Opening a Russian Subsidiary of a Foreign Company

Foreign companies, which establish their offices in Russia, usually choose limited liability companies or non-public joint stock companies to organize their business because these are the most suitable forms for small and medium enterprises under Russian law.

Limited liability companies (LLC)

The authorized capital of LLC shall be not less than 10 000 rubles and shall be paid in full within 4 months from the date of LLC’s registration. The company’s authorized capital might be paid in money or in property, and is divided amongst its shareholders. The property contributed as payment for shares in a company’s authorized capital shall be evaluated in monetary equivalent.

The shareholders of LLC may be individuals and legal entities. The number of the LLC’s shareholders is restricted: a company cannot consist of less than one shareholder, and more than fifty shareholders. An LLC cannot have as a single founder or shareholder another legal entity, which, in turn, has a single legal-entity founder/shareholder.

A package of documents to be filed for registration includes: a registration application, a company’s charter, and a document confirming payment of a state duty. Additionally, in case a foreign legal entity is one of the company’s founders, it shall submit the following documents: a registration certificate, an excerpt from a trade register, memorandum and articles of association, a certificate on the company’s address, a letter from bank on good financial standing, and a tax registration certificate. If a foreign individual is one of the LLC’s founders, it shall submit the documents certifying the individual’s identity. Moreover, all documents issued in a foreign country shall be legalized (or bear an Apostille), and, in case the documents are in a foreign language, they shall be accompanied by a notarized translation into Russian.

When an LLC is created by the several persons jointly, all of them are treated as applicants for the purposes of state registration. This means, that co-founders cannot delegate their powers with respect to the LLC’s state registration to another co-founder. The Applicant’s signature on an application shall be notary certified. Under Russian laws there is no way to delegate one’s powers to sign state registration application by power of attorney. An individual founder or a company-founder’s CEO shall visit the notary in person. These requirements might complicate the process of state registration of a legal entity with foreign investments.

At the stage of state registration of LLC creation, some questions arise with respect to the company’s CEO. Normally, hiring of a foreign citizen is possible only in accordance with the general scheme of attracting a foreign employee – first, a company acquires a special permission for that matter, and a foreigner obtains a work permission/patent, then, a company concludes an employment contract with a foreigner and notifies a competent state authority about the fact of hiring a foreigner. Therefore, when creating an LLC with foreign investments, there is no opportunity to appoint a foreigner as a CEO of the company at the stage of a company’s state registration. However, the CEO may be changed, providing that all requirements for attraction of foreign employees are fulfilled.

In case a foreign investor wishes to escape possible difficulties connected with an LLC’s state registration, there is an opportunity to buy a share in an existing Russian company. Generally, a transaction of purchasing LLC’s shares is subject to notary certification in Russia. Thus, a buyer and a purchaser shall be present before a Russian notary, who certifies the transaction and files relevant documents to the FTS. These actions might be delegated by the notarized power of attorney.  

Joint-stock companies (JSC)

Non-public JSC’s minimal amount of an authorized capital is also 10 000 rubles, like in an LLC. But, there can be more than fifty shareholders in a non-public JSC (unlike in an LLC).

Generally, the procedure and package of documents for JSC’s registration is almost the same as for LLC’s. However, in case of a JSC, there are some additional requirements connected with a necessity of shares emission and state registration of it by the Russian Central Bank (which is in charge of regulating the activities on the securities markets). These additional requirements make the procedure of a company creation a bit more complicated when compared to an LLC. Besides, JSC provides for higher operational costs connected, for instance, with maintenance of a company’s register of shareholders by an external registrar, certification of minutes of general shareholders’ meetings by a notary or by a registrar, etc.

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