Russian ministries will be able to ban foreigners from buying back businesses - amendments

MOSCOW. May 23 (Interfax) - Russian companies will not be obliged to return assets to foreign investors providing a series of conditions are met, and the relevant ministries will also have the right to prohibit this, according to a draft law prepared by the State Duma Property Committee for its second reading.

Under the amendments, Russian companies can unilaterally decline to return assets to foreign investors, and this can also be prohibited by relevant ministries. These rules will apply providing five conditions are met simultaneously: the foreign investor is affiliated with a non-friendly country; the deal took place between February 24, 2022 and March 1, 2025; the price was "significantly lower than market value" and the seller or affiliated person obtained the rights to buy them back within three years or more on pre-agreed terms; more than two years have passed since the option contract was signed; and the Russian company carries out its obligations before employees and creditors.

The draft does not specify what is meant by prices below the market. As reported, foreign investors from unfriendly jurisdictions were required to offer a discount of "50% or above" in order to obtain the right to withdraw from Russian assets.

A foreign investor will be entitled to compensation if refused the right to buy back a Russian business which they previously owned. However, the current owner of the business will be able to lower the compensation amount or refuse to pay it if the foreign investor, in selling their stake in the business, failed to comply with corporate rights, caused obstructions to the management of the company or acted in other ways leading the company to halt its activity or go bankrupt.