Experts called barriers for moving companies to "Russian offshore"

Because of the sanctions, companies face "serious obstacles" when moving to special administrative regions of RUSSIA. Service providers from unfriendly countries block control,

Holding companies that decide to transfer business from a foreign jurisdiction to special administrative regions of Russia (a procedure called redomiciliation) face a number of difficulties amid sanctions. This was reported by experts during the session "CAP: New Corporate Governance Tools and Opportunities for Russian Jurisdiction" at the St. Petersburg International Legal Forum, RBC correspondent reports.

Among the most common problems, lawyers named obstacles from government agencies and blocking the process of changing jurisdiction by providers of corporate services (accounting, legal, fiduciary, such as services for the appointment of a DIRECTOR, etc.).

Unfriendly service providers and government regulators

As Alexander Panin, General Director of the PB-Legal law firm, explained at the forum, the beneficiaries of holding companies in foreign jurisdictions, as a rule, are outside the corporate structure: companies are managed by directors, administered by various administrators, and trusts are mainly in the register of shareholders and directly trustees are individuals or legal entities authorized to administer the property of the trust.

Significant corporate decisions, such as moving to another jurisdiction, require the consent of the service providers and the trustee. “While both are involved in corporate governance, service providers are generally not limited by sanctions, which is not the case with trusts. Trustees are, as a rule, under sanctions; this applies to the EU , the usa , the British Virgin Islands," Panin said.

Therefore, according to him, business is forced to explain to service providers the need to initiate a corporate procedure. “And, unfortunately, there is a trend where service providers, not being limited by sanctions, are very concerned about their reputational risks and are removed from decision-making processes. That is, they do not put their signatures, fearing that someday the next package of sanctions will be adopted and their deeds will be visible, ”said the lawyer.

He noted that there were instances where directors simply refused to sign any corporate resolutions or take any corporate action. Such service providers are usually changed to more friendly ones, which is not prohibited by sanctions, and the need to change jurisdiction is discussed with them in advance.

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According to Marina Belyakova, partner of the B1 group of companies, the problem with service providers is one of the key issues in the relocation of companies to the SAR. “Everyone is afraid of the risks of working with sanctioned clients,” she explained.

Belyakova also spoke about the obstacles on the part of state institutions. “In Cyprus, there is a special commission that will write out the company, and its powers are defined, but in fact it has unlimited powers - to request additional documents and doubt something,” she described.

In addition, for companies and groups of companies that are subject to sanctions , Cyprus has a special commission that considers the issue of their withdrawal from local jurisdiction. The KPI of these commissions is "not to let go of the company without making sure that the interests of European stakeholders in the broadest sense do not suffer from this." “These are not necessarily shareholders or creditors, but, for example, pledgees, from whom even consent may not be required during the transition. They will watch everything in detail, and even if there is some political element of exchange, even in such a situation, the company may not be released, ”the lawyer emphasized.

She also recalled the so-called "exit tax" for companies. “You cannot transfer a large asset somewhere without noise and dust; this requires corporate actions. In many countries, exit is a tax event that costs a large amount of money. These are quite serious obstacles to exit, ”said Belyakova.

Redomiciliation and incorporation

In order for a company to change its registration, the legislation of the country from which it wants to move must provide for the institution of redomiciliation. “To put it bluntly, not all jurisdictions have such an institution. Redomiciliation is an institution, in principle, not very often involved, ”said Panin.

If there is no such concept in the legislation, it is necessary “to go through the closure of a company in an unfriendly jurisdiction by liquidation, having previously registered a Russian legal entity of this group,” he specified. This process is known as incorporation.

In the process of incorporation, an international company will be created from scratch in the SAR, explained Ilya Torosov, First Deputy Minister of Economic Development. At the same time, one of the founders of an international company in the SAR must be a foreign legal entity, which is obliged to transfer assets to the international company in the amount of at least 800 million rubles within a year.

Now it is often simply impossible to move to the SAR due to the blocking of corporate decisions, for this the institution of incorporation is expanding, Torosov specified. Now incorporation is allowed only for international public benefit and personal funds. But on May 10, the State Duma Committee on Property, Land and Property Relations approved a parliamentary bill providing for a new procedure for moving to “Russian offshores” - the creation of international companies by way of incorporation, when the law of Western countries prevents direct redomiciliation.

According to Torosov, the Ministry of Economic Development expects that the amendments regulating this mechanism will be adopted in the current or next parliamentary session.

What is SAR

Special administrative regions are territories with a preferential tax regime for investors, created in 2018 to repatriate capital and protect businesses from sanctions. Two SARs have been created in Russia - on Oktyabrsky Island in the Kaliningrad Region and Russky Island in the Primorsky Territory.

When moving to the SAR, foreign legal entities receive the status of international holding companies. In 2022, Russian companies also received the opportunity to become residents of the SAR.

Torosov said that in 2022, against the backdrop of sanctions, the number of moves to the SAR from foreign jurisdictions has tripled. Now the ATS has 190 residents, including Rusal, Lenta, Severstal, and SUEK holding structures.

According to Torosov, about 40 new applications are currently under consideration in the management companies of the SAR. The Ministry of Economic Development expects that by the end of 2023 the number of companies in the SAR may reach 250.

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