Public mergers and acquisitions in the Russian Federation: overview

08.12.2020
Practical Law Guide / Thomson Reuters, 02.12.2020

 A Q&A guide to public mergers and acquisitions law in the Russian Federation.

The country-specific Q&A looks at current market activity; the regulation of recommended and hostile bids; pre-bid formalities, including due diligence, stakebuilding and agreements; procedures for announcing and making an offer (including documentation and mandatory offers); consideration; post-bid considerations (including squeeze-out and de-listing procedures); defending hostile bids; tax issues; other regulatory requirements and restrictions; as well as any proposals for reform.

To compare issues across multiple jurisdictions, visit the Country Q&A tool. This Q&A is part of the global guide to mergers and acquisitions law. For a full list of jurisdictional Q&As visit www.practicallaw.com/acquisitions-guide.

M&A activity

1. What is the current status of the M&A market in your jurisdiction?

In 2019, both deal numbers and values increased. Foreign investment also increased, despite the sanctions imposed on numerous Russian private and public companies. M&A deals totalled USD63 billion, less than 1% of the global M&A market (https://home.kpmg/ru/en/home/insights/2020/02/russian-2019-ma-overview.html).

Oil and gas sector M&As are prominent, particularly liquid natural gas (LNG) projects. In 2018 and 2019, the key driver of the Russian M&A market was NOVATEK’s share sales in the Arctic LNG-2 project to:

  • Total in 2018.
  • China's CNPC and Japan's Mitsui in 2019.

The innovation and technology sector is second in investment value and number of deals. The biggest deals were the:

  • Sale of software developer Luxoft to the USA's DXC Technology for nearly USD2 billion.
  • Acquisition of Avito shares by South Africa's Naspers media group.
  • Initial Public Offering (IPO) by HeadHunter (hh.ru) recruitment agency, the first Russian company to go public in two years.

True public takeovers remain rare in Russia. The vast majority of M&As are:

  • Private (for example, Arctic LNG-2 project is operated through a limited liability company controlled by NOVATEC).
  • An acquisition of a foreign holding company (for example, the sale of Luxoft).

2. What are the main means of obtaining control of a public company?

There are several ways to acquire a public company (public joint-stock company (PJSC)), in particular:

  • The direct private acquisition of shares.
  • The indirect private acquisition of shares by gaining control over the company's majority shareholder. This is commonly done outside the Russian jurisdiction, through the acquisition of a foreign special purpose vehicle (SPV) that is the majority shareholder in a public company.
  • Voluntary public offers. These are:
    • voluntary acquisitions of more than 30% of the voting shares in a PJSC through a public offer; and
    • voluntary acquisitions of the voting shares in a PJSC through a public offer by a bidder that was the sole shareholder in a public company and as a result of reorganisation of that company (in the form of a merger with or accession to another company) acquired more than 95% of the shares in the reorganised public company.
  • Mandatory public offers (see Question 16).
  • Reorganisation in the form of a merger or accession. These are quite rare.

All public takeover bids are subject to strict rules, including pricing mechanics, though voluntary public offer rules are more flexible.

The public takeover bid rules also apply to certain private companies. Generally, these are non-PJSCs that used to be open joint-stock companies (the form preceding the PJSC).

Hostile bids

3. Are hostile bids allowed? If so, are they common?

There is no legal distinction between friendly and hostile takeovers. Hostile takeovers are unusual because very few public companies have truly dispersed share capital. Most public companies have a key majority shareholder (either a single person or a group of affiliates) and their directors are controlled by one or a group of major shareholders. The board can only give recommendations on a public offer and has no legal methods of blocking a public acquisition.

