Transactions under economic restrictive measures: overview for clients

As a general rule, it is prohibited to carry out the following transactions without the approval of the Government Commission:

• Transactions between residents and Unfriendly persons involving participatory interests in LLCs (excluding banks and non-credit financial institutions), as well as other transactions that enable a person to determine the terms of the management of LLC and/or the conditions for the conduct of entrepreneurial activities
• Transactions between residents and Unfriendly persons involving more than 1% of shares (participatory interests) or more than 1% of the votes corresponding to such shares (participatory interests) in Russian credit institutions, insurance organizations, mutual investment funds, etc.
• Transactions between residents and Unfriendly persons resulting in the acquisition of ownership rights to securities and real property
• Transactions between residents and Friendly persons resulting in the acquisition of ownership rights to securities and real property acquired after February 22, 2022, by Friendly persons from Unfriendly Persons
• Transactions for the transfer to residents, certain non-residents and non-Unfriendly persons, of shares in a Russian joint-stock company acquired and credited from the accounts of foreign persons, the rights to which are centrally registered by a Russian depository, as well as investment units of a Russian mutual investment fund (PIF), including those acquired under an agreement concluded before March 1, 2022 (inclusive)
• Transactions on transfer after March 1, 2022 of shares of Russian issuers to residents, certain non-residents and non-residents who are not Unfriendly persons, received as a result of the redemption of securities of foreign issuers, certifying rights related to such shares (provided that the securities of foreign issuers certifying rights to such shares were received as a result of the termination (performance) of obligations under a foreign financial instrument acquired before March 1, 2022, inclusive).

• Restrictive measures do not apply to transactions aimed at alienation of real property by Unfriendly persons and persons under their control (except for residents), provided that transactions settlements are carried out using a “C” type account.
• Funds from the “C” type account may be debited only for the purposes established by the Decision of the Board of Directors of the Bank of Russia.
• It is possible to terminate a resident's obligation on payment of the price of real estate in favor of an Unfriendly Person without crediting the performance to the “C” type account on the basis of the approval of the Bank of Russia or the Ministry of Finance of the Russian Federation in coordination with the Bank of Russia through the following means:
  • set off;
  • provision of a substitute performance;
  • fulfilment of the obligation that arose under the novation.
• It is permitted to pay for participatory interests, contributions and units in the property of non-resident legal entities, as well as contributions in simple partnerships without obtaining individual permits from the Bank of Russia, provided that the following conditions are simultaneously met:
  • a transaction in rubles or foreign currency for a total amount not exceeding the equivalent of 15 million rubles at the official exchange rate of the Bank of Russia on the date of payment;
  • the aggregate volume of resident's transactions made in favor of one non-resident legal entity from April 1, 2024 must not exceed 15 million rubles.

• Transaction support and preparation of necessary documentation
• Assistance in obtaining transaction approval from the Government Commission
• Analysis of the transaction structure for the presence / absence of restrictive measures

This Overview is based on current Russian legislation, published clarifications and recommendations, and our practical experience. Legislation and / or official clarifications may be amended at any time. We cannot predict either the timing or the substance of such changes; however, at present, we are not aware of any planned amendments that could materially affect our comments.

We do not assume any obligations to update the Overview in connection with events, transactions or circumstances that may occur after the date of analysis.

The position we have expressed is not binding on Russian regulatory authorities or Russian courts. We cannot predict how particular governmental authorities may interpret the regulatory and other acts analyzed in the Overview.