% of the acquired block of shares of the public joint-stock company, whereby:

the placement shall begin not later than one year after the date of performance (execution) of the transaction (operation), and shall not last longer than three years from its start;

in the event of a reorganisation of a business company by way of merger into a public joint-stock company, shares of the public joint-stock company into which the merger has taken place, in a number equivalent to up to 20% of the shares of the merged company taking into account the conversion ratio of the shares of those companies on merger, shall be placed on organised trading within three years of the date of performance (execution) of the transaction (operation);

#6) where the transaction (operation) results in a joint-stock company losing its public status or being liquidated, placement on organised trading of up to 20% of the shares of a public joint-stock company (newly created or having acquired public status as a result), whereby the acquisition of public status by the joint-stock company and such placement shall take not longer than three years from the date of performance (execution) of the transaction (operation);

#7) key performance indicators for the buyers and/or the business company acquired by them, which shall provide, among other things, for preserving the technological capacity and the principal type of economic activity of that business company, preserving jobs and performing obligations under contracts it has concluded with other legal entities, together with a recommendation to the federal executive authority to monitor the achievement of those indicators;

#8) for a transaction (operation) providing for the possibility of a buy-back of the asset: buy-back at market value as at the date of exercise of the option, an economic benefit for the resident owner of the asset, and a limited term of validity of the permit (as a rule, not more than two years from the date of performance (execution) of the original transaction (operation));

#9) transfer of funds under the transactions (operations) to persons of foreign states that commit unfriendly actions to type “C” accounts, or settlement of the transactions (operations) in roubles within the banking system of the Russian Federation without transferring funds outside the Russian Federation, or, where funds under transactions (operations) with foreign persons are transferred to accounts of such persons opened with banks and other financial market organisations located outside the territory of the Russian Federation, payment by instalments;

#10) the applicant holds any other permits required under the legislation of the Russian Federation for the performance (execution) of the transaction (operation), information on which has been submitted by the applicant.

Paragraph 2⧉

2. The Sub-commission took note of the information from the Ministry of Finance of Russia and the Bank of Russia on the approach to decisions on granting permits for the payment of profit (dividends) to foreign creditors in the cases established by Decrees of the President of the Russian Federation (the “foreign creditors”), as a rule subject to the following conditions:

#1) the amount of profit (dividends) paid does not exceed 50% of net profit for the previous year;

#2) the results of a retrospective analysis of profit (dividend) payments for past periods are taken into account;

#3) the participants (shareholders) who are foreign creditors are willing to continue commercial activity in the territory of the Russian Federation;

#4) the positions of federal executive authorities and the Bank of Russia on the significance of the organisation’s activity and the impact of that activity on the technological and industrial sovereignty of the Russian Federation and on the socio-economic development of the Russian Federation (of constituent entities of the Russian Federation) are taken into account;

#5) the applicants have performed their undertakings to achieve key performance indicators, as confirmed by federal executive authorities (the Bank of Russia);

#6) profit (dividends) may be paid on a quarterly basis provided that the established key performance indicators are achieved.

Paragraph 3⧉

3. Minutes of meetings of the Sub-commission No. 118/1 of 22 December 2022 and No. 143/4 of 2 March 2023 shall be deemed to have lapsed.

Operations that rest on it⧉