Regulation and regulatory bodies

4. How are public takeovers and mergers regulated, and by whom?

Principal regulations

The key legislation regulating public takeovers and mergers includes:

  • Federal Law No. 208-FZ on Joint-Stock Companies, 26 December 1995 (JSC Law). This is the key source of rules on public takeovers.
  • Federal Law No. 39-FZ on the Securities Market, 22 April 1996.
  • Federal Law No. 135-FZ on Protection of Competition, 26 July 2006.
  • Federal Law No. 160-FZ on Foreign Investment in the Russian Federation, 9 July 1999.
  • Federal Law No. 57-FZ on the Procedure for Making Foreign Investments in Business Entities of Strategic Importance for National Defence and State Security, 29 April 2008.
  • Regulations of the Bank of Russia No. 477-P on Requirements on the Procedure for Individual Actions in relation to Acquisition of More than 30% of the Shares in Joint-Stock Companies and State Control over Acquisition of Shares in a Joint-Stock Company, 5 July 2015.

Regulator

The Bank of Russia regulates public takeovers, specifically the Department of Corporate Affairs. Other regulators (for example, the Federal Anti-monopoly Service) can also be involved, depending on the type of transaction and the target's main activities.

Pre-bid

Due diligence

5. What due diligence enquiries does a bidder generally make before making a recommended bid and a hostile bid? What information is in the public domain?

Recommended bid

Public acquisitions are most commonly made through recommended bids. In a recommended bid, the acquirer is dealing with one or a group of major shareholders and can therefore be provided with almost any information about the target and conduct a full due diligence investigation into the target's legal and financial status. Certain exceptions can apply if the target company is a regulated entity. For example, if the target company is a bank, the rules on banking secrecy should be considered.

If the bidder already possesses the target's shares, it can obtain certain information directly from the target. The amount of information usually depends on the size of the bidder's shareholding. The fullest access is available to a shareholder (or several shareholders acting in concert) possessing more than 25% of the target's shares. They can access the target's corporate and most of its financial documents.

Hostile bid

A full due diligence investigation is unlikely in a hostile bid. A hostile bidder can obtain certain information from the public domain, but this does not usually provide an adequate risk assessment and affects the price determination. A fuller risk assessment is possible if the bidder is already a shareholder in the target and so has access to more information.

Public domain

Key public sources of information include:

  • The Unified State Register of Legal Entities operated by the tax authorities and other official corporate registers (for example, Fedresurs). These registers contain the main corporate information on every legal entity in the Russian Federation including the company's:
    • Articles. However, these do not provide information on the target's assets and financial standing and do not enable the bidder to make an adequate assessment of its legal and financial exposure;
    • particulars;
    • financial position (whether in good standing or in liquidation/reorganisation);
    • amount of issued capital; and
    • licensing data.
  • The Unified State Register of Real Estate, that contains information on real properties, their owners and encumbrances.
  • Commercial Court Case Catalogue (CCCC) information system (Информационная система «Картотека арбитражных дел»)(КАД)). This system provides information on the target company’s litigation proceedings.
  • Obligatory disclosures. Most public companies must release certain information into the public domain, in particular:
    • information about their management (CEO, board of directors and/or management board);
    • annual report and annual financial report;
    • list of affiliates;
    • material corporate decisions; and
    • information about events that might significantly influence their shares' market value.

Secrecy

6. Are there any rules on maintaining secrecy until the bid is made?

A voluntary public offer or a mandatory public offer must comply with a special procedure. First, the offer must be filed with the Bank of Russia. Second, it must be sent to the target company, which must distribute it to shareholders. The bidder must not disclose the terms and conditions of the offer until it is sent to the target company (see Question 12).

Agreements with shareholders

7. Is it common to obtain a memorandum of understanding or undertaking from key shareholders to sell their shares? If so, are there any disclosure requirements or other restrictions on the nature or terms of the agreement?

Hostile bids

Hostile bids are very rare. Typically, public takeovers are structured through either direct acquisition of a majority shareholding from a particular existing shareholder (or several shareholders) or a public offer. Even voluntary public offers are usually made by bidders that are already shareholders in the target and have sufficient knowledge of the company's business, financial status and corporate affairs.

