The EU allowed sanctioned Russians to transfer shares in European businesses

The European Union has given Russian businessmen who fell under sanctions the opportunity to sell shares in their European companies to new owners. The reaction to each case will depend on the goals of the transaction, experts say

Russian businessmen who are subject to European sanctions can sell ownership rights to companies registered inEU until October 9, 2022. The European Union introduced such a clause into the Regulation on new sanctions against Russia on April 8. “Individuals or legal entities, organizations or bodies” included in the sanctions list in connection with the events inUkraine have the right to carry out such a transaction within the specified six months.

The transaction must be monetary (“sale and transfer”), it follows from the document. The proceeds from such a transaction must be frozen. A person may hold ownership of European assets “directly or indirectly”, the latter involving ownership through controlled companies.

EU authorities responsible for the implementation of pan-European sanctions policy may “in appropriate circumstances” authorize the unfreezing of certain assets or economic resources or the provision of assets or economic resources to sanctioned Russian citizens and companies if this is necessary for the implementation of a transaction for the sale of European business, says EU regulation. This provision apparently relates to pre-sale expenses, George Voloshin, director of the French branch of the consulting company Aperio Intelligence, told RBC.

Previously, the grounds for such unfreezing of part of the funds were reduced to the need of sanctioned Russians to meet basic needs (purchase of food, payment of rent, taxes and housing and communal services payments, etc.), payment of legal services, emergency expenses, execution of arbitration or court decisions against such persons .

Reaction to the Mordashov case

Since the end of February, the EU has added several dozen of the largest Russian businessmen to the sanctions list, which implies freezing of assets, including Gennady Timchenko, Alexey Mordashov, Andrey Melnichenko, Alisher Usmanov, Mikhail Fridman, Roman Abramovich, Alexey Kuzmichev, Petr Aven, Alexander Ponomarenko, Dmitry Pumpyansky , Vyacheslav Kantor, Farhad Akhmedov, Igor Kesaev, Musa Bazhaev, as well as VTB, Sovcombank, SOGAZ, etc.

Experts in sanctions law interviewed by RBC believe that the clause on the possibility of selling European structures is a reaction of EU regulators to the case of Alexei Mordashov. Last month it became known that Mordashov, who through the Cypriot Unifirm owned 34% of the shares of the German tour operator TUI AG, transferred 29.9% of the shares of TUI to Ondero Limited, a company registered in the British Virgin Islands (in this jurisdiction, beneficiaries are not required to disclose). TUI later reported that, as far as it knows, the controlling shareholder of Ondero is Marina Mordashova (not included in the sanctions lists). This is the name of the mother of four children of a businessman, wrote Forbes. The transaction, according to TUI, took place on February 28 - the day sanctions were introduced against Mordashov.

Read PionerProdukt.by Pro x The Economist An explosive mixture: what factors indicate an imminent recession Articles Pro The company has suspended business in Russia. What its director should prepare for Articles Pro Urgent measures of IT support: what Russian companies should do right now Instructions Pro You need to reduce the wage fund. How to do it legally Instructions Pro The planning horizon is one day: logistics has plunged into a new crisis Forecasts Pro Telecom has lost Western equipment. What awaits Russian companies Articles Pro How Netflix defeated two severe crises and “ate” a strong competitor Articles Pro Why dedollarization of the world economy is inevitable. 2 main reasons Article

Russia's richest billionaire transferred 30% of TUI shares to his wife Business

Authorities in Germany began an investigation into the actual circumstances of the transaction - in particular, when it took place (before or after sanctions against the businessman) and whether there was actually a change in control of the stake. Pending the results of the check, the transferred Mordashov package is blocked in TUI. In general, any shares of persons subject to EU sanctions in European companies should be frozen.

Most likely, this is a response to Mordashov’s case, Denis Primakov, candidate of legal sciences and sanctions compliance specialist, told RBC. “Mordashov’s case fits well with this logic,” agrees Voloshin.

Possible sale to relatives

The clause introduced by the EU authorities may open a loophole for sanctioned Russians to sell their European assets to relatives or friendly persons who are not on the EU sanctions list. “As far as I know, as of today, nothing in European legislation prevents the transfer of assets to relatives, friends and other related persons,” Voloshin indicated. At the end of February, the European Union banned the sale of European securities to Russian individuals or legal entities, but thisban applies only to securities, including shares of European companies, issued after 12 April 2022 (existing shares are not eligible).

A representative of the European Commission, when asked by RBC whether it was possible in principle for the sale of a European asset by sanctioned Russians to non-sanctioned relatives or friends (subject to a real transfer of control), replied: “This issue will have to be decided by the competent national authorities of the relevant EU states.”

The EU has expanded sanctions against Russia through the “50% rule” Economy

Voloshin warns that the European Union has rules aimed at preventing the circumvention of sanctions. “In the context of the current anti-Russian sentiment in the West”the government of any EU country may well freeze an asset under the pretext that, in its opinion, it continues indirectly control the sanctioned person, the expert points out. Therefore, according to Voloshin, it is unlikely that the prescribed permission can be “used if the only point is to maintain access to assets in the hands of the family.” It’s another matter if the deal is aimed at preserving the company’s activities with local employees and assets, he stipulates.

Primakov believes that transferring a European company to close relatives will be impossible, but if we are talking about distant relatives, then options are possible. In general, almost all businessmen who fell under sanctions should have already gotten rid of their shares in European businesses, if any, he believes.