Overview of Russian Corporate Law.
Russian law in general is based on statutes. Only laws and sublaws (so-called instructions issued by a relevant ministry on the basis of an authorization under a law) are regarded as source of law. Case law is not a source of law. In practice, however, judges use precedents or prior rulings on cases of a similar nature when considering their decisions. If certain situations are not regulated by laws and sublaws then the judge, when considering his ruling, normally refers to court practice. Nevertheless, when drafting adjudications he may refer only to laws and sublaws and not to case law on similar matters, with the exception of Constitutional Court rulings.
Company law comes under the umbrella of civil law. The main source of company law is the Civil Code of the Russian Federation. Where appropriate, the Code makes references to statutes, most importantly to the Federal Law 208-FZ of December 26, 1995 'On Joint-Stock Companies' and to the Federal Law 14-FZ of February 8,1998 'On Limited Liability Companies'.
The Civil Code, which was introduced by the Federal Laws 52-FZ of November 30, 1994, 15-FZ of January 26, 1996 and 147-FZ of November 26, 2001, 230-FZ of 18 December 2006 provides a complete list of legal entities in Russia.
The Code distinguishes between commercial and non-commercial organizations. Commercial legal entities may take any of the following forms, which are collectively known as 'economic partnerships and corporations':
- public joint-stock company (otkrytoe akcionernoe obshchestvo, OAO)
- private joint-stock company (zakrytoe akcionernoe obshchestvo, ZAO)
- limited liability company (obshchestvo s ogranichennoj otvetstvennost'ju, OOO)
- additional liability company (obshchestvo s dopolnitel'noj otvetstvennostju)
- general partnership (polnoe tovarishchestvo)
- limited partnership (komanditnoe tovarishchestvo)
- industrial cooperative (proizvodstvenyj kooperativ)
- state and municipal unitary enterprise (gosudarstvennoe i municipal'noe unitarnoe predprijatie).
In addition to the above-mentioned legal entities, individuals, simple and silent partnerships (which are not considered legal entities) may engage in commercial activities.
Non-profit organizations may take the form of institutions, public associations, consumers cooperatives, social funds and religious associations.
The most important forms of legal entities are the limited liability company, the private joint-stock company and the public joint-stock company. In all three cases, the liability of the shareholders, as far as company debts is concerned, is limited to the amount of their contribution to the nominal capital of the company.
Foreign investors may establish companies which are fully foreign owned in any form, with the exception of unitary enterprises. Foreign companies may also register representative offices (for auxiliary and preparatory activity) or branch offices (for commercial activity). Please refer to the comparing the most commonly used types of entities and offices.
The form of legal presence in Russia which your business takes will influence every aspect of the work that you do. Your choice of legal presence will have an impact on the deals you are capable of making and the tax consequences of those deals. It will affect your financial and tax accounting and reporting. It will affect what you are capable of doing as far as customs are concerned, currency control legislation, your ability to employ foreign nationals, the repatriation of income, the application of international treaties and a whole range of other aspects. Therefore, particular attention must be paid to Russian business modeling PRIOR to setting up a legal presence in Russia.
Licensing and Certification
Russian legal entities and branches (including entities with foreign ownership and branches of foreign legal entities) may carry out any activity which is not prohibited by legislation. For instance, Russian legislation does not allow foreign companies and private Russian companies to own and sell some strategic objects, weapons and ammunition and nuclear products. Some activities also require that special permission licenses are obtained and some products may require certification.
Licensed activities are listed not only in the Law 'On Licensed Activities' No 128 FZ of August 8, 2001, but also in several other laws and include:
- banking, insurance, investment
- customs brokerage, transportation, logistics, vehicles, aircrafts repair and maintenance
- medicine and pharmaceuticals, production of medical equipment
- notary services
- construction and maintenance of dangerous objects
- all activities related to weapons (non-strategic), drugs, poisons
- travel agency
- some other similar activities.
Medicines, detergents, medical equipment, telecommunication equipment and some other products require certification before their import and sale in Russia.
Customs relationships are governed by the Customs Code, Law No 61-FZ of May 28, 2003 and a number of subordinate laws and instructions which detail the provisions of the Customs Code.
As a general rule, goods may be imported and exported by all entities and offices. Representative offices of foreign legal entities, naturally, may import only for personal use and often apply a temporary importation regime. As far as branches of foreign legal entities are concerned, goods for further resale may not be imported by branches within a contract between a foreign and Russian legal entity, i.e. there should be no international trade deal.
Some relief from customs duties and import VAT may be obtained under temporary importation and similar customs regimes. The relief may be total or partial (with payment of a percentage of customs duties and import VAT for the period of importation). In theory, paid duties under temporary importation regime are refundable upon export however in practice this refund does not usually happen. Goods under temporary importation should be exported in the condition as they were imported.
The importation of a number of goods requires certification and the examples are provided above. Media software cannot be separated by value for customs duties and VAT purposes. Some equipment, e.g. telecommunication, may be imported only by licensed companies. Importation of goods as a contribution to charter capital are exempted from customs duties and VAT. There are also other exempted goods, mostly socially or economically important.
Currency and exchange transactions in Russia are governed by Law "On Currency Regulation and Control" No 173-FZ of December 10, 2003.
In general, Russian residential companies and individuals are not allowed to carry out transactions in foreign currency between one another. Foreign currency transactions with non-Russian residential companies and foreign national individuals are allowed with certain restrictions pertaining to the terms of deals and special controlling documental procedures. The procedures are generally applicable to deals amounting from 10 000 USD equivalent.
Financial and Tax accounting is carried out in rubles and all foreign currency transactions are converted into rubles