Duma passes bill on new way to transfer assets from abroad to Russia's SAR in first reading

MOSCOW. May 17 (Interfax) - The State Duma on Tuesday passed a bill in the first reading that will allow companies registered abroad to set up subsidiaries in Russia's special administrative regions (SAR) and transfer assets to them.

The bill (No. 337661-8) was submitted to the Duma in mid-April by committee chairman Sergei Gavrilov, his first deputy Sergei Ten, the first deputy chairman of the Committee on Security and Corruption Control Andrei Lugovoi and a number of other MPs.

Foreign companies were given the option to redomicile in the SARs on Russky Island in Primorye and Oktyabrsky Island in Kaliningrad Region in 2018, but in a number of cases recomiciliation turned out to be impossible or very difficult due to sanctions imposed by "unfriendly" countries.

In light of this, lawmakers proposed to allow the creation of new Russian organizations in the form of international companies (IC) in SARs on the condition that the assets of the foreign founders are transferred to them. In the bill, this process is called "incorporation." It states that an IC can be founded by a foreign company that had publicly traded shares as of March 1, 2022 for which redomiciliation in an SAR is not provided for or prohibited by the private law of a foreign organization.

A mandatory condition for incorporation is that the foreign founder must transfer assets they had at the time of the IC's registration, but no less than 800 million rubles worth, to the IC within a year.

The bill also makes corporate governance at all ICs, regardless of how they were created, more flexible. Founders can choose to settle many issues at the level of the IC's charter to maintain or replicate the corporate governance rules in effect at the foreign legal entities or at the level of the founders. Furthermore, incorporated ICs can choose to operate under the foreign law of their foreign founder.

An IC's charter can provide for various classes of members of the board of directors and management board, with various term durations and scope of powers, including the right of veto on certain issues.

In addition to granting the freedom to choose many options in the corporate governance of ICs, the authors of the bill also propose to give their founders additional guarantees that their rights will not worsen in the event of changes to legislation. The bill prohibits their restriction; ICs will be subject to provisions of civil law in effect at the time of their registration, it states. For example, it will not be possible to change requirements for a quorum or number of votes for making decisions.

If the bill is passed, it will become law ten days after its official publication.