Commercial Code in Russia
Commercial Code in RussiaUpdated on Monday 14th October 2019
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Russian Company Law is part of the Civil Law and the Civil Code of the Russian Federation is at the base of both Civil and Company Law. The Company Law makes a difference between commercial businesses and non-commercial ones. The most important commercial entities are the joint stock companies, the limited liability companies and the partnerships.
Our lawyers in Russia can offer more information the Commercial Law. With a vast experience in legal matters, our law firm can help local and foreign investors register companies in accordance with the provisions of the Commercial Law in Russia.
The content of the Russian Commercial Law
Companies in Russia fall under the Commercial and the Company Law. These are further divided into several sub-chapters. The Commercial Code is made up of:
- - the Law on Special Economic Zones in Russia;
- - the Law on the Special Economic Zone of Kaliningrad.
The Russian Company Law is made up of:
- - the Law on the Protection of Competition;
- - the Law on Joint Stock Companies;
- - the Law on Non-Profit Organizations;
- - the Law on Self-Regulated Organizations;
- - the Law on Individual Enterprises.
As seen above, the Company Law is the one providing for the types of companies which can be registered in Russia. Foreign investors should also know that in 2016 the Contract Law which is comprised in the Company Law was amended.
Types of companies which can be set up in Russia
Both local and foreign investors have the right to do business in Russia according to the Commercial Code. They can choose any type of company they want as long they respect the requirements imposed by the law. The following types of companies can be registered in Russia:
- the sole proprietorship or sole trader for which a foreign individual needs a Russian residence permit before registering it;
- the partnership which can be general or limited and which implies having at least two founding members;
- the limited liability company which can be private or public and which is the most popular business form in Russia;
- the branch office and the subsidiary which are legal entities that can be used by foreign companies seeking to enter the Russian market;
- franchises and joint ventures which allow foreign businesspersons to create partnerships with Russian companies.
No matter the chosen structure, the provisions of the Russian Commercial Code must be respected upon the registration of any of them. With the help of our Russian lawyers, the creation of a business in this country is quite simple.
Requirements for starting a business under the Russian Commercial Code
As mentioned above, any investor who decides to set up a business in Russia must respect the conditions imposed by the Company Law. After the type of structure to be used has been determined, the legal requirements for registering it must be considered. These are related to the number of shareholders, the share capital requirements and the licenses which need to be obtained after the company is registered with the Companies House in Russia.
The following conditions must be respected in order to register a company in Russia in accordance with the provisions of the Company Act:
- - the company must have a trade name which can be written in Russian or a foreign language, as desired by the owner;
- - the company must have a registered address in Russia in the region/city where it will complete its activities;
- - the share capital of the company must be deposited in account opened with a Russian bank;
- - the company must have at least one resident director, no matter if it is a private or joint stock company.
With respect to the trading name of the company, it should be noted that in the case of private and joint stock companies, these must bear the abbreviation of the chosen business form.
Setting up a business in Russia is not complicated, however, in order to ensure you respect all the conditions imposed by the law, you can rely on our local lawyers. We can also help you with the preparation of the documents which need to be filed with the Trade Register.
Russian limited liability companies
The Russian limited liability company is required to have a maximum number of 50 members and 50% of its capital must be paid before the company is registered. The capital of a limited liability company is made up of participation interests that, according to the Russian Company Law, cannot be considered securities and they cannot be publicly traded.
Their values can be unequal and offer their holders the rights to vote. The members of a limited liability company in Russia may be subject to obligations that will exceed the value or the size of their participation interests. Also, the members of Russian limited liability companies have preemption rights that will possibly forbid the transfer of interests to third parties.
If you need more information about how you can open this type of company, you may contact our law firm in Russia.
Russian joint stock companies
There are two types of joint stock companies in Russia: private and open or public. The difference between the two types is that in an open joint stock company the shares can be transferable to third parties, while in the private joint stock company shares cannot be transferred directly due to the shareholders’ preemption rights.
To incorporate a public joint stock company, the shareholders must bring a minimum of 1,000 monthly wages and it is allowed for this type of company to have unlimited number of shareholders. For the private joint stock company, the minimum capital share is set at 100 monthly wages and it can have up to 50 shareholders. For both types of companies the Russian law treats the shares as securities, therefore securities market regulations are applied to joint stock companies.
Russian Civil Law considers partnerships separate legal entities. Partners are totally liable for partnership obligations. This is the main reason partnerships are not very popular in Russia. Also, Russian partnerships do not beneficiate from any tax deductions.
Representative office in Russia
Foreign companies are allowed to open representative offices in Russia that will normally not engage in commercial activities, even if the Russian Civil Law does not specifically interdict carrying such activities.
Representative offices will be considered separate legal entities and taxed depending on the activities they carry in Russia. Representative offices are required to register with both regional and state tax authorities.
How to register a company in Russia
The first step to open a company in Russia is to prepare the incorporation documents: the Memorandum and Articles of Association. These must be filed with the Trade Register in Russia together with the details of the companies’ shareholders and directors. After the company is registered, the owners or their representatives must open the corporate bank account where the share capital will be deposited. Then the company must register with the tax authorities. It should be noted that depending on the activity the company will undertake, special licenses could be required. These must be obtained with the relevel authorities in Russia.
Changes in the Commercial Law in Russia
The Russian government is constantly trying to modernize the legislation which enables local and foreign investors who want to do business here. One of the latest amendments to the Commercial Code was introduced in 2017 and it provides for Russian companies to be allowed to enter into agreements which can help them settle disputes in arbitration tribunals in Russia, not only with the International Arbitration Court.
Another change in the Commercial Law provides for enhanced protection of foreign investments in Russia. This implies a better control of those who participate in the shareholding structure of Russian companies.
Another important change related to the shareholders’ meeting, which is currently under work, could provide for the annual general meeting to be held online. This will imply for foreign shareholders to no longer travel to Russia in order to participate to the meeting.
All the changes can be explained by our Russian lawyers. We can also assist with the registration of companies under the new regulations imposed by the Company Law.
Why start a business in Russia?
Russia is one of the most important economies in the world and one of the largest agricultural goods producers at a worldwide level. This is why it attracts an important number of foreign investors every year. Statistically speaking:
- - in 2018, Russia had a Foreign Direct Investment (FDI) inflow of 13,332 million USD;
- - in the same year, Russia’ s FDI stock stood at 407,362 million USD;
- - Cyprus was Russia’s most important investment partner in 2018 with a participation of 27.3%, while the Netherlands accounted for 10% of the investments;
- - mining and quarrying (25.2%) and manufacturing (20.2%) were the most appealing foreign investment sectors in 2018.
Our Russian lawyers provide you valuable information about opening a business in this country, so do not hesitate to contact us.