Russian Legislation Update: 9 May - 17 July 2016

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Welcome to the most recent issue of our Russian Legislation Update, covering the period of 9 May - 17 July 2016.

In This Issue:

Civil relations
Currency Control
Anti-Money Laundering
Banking
Procurement
Financial Markets

Corporate / disclosure of beneficiaries

On 23 June 2016 the President signed Federal Law No. 215-FZ "On Amending Federal Law on Anti-Money Laundering and Counter-Terrorism Financing and the Russian Code of Administrative Offences."

Under the law, legal entities will be required to identify (determine) and disclose the identity of their beneficial owners and regularly (no less than once a year) update the information held by them in relation to their beneficial ownership. The information must be held for at least 5 years from the date on which it was obtained. For this purpose, a legal entity is entitled to request the relevant information from its founders and companies otherwise controlling it. A corresponding obligation to provide the requested information is imposed on a company’s owners.

The term "beneficial owner" is defined as an individual who ultimately, directly or indirectly (via third parties), has a stake of more than 25% in the capital of the relevant legal entity or can control its actions.

The information on beneficial ownership must be disclosed upon the request of the tax authorities or other authorized agencies. The administrative fine for failure to comply with this requirement is 30,000 – 40,000 rubles for company officers and 100,000 – 500,000 rubles for legal entities.

The following entities will be exempt from this requirement: public authorities, state-owned companies, international organizations, issuers having an official listing, foreign companies with securities listed on a stock exchange that is included in the list maintained by the Central Bank and foreign structures with no beneficial owner or sole executive body.

The Federal Law will enter into force on 21 December 2016.

Civil relations / corporate and secured financing

On 3 July 2016 the President signed Federal Law No. 360-FZ amending the Basic Principles of Notary Activities, the LLC Law and a number of other laws.

The amendments provide, among others, the following:

  • (as of 1 July 2017) the participants of a limited liability company (LLC) can decide that the list of participants will be kept and maintained by the Federal Notary Chamber (FNC) as part of the register of lists of participants of limited liability companies; such register will form part of the unified information system of notaries; data from the register can be obtained by the LLC itself and its participants;
  • a decision of the sole participant on increasing the charter capital must be confirmed with its signature certified by a notary;
  • the list of documents which may serve as a basis for extra-judicial debt recovery based on a notary's executive endorsement has been extended to include: 1) notarized transaction documents underlying monetary obligations or obligations for the transfer of assets, and 2) credit agreements, if they envisage the possibility of such debt recovery;
  • the state registration of the origin and transfer of rights to immovable property must be confirmed by an extract from the Unified State Register of Rights to Immovable Property (certificates on state registration will no longer be issued);
  • (as of 1 October 2016) the scope of data to be included in the Unified Federal Register of Data on Certain Facts of Activity of Legal Entities (www.fedresurs.ru) will be extended to include data on: 1) the occurrence of signs of insufficiency of assets; 2) financial statements which must be disclosed in the mass media; 3) the issuance of an independent guarantee (including data on its substantial terms); 4) a financial agent's entering into a factoring agreement; 5) a lessor's entering into a leasing agreement (including data on the leased asset); 6) a levy of execution on certain assets of a debtor in the course of enforcement proceedings; 7) membership in a self-regulated organization, and 8) the results of a mandatory audit;
  • the list of cases where a secured creditor can enforce a pledge in financial rehabilitation or external management bankruptcy has been extended to include cases where the pledged asset is at risk of damage or loss.

The amendments also relate to public-private partnerships.

The Law entered into force on 15 July 2016, save for certain provisions entering into force later.

Civil relations / Power of attorney

On 3 July 2016 the President signed Federal Law No. 332-FZ amending the Civil Code and the Basic Principles of Notary Activities.

According to the amendments, if a notarized power of attorney is revoked, third parties will be deemed to be notified of the revocation on the next day after the revocation is recorded in the register of notary acts, unless they were notified of that earlier. Such records are open to the public (currently at http://reestr-dover.ru/).

In addition, the FNC will annually establish the maximum amounts of fees for legal and technical notary services for each Russian region and the regional notary chambers will establish the exact amounts of fees not exceeding those limits. The maximum and exact amounts are to be established and published on the websites of the FNC and the regional notary chambers before 1 November 2016 and 1 January 2017, respectively (currently, the FNC recommendations on establishing the maximum amounts of fees are set out in Letter No. 1078/03-16-3 of 1 April 2016).

The FNC is also required to enable state and municipal authorities to verify the authenticity of notarized documents as of 1 January 2017 with respect to notarized powers of attorney, and as of 1 January 2018 with respect to other documents.

The Law will enter into force on 1 January 2017, save for certain provisions entering into force earlier.

