13 Dec 2022 09:29

Russia to extend restrictions on rights of "unfriendly" foreign investors by one year

MOSCOW. Dec 13 (Interfax) - Provisions that allow the restriction of the corporate rights of foreign shareholders of companies with licenses to use subsurface mineral resources and cross-border gas transport infrastructure in Russia who hinder their normal operations will be extended to the end of 2024 under amendments to a government bill to extend corporate rules to counter sanctions to 2023.

The State Duma Committee on Land and Property Relations has recommended that these amendments be passed.

The Duma passed law No. 320-FZ in the summer of 2022, allowing branches of foreign companies that develop resources and own gas transport infrastructure in Russia to be transformed into a Russian limited liability company, with the transfer of licenses, by court order.

The law also allowed, through the courts, to temporarily restrict the rights of "unfriendly" foreign shareholders (with stakes upwards of 25%) of important Russian companies, such as bar them from participating in meetings, receiving dividends and profits and disposing of shares and stakes, until December 31, 2023. The Russian companies classified as important are those with licenses to use subsurface resources or that own cross-border gas transport infrastructure in Russia if their shares are not traded on an exchange and they have no more than 50 shareholders.

Rights can be deprived by court order if the "unfriendly" shareholders hinder the normal operation of the company. For example, if between February 24 and December 31, 2022 they publicly announced the suspension of the company's operations, terminated significant contracts, dismissed more than a third of employees, and so on.

The amendments approved by the Duma committee also extend the time period over which the court can assess the actions of foreign investors, from February 24, 2022 to the end of 2023.

The rules set by this law do not apply to organizations implementing liquefied natural gas projects under production sharing agreements.