Privately negotiated acquisitions

If the acquisition is privately negotiated, it is common for the bidder to enter into a memorandum of understanding or other preliminary agreement with the seller before a due diligence investigation is carried out. These preliminary agreements are not legally binding, except for a very limited number of clauses (for example exclusivity, confidentiality and break-up fees). More rarely, the bidder can enter into a conditional binding sale and purchase agreement at the start of the process. The bidder should take particular care in drafting the agreement, especially if they may need to obtain anti-monopoly or other regulatory clearance for the transaction.

Public offers

Preliminary agreements are not common if the acquisition is made through a public offer.

Disclosure

There are no specific rules on disclosing preliminary agreements. However, certain provisions, particularly those that are legally binding, can require anti-monopoly clearance or disclosure as a material change event (if the bidder is a public company).

Stakebuilding

8. If the bidder decides to build a stake in the target (either through a direct shareholding or by using derivatives) before announcing the bid, what disclosure requirements, restrictions or timetables apply?

Until the bidder accumulates a 30% shareholding, there are no restrictions on acquiring shares in the target before the bid is formally announced. When the 30% threshold is exceeded, further acquisition of shares must be by mandatory public offer (see Question 16). If the 30% threshold has been exceeded, to protect the interests of the minority shareholders until the mandatory offer is made, the bidder can only vote with 30% of their shares (these rules also apply to a mandatory offer made as a result of exceeding the 50% or 75% thresholds).

For the purposes of the public takeover regulations (in particular those covering mandatory offers), the shareholding of the bidder and its affiliates are aggregated so that this 30% threshold (or 50% or 75%, as applicable) includes the shares owned by the bidder and its affiliates. Conversely, derivatives and other securities (including convertible securities) are not taken into consideration when determining the threshold.

Certain companies (mostly public) must disclose information about any of their shareholders acquiring more than 5%, 10%, 15%, 20%, 25%, 30%, 50%, 75% or 95% of the shares (or increasing their stake to above any of these thresholds). If the acquirer is a Russian company, in certain cases it can also be required to disclose information about acquisition of a joint-stock company.

Agreements in recommended bids

9. If the board of the target company recommends a bid, is it common to have a formal agreement between the bidder and target? If so, what are the main issues that are likely to be covered in the agreement? To what extent can a target board agree not to solicit or recommend other offers?

Formal agreements between the bidder and the target are legal but uncommon because:

  • Most public takeovers are structured through the direct acquisition of shares from an existing majority shareholder (or several shareholders), with a subsequent squeeze out of minority shareholdings.
  • The target's board plays a minor role in public takeovers, generally limited to assessing a public offer and making recommendations to the target's shareholders. Company boards are usually controlled by a majority shareholder and the concept of a director's fiduciary duties is not well developed. Therefore, board members are unlikely to be liable for any failure to consider the bid carefully and make proper recommendations to the shareholders. Nor has the board any obligation to solicit other offers.

Break fees

10. Is it common on a recommended bid for the target, or the bidder, to agree to pay a break fee if the bid is not successful?

A break fee is not common because of the minor role of the target and its board in the public takeover process. There is no regulation of break fees. However, a bidder must reimburse the target company all the costs incurred as a result of the offer, principally the costs of notifying the shareholders about the offer received.

Break fee agreements are more common in private acquisitions of shares in a public company. Break fees are not specifically restricted and are therefore enforceable. There is, however, a risk that a court can reduce a break fee if it finds it unreasonable (Civil Code).

Committed funding

11. Is committed funding required before announcing an offer?

Committed funding is required for a voluntary or mandatory public offer. The bidder must obtain an irrevocable bank guarantee for the entire amount of the offer purchase price. There are no other mandatory legal requirements for committed funding.