Civil relations / Interest

On 3 July 2016 the President signed Federal Law No. 315-FZ amending, among others, the Civil Code.

The amendments affect the accrual of interest under Articles 317.1 and 395 of the Civil Code:

  • the interest for monetary obligations due under Article 317.1 of the Civil Code will accrue only in cases envisaged by law or contract (as opposed to the earlier accrual by default unless the law or contract provided otherwise);
  • the interest for unlawful use of funds due under Article 395 of the Civil Code will accrue based on the Central Bank key rate (as opposed to the earlier accrual based on the average bank interest rates for deposits of individuals).

The described amendments entered into force on 1 August 2016.

Currency Control

On 23 June 2016 the President signed Federal Law No. 212-FZ amending the Administrative Offences Code.

According to the Currency Control Law, residents are required to ensure that foreign trade proceeds received in their accounts are in rubles in an amount specified by the Government (no such amount has been specified so far).

Under the amendments to the Administrative Offences Code companies will be fined RUB 40,000 – 50,000 for breach of that requirement.

The amendments entered into force on 4 July 2016.

Anti-Money Laundering

On 23 June 2016 the President signed Federal Law No. 191-FZ amending the Banking Law and the Anti-Money Laundering Law.

According to the amendments, in certain cases banks will be able to open bank accounts for Russian companies without their representatives having to apply in person. In those cases, clients will provide documents and information in electronic form certified by an enhanced electronic signature.

The Law will enter into force on 1 September 2016.

Banking

On 3 July 2016 the President signed Federal Law No. 362-FZ amending the Law on the Central Bank and the Law on Banks.

According to Law No. 362-FZ, the representatives of the Central Bank (CBR) are entitled to inspect the pledged assets and inquire about the borrower's and/or pledgor's business on-site. Provisions for loans must be established with due regard to the results of the CBR inspection.

Banks are obliged to:

1) specify in internal documents the ways in which they will assist the CBR representatives in obtaining documents and data about the pledged assets and the borrower's and/or pledgor's business; and

2) (as of 4 August 2016) include in loan and pledge agreements an obligation of the borrower and/or pledgor to provide the bank with the relevant documents (data) and to perform other actions so that the CBR representatives can inspect the pledged assets and inquire about their business.

From 1 January 2017 (that is 180 days after the Law enters into force), the requirement described in clause 2) above will also apply to agreements signed before its entry into force.

The Law entered into force on 4 July 2016, save for certain provisions entering into force later.

On 27 June 2016 the Central Bank issued Directive No. 4052-U regarding mandatory reserves.

As of 1 August 2016, the mandatory reserves ratios with respect to banks' liabilities in rubles have been increased to 5 percent, for liabilities in foreign currencies – to 7 percent (for liabilities in foreign currencies to individuals – to 6 percent).

(Between 1 July and 1 August 2016, the mandatory reserves ratios with respect to banks' liabilities in foreign currencies were 6.25 percent (and those to individuals – 5.25 percent), pursuant to Central Bank Directive No. 4038-U dated 10 June 2016.)

The Directive entered into force on 1 August 2016.

On 2 June 2016 the Bank of Russia issued Directive No. 4033-U amending Directive No. 2332-U on reporting forms of credit organizations.

The Directive was registered with the Ministry of Justice on 29 June 2016.

The Directive amends a number of reporting forms of credit organizations and the procedure for their preparation (in particular, calculation of the net worth (capital) (Basel III), data on loans granted to corporate entities, and data on operations made with payment cards).

The Directive entered into force on 1 July 2016, save for certain provisions entering into force later.

Procurement

On 3 July 2016 the President signed Federal Law No. 321-FZ amending procurement laws.

Under the amendments, state and municipal unitary enterprises will be obliged to procure goods, works and services in accordance with Federal Law No. 44-FZ "On the Contractual System for Procurement of Goods, Works and Services for State and Municipal Needs" (rather than in accordance with Law No. 223-FZ "On Procurement of Goods, Works and Services for Certain Types of Legal Entities," as before). Unitary enterprises will be entitled to make purchases as per Law No. 223-FZ only in a limited number of cases specified in the law.

The Law will enter into force on 1 January 2017.

Financial Markets

On 26 May 2016 the Board of Directors of the Central Bank approved the Guidelines for the Development of the Financial Markets in Russia in 2016 – 2018.

The principal goals include, among others: (i) making Russian public companies more attractive for investors due to use of a modern corporate governance system, (ii) development of a bond market and syndicated lending, and (iii) improving regulation of financial markets. The guidelines describe a number of specific steps to be taken to achieve those goals.

The Guidelines were published in the Central Bank Herald on 17 June 2016.

DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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