Coordination of transactions with foreigners

The complexity of making transactions with foreigners
in Russia has become a significant aspect of the business environment since the
introduction of the requirement for coordination with the Cabinet of Ministers.
Since that time, entrepreneurs have to face additional procedures and
restrictions, especially in the case of transactions with persons from
unfriendly countries.

It is important to note that not all transactions are
subject to mandatory approval. For example, if a resident acquires assets from
the spouse or close relative of a foreigner from an unfriendly state, then the
permission of the Cabinet of Ministers is not required. However, in most cases,
especially when dealing with large assets such as real estate or securities,
coordination with government authorities becomes a necessary step.

It should be borne in mind that the approval process
can take a long time, up to 12 months, depending on the complexity of the
transaction and other factors. In some cases, the refusal of approval may be
due to the fact that another person has already applied for the same
transaction.

An important aspect when considering transactions is
the buyer’s ability to maintain the stability of the enterprise at the level
achieved by the previous owner. It is necessary to provide evidence that the
buyer has the financial resources and competencies for the development of the
company.

Despite these difficulties, experts say that the
parties, as a rule, avoid submitting applications without confidence in a
successful outcome in order to avoid unnecessary costs and time delays. In
general, despite the increase in administrative procedures, the rules for
approving transactions with foreigners in Russia contribute to protecting the
interests of the state and reducing possible risks for business.

Difficulties in making transactions with foreigners
since 2022, requiring the consent of a special subcommittee of the Cabinet of
Ministers, have become a noticeable aspect of Russian business. This step is
aimed at controlling investments from unfriendly countries and enabling
government agencies to actively intervene in the regulation of such
transactions. According to the Central Bank’s financial stability review, from
March 2022 to March 2023, about 200 transactions were concluded for the sale of
Russian subsidiaries by foreign investors, while some of them were of
significant scale, exceeding the amount of $ 100 million. However, the lack of
permission from the Cabinet of Ministers may lead to the cancellation of such
transactions, which jeopardizes their legal validity and financial stability of
the parties.

It is important to note that in the process of
approving transactions with foreigners, criteria determining the need for
approval, such as transactions with persons from unfriendly countries and
changes in rights with respect to Russian companies, play a key role. However,
there are exceptions to the general rule, for example, transactions for the
gratuitous purchase of real estate from spouses or close relatives of foreign
persons. It is important to remember that the status of a resident is
determined in accordance with the norms of currency legislation, which may
affect both citizens living abroad and Russian citizens with other citizenship.

In addition, it should be borne in mind that the
duration of the approval process can reach up to 12 months, which significantly
complicates the planning and implementation of transactions. It is also
important to note that refusals to issue permits may be related to various
factors, including the presence of other applications for the same transaction
and the buyer’s inability to ensure the stability of the enterprise. This
underlines the importance of thorough preparation and proof of financial
capabilities when negotiating deals with foreign investors.