Announcing and making the offer

Making the bid public

12. How (and when) is a bid made public? Is the timetable altered if there is a competing bid?

The timetable for a voluntary public offer and mandatory public offer for a publicly-listed company is as follows:

  • The offer must be filed with the Bank of Russia before being sent to the company.
  • No later than the day after the filing date, the bidder must publish basic information (for example, the name of the target company, type of offer (voluntary or mandatory) and class of shares to be purchased) on the filing on the news wires and, if the bidder is a PJSC obliged to disclose information in the form of quarterly reports, on the website used by the bidder for regulatory disclosures.
  • Within 15 calendar days of the documents being filed, the Bank of Russia can issue a prescriptive order to amend the offer to make it compliant with legislative requirements.
  • If the Bank of Russia does not provide instructions within 15 calendar days, the bidder can send the offer to the target company. The law does not provide for specific timing for sending the offer to the target company. The target must distribute the details to its shareholders.
  • The content of the offer (including the class of shares to be purchased and the offer price) must be published on the website used by the bidder for regulatory disclosures and disclosed on the news wires no later than the day after 15 calendar days from the filing date, unless instructions are given by the Bank of Russia.
  • It takes about four to five months to complete the offering process, excluding any merger consent or other necessary regulatory approval.

Competing bid

A competing bid can be made 25 calendar days before expiry of the most recent bid received by the company, if there is more than one. The competing bid must be made for at least an equal number of shares and the price offered for the shares must be no less than that in the initial bid.

The voluntary and mandatory bid rules apply to a competing bid.

Offer conditions

13. What conditions are usually attached to a takeover offer? Can an offer be made subject to the satisfaction of pre-conditions (and, if so, are there any restrictions on the content of these pre-conditions)?

There are strict rules governing mandatory public offers, voluntary public offers, squeeze-out and buyout procedures. For example, the:

  • Shareholders must be notified by the target company.
  • Shares must be acquired at their market price. There are different rules for determining the shares' market price, depending on whether or not they are listed on the securities market (JSC Law).
  • Offer price (except in a squeeze-out) must be secured by an irrevocable bank guarantee.

The mandatory offer, squeeze-out and buyout procedures cannot be subject to the satisfaction of pre-conditions. The voluntary public offer rules are more flexible and in theory the bidder can make its offer subject to the satisfaction of certain preconditions. In practice, the only condition that is widely used is the minimum number of shares to be purchased for the offer to be effective.

Bid documents

14. What documents do the target's shareholders receive on a recommended and hostile bid?

The main documents received by the target company shareholders depend on the type of offer.

Voluntary public offer

A voluntary public offer must include the:

  • Public offer document. This is prepared by the bidder and must include, among other things:
    • the bidder's details (for example, name and registration number), including details of its affiliates;
    • information on the number of target company shares owned by the bidder and its affiliates;
    • information on the target company shares that the offer is for (for example, class of shares and issue registration number), and the offer price; and
    • the period during which the offer is valid.
  • Bank guarantee.

Voluntary public offers can also include any other information that the bidder considers important for the shareholders, for example, the bidder's plans for the target company and/or its employees.

Mandatory public offer

A mandatory public offer (see Question 16) must include:

  • The public offer document. This is prepared by the bidder and must include, among other things:
    • the bidder's details (for example, name and registration number), including details of its affiliates;
    • information on the number of target company shares owned by the bidder and its affiliates;
    • information on the target company's shares that the offer is for (for example, type of shares and issue registration number), including the offer price or how the bidder has assessed the price; and
    • the period during which the offer is valid.
  • An independent appraisal report on the shares in the target company if the target is not listed or a document issued by a stock exchange confirming the average market price of the shares in the target company if the target is listed.
  • The bank guarantee.

A mandatory public offer can also include the bidder's plans for the target company and/or its employees.

Employee consultation

15. Are there any requirements for a target's board to inform or consult its employees about the offer?

The target's board has no obligation to inform or consult its employees about the offer. However, the target should consider any change of control provisions in its key employees' (for example, the chief executive officer and board members) employment contracts.

Mandatory offers

16. Is there a requirement to make a mandatory offer?

When a bidder (together with its affiliates) acquires more than 30% (and more than 50% and 75%) of a PJSC's voting shares they must make a mandatory public offer to the target company's shareholders to acquire all other voting shares, and securities convertible into voting shares at their market price.

A voluntary public offer can also be made under the rules applicable to mandatory public offers, including the offer pricing rules and minimum offer price. This enables the bidder to acquire the shares in the target company without making a mandatory public offer.

Consideration

17. What form of consideration is commonly offered on a public takeover? 

Bidders must offer cash for publicly acquired shares. However, the offer can also include an option for each shareholder to exchange their shares for other securities offered by the bidder in addition to the cash consideration.

In a squeeze-out or buyout procedure (see Question 20) shares can only be purchased for cash consideration.

18. Are there any regulations that provide for a minimum level of consideration?

Voluntary public offers are not subject to any minimum consideration restrictions. A minimum purchase price is set for:

  • Mandatory public offers (see Question 16). The minimum purchase price is either the:
    • weighted average price of the shares as quoted on a stock exchange for the preceding six months;
    • price determined by an independent appraiser if the shares are not traded or have been traded for less than six months; or
    • maximum price the acquirer (or any of its affiliates) has paid or agreed to pay for the same shares within the preceding six months.
  • Squeeze-outs (see Question 20). The minimum purchase price is either the:
    • price determined by an independent appraiser;
    • price paid for the shares in a public offer resulting in the acquirer holding 95% of the shares;
    • maximum price the acquirer (or any of its affiliates) has paid or agreed to pay for the same shares since expiry of the public offer; or
    • price paid for the shares in a voluntary offer made by a bidder that was the sole shareholder in a public company and, as a result of reorganisation of that company (through a merger with or accession to another company) has acquired more than 95% of the shares in the reorganised public company.
  • Buyouts (see Question 20). The minimum purchase price is either the:
    • price determined by the rules governing a mandatory public offer;
    • price paid for the shares in a public offer resulting in the acquirer holding 95% of the shares; or
    • maximum price the acquirer (or any of its affiliates) has paid or agreed to pay for the same shares since expiry of the public offer.

19. Are there additional restrictions or requirements on the consideration that a foreign bidder can offer to shareholders?

There are no additional restrictions on the consideration that a foreign bidder can offer to shareholders.

Post-bid

Compulsory purchase of minority shareholdings

20. Can a bidder compulsorily purchase the shares of remaining minority shareholders?

A bidder can squeeze out minority shareholders in a PJSC company if:

  • the bidder made a voluntary or mandatory public offer resulting in it owning (cumulatively with its affiliates) more than 95% of the total number of the target company's voting shares and at least 10% of the voting shares owned by the bidder were acquired through that mandatory or voluntary public offer; or
  • the bidder was the sole shareholder in a public company reorganised by a merger with or accession to another company. As a result of that reorganisation the bidder acquired more than 95% of the shares in the reorganised public company. The bidder made a voluntary public offer for the remaining shares in the public company within five years of the reorganisation. As a result of that voluntary public offer, the bidder acquired at least 50% of the remaining shares in the public company.

The bidder can submit a notice demanding the purchase of the shares owned by the minority shareholders within six months of the period for acceptance of the relevant voluntary or mandatory public offer.

The squeeze-out notice is forwarded to the minority shareholders through the target company after clearance by the Bank of Russia.

A minority shareholder that disagrees with the squeeze-out price can claim damages if they believe the squeeze-out price is not correct.

A majority shareholder's squeeze-out right correlates with the minority shareholders' right to demand that the majority shareholder buyout their voting shares, and other securities convertible into voting shares (buyout).

Restrictions on new offers

21. If a bidder fails to obtain control of the target, are there any restrictions on it launching a new offer or buying shares in the target?

A bidder can make as many voluntary public offers as it wishes if its previous voluntary offers were unsuccessful.

De-listing

22. What action is required to de-list a company?

The securities are de-listed by the stock exchange on its own initiative or on an application by the listed company. De-listing is governed by both the:

  • Bank of Russia de-listing procedure regulations (including a specific list of actions required for de-listing).
  • Listing (de-listing) rules of a particular stock exchange. These also contain a list of cases when de-listing is mandatory (for example, for certain breaches of the law).

Target's response

23. What actions can a target's board take to defend a hostile bid (pre- and post-bid)?

Hostile bids are uncommon, and the role of the target's board is very limited.

An offer (either voluntary or mandatory) must be addressed to the target company's shareholders but sent through the target. The target company must communicate the offer to its shareholders. The target's board can express its views on the offer and make recommendations to the shareholders, and these should be communicated to the shareholders together with the offer.

The legislation is bidder friendly. It restricts the management powers of the target's board during a public takeover. In particular, if the target receives a voluntary or mandatory offer, the following corporate decisions must be referred to a target's shareholders' meeting (and cannot be resolved by the board), including:

  • The issue of additional shares.
  • The approval of sale or disposal of assets worth 10% or more of the target company's asset book value.
  • The approval of interested party transactions.
  • An increase in the target company's top management's renumeration.

These restrictions apply for 20 days from either the

  • Expiry of the term for acceptance of the relevant offer.
  • Election of a new board at a shareholders' meeting convened by a bidder that has acquired more than 30% of the shares as a result of a voluntary or mandatory offer.

Tax

24. Are any transfer duties payable on the sale of shares in a company that is incorporated and/or listed in the jurisdiction? Can payment of transfer duties be avoided?

No transfer duties are payable on sale of a PJSC's shares.

Other regulatory restrictions

25. Are any other regulatory approvals required, such as merger control and banking? If so, what is the effect of obtaining these approvals on the public offer timetable?

Public acquisition is usually subject to merger control. The Federal Antimonopoly Service's prior consent is required for a person or a group of affiliates' (direct or indirect) acquisition of more than 25%, 50% or 75% of the voting shares of a company if either the:

  • Total asset balance value of the bidder (and its group) and the target (and its group) exceeds RUB7 billion and the total asset balance value of the target (and its group) exceeds RUB400 million.
  • Total revenues of the bidder (and its group) and the target (and its group) for the previous calendar year exceed RUB10 billion and the total asset balance value of the target (and its group) exceeds RUB400 million.

Financial institutions are subject to separate thresholds. The Federal Antimonopoly Service's prior consent is required for acquisition of more than 25%, 50% or 75% of the voting shares in a financial institution if the total balance value of its assets exceeds the following thresholds:

  • Credit institutions: RUB33 billion.
  • Microfinance institutions: RUB3 billion.
  • Non-governmental pension funds: RUB2 billion.
  • Stock/currency exchanges: RUB1 billion.
  • Mutual insurance societies and credit consumer co-operatives: RUB500 million.
  • Insurance companies, insurance brokers, professional participants on the securities market, clearing companies, management companies of investment funds, management companies of mutual funds, management companies of non-governmental pension funds, specialised depositories of investment funds, specialised depositories of mutual funds, specialised depositories of non-governmental pension funds and pawnshops: RUB200 million.
  • Medical insurance organisations: RUB100 million.

To obtain prior consent from the Federal Antimonopoly Service, a significant number of documents and commercially sensitive information must be prepared, for example, the bidder's and target's market and list of their key suppliers and customers. Preparation for filing and obtaining prior consent usually takes up to two months.

Completion of an acquisition without obtaining prior consent can incur administrative liability and the acquisition can be challenged by the Federal Antimonopoly Service.

There is an additional obligation to notify the Bank of Russia on acquisition or receipt in trust of more than 1% of the shares in a credit institution (Federal Law No. 395-1 on Banks and Banking, 2 December 1990). The Bank of Russia's prior approval is required (the decision should be issued within 30 days of the filing date) for both the:

  • Direct acquisition or receipt in trust of more than 10%, 25%, 50% and 75% of the shares in a credit institution.
  • Acquisition of direct or indirect control over a person holding more than 10% of the shares in a credit institution.

26. Are there restrictions on the foreign ownership of shares (generally and/or in specific sectors)? If so, what approvals are required for foreign ownership and from whom are they obtained?

The Law on Foreign Investments in Strategic Companies regulates foreign investment. It provides for special rules for foreign investors intending to invest in companies of strategic significance to ensure the country’s defence and national security. These rules apply to companies operating in 47 areas of the economy.

Since August 2017, the concept of a foreign investor has been expanded. The Law on Foreign Investments in Strategic Companies now applies to both Russian citizens with dual citizenship and Russian organisations controlled by foreign investors.

Certain types of transaction made in relation to strategic companies require consent from a special government committee (applied for through the Federal Antimonopoly Service) including the:

  • Acquisition of the right to dispose, directly or indirectly, of more than 50% of the votes attached to voting shares in the charter capital of the entity.
  • Acquisition of the right to appoint a single member executive body and/or more than 50% of a collegial executive body and/or the right to elect more than 50% of the board of directors.
  • Acquisition (direct or indirect) of at least 25% of the voting shares in the charter capital of an entity using subsoil areas of federal significance.

(Law on Foreign Investments in Strategic Companies.)

A foreign state or an international organisation (subject to certain exceptions), or a company controlled by either, is not allowed to obtain control over strategic companies and the acquisition thresholds for these types of investor are lower:

  • 25% in ordinary strategic companies.
  • 5% in companies using subsoil areas of federal significance.

Foreign investors that do not disclose their beneficiaries and controlling persons to the competition authorities are subject to the regulation that applies to foreign states and international organisations. In practice, any foreign investor must disclose its beneficiaries and controlling persons to the Federal Antimonopoly Service before making almost any major deal involving strategic entities.

Transactions executed in breach of the Law on Foreign Investments in Strategic Companies are null and void.

In addition, specific restrictions apply to foreign investment in particular industries or activities, for example the media, communications and aviation, including:

  • Insurance organisations must obtain permission from the insurance supervisory authority to increase their charter capital at the expense and in favour of a foreign investor and/or its affiliates or to alienate its shares or a stake in its charter capital to a foreign investor. Russian shareholders must obtain permission to alienate shares (participation interest in the charter capital) of an insurance organisation to foreign investors and/or their affiliates (Federal Law on Organisation of Insurance Business in the Russian Federation).
  • Foreign capital participation in an aviation enterprise established on Russian territory must not exceed 49% of the charter capital (Air Code of the Russian Federation).
  • Foreign nationals or organisations' stakes in the sale and purchase of shares held by owners of regional gas supply systems and of gas distribution systems, or of other transactions or operations connected with a change in the ownership of these shares, must not exceed 20% of the total number of ordinary shares (Federal Law on Gas Supply in the Russian Federation).
  • Since 2016, foreign entities or individuals have been prohibited from holding more than 20% in the capital of any media outlet or from establishing/exercising any kind of control over them. Generally, media organisations must report quarterly on any foreign investment.

27. Are there any restrictions on repatriation of profits or exchange control rules for foreign companies?

There are no legal restrictions on repatriation of profits to foreign investors. To claim certain tax reliefs (where there is a double tax treaty with a foreign company's country of incorporation), the foreign company should provide documentary proof of its tax residence in its country of incorporation.

28. Following the announcement of the offer, are there any restrictions or disclosure requirements imposed on persons (whether or not parties to the bid or their associates) who deal in securities of the parties to the bid?

All persons who are aware of the bid (including the bidder and target company's directors and officers) are subject to restrictions. They must not use, transfer or recommend the use of insider information to any third party. The unlawful use of insider information (including its transfer to other parties) incurs administrative and criminal liability (Federal Law No. 224-FZ on Combating Unlawful Use of Insider Information and Market Manipulation, and Amendment of Certain Legislative Acts of the Russian Federation).

Reform

29. Are there any proposals for the reform of takeover regulation in your jurisdiction?

No significant reform of takeover regulation is expected this year.

 

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