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05.09.2019

A guide to opening an LLC in Russian federation

Earlier focusing on the ways for foreign founders to establish a legal presence in Russia, information technology would exist helpful to say a few words nigh common forms of local business organization structures for non-resident investors.

Distributorship contract

This form of business organisation does not crave opening a company in Russian federation. Distributorship contract is an economically feasible options for foreign small businesses. At an early phase, when there are no regular employees and no reliable distribution channels, a foreign legal entity (FLE) may allow the Russian companies to sell the FLEs' goods in Russian federation.

Cooperation betwixt the manufacturer and the official distributor may take several forms. A FLE may grant a Russian distributor exclusive rights to import goods and sell them in Russia. A FLE may choose several distributors for various groups of goods or impose territorial restrictions requiring the customers to purchase products only from a sure distributor. Nigh usually a distributor grants smaller dealers the rights to piece of work with clients and focuses on product promotion and partner network expansion.

Representative office or branch. A branch and representative office (RO) of a FLE are stand up-alone subsidiaries governed by a parent visitor and performing all or some of its functions. In exercise, branches and representative offices are the most mutual forms of business for medium and large FLEs. They may open and shut accounts in the Russian and foreign banks, make transactions and sign contracts. Branches and representative offices are managed past an appointed caput/director.

FLEs' branches or representative offices registered in Russia pay taxes in line with the Russian tax legislation and international agreements. Double taxation treaties between Russia and FLE's countries of origin are meant to prevent double taxation. To work in Russia, branches and representative offices are subject to accreditation, which takes nigh thirty days and requires a 120,000 roubles fee.

Articulation venture. At that place is no such matter as a joint venture (JV) in Russian law. Essentially, it is an unofficial proper name for an organisation established by local and foreign businessmen in Russian federation. JV is registered as an ordinary company, a articulation stock company (JSC) or a express liability visitor (LLC).

To form a joint venture a foreign investor may constitute a new company or purchase a stake in an existing Russian-owned enterprise by acquiring a participatory involvement in the company'south charter majuscule or by condign a participant through an increase in the lease capital.

The advantages of this type of business in Russian federation include the ability to tap several markets and potent economic growth. What is more, the Russian partners are fully aware of the market place climate, well versed in legal matters and have the required expertise and contacts.

A company with a strange founder.

The most popular forms of company registration in Russian federation are joint stock companies and express liability companies. Such legal entities operate nether their own charter and in line with the Russian laws. The incorporation procedures for a JSC and an LLC are very similar, the divergence is that after JSC incorporation, it is necessary to additionally register the shares outcome and delegated the powers of keeping the register of shareholders to a professional registrar. The liability of the participants for the company's debts is limited to the payment of their shares in the charter capital. LLC may opt for a simplified tax system (STS), a preferential taxation regime offered by the state, which is beneficial to pocket-sized and medium businesses.

This commodity will focus on registration of an LLC with non-resident founders, as the nearly familiar and piece of cake-to-use business form for foreigner investors.

Before going into details, information technology is necessary to outline the existing terms for establishing an LLC with foreign participation in Russia.

Is it possible to open up an LLC with foreign participants (foreign national or a FLE) in Russia? Under par. four of art. 66 of the Russian Civil Code the participants in the economic companies and the investors in the limited (commandite) partnerships may exist the citizens and the legal entities. The law may prohibit or restrict the participation of the individual categories of citizens in the economic partnerships and companies, with the exception of the public joint-stock companies. The similar rule is set out in par. 1 of art. 7 of the Federal law "On Limited Liability Companies" (On LLC) dated 08.02.1998 N14-FZ.

Registration of LLC with foreign participation
+7(495) 589-05-39 and info@ur-aid.ru

On the ground of par. 7 of art. 11 of the Constabulary N 14-FZ registration procedure for LLC with foreign participation is adamant by the federal police.

Under fine art. half dozen of the Federal Law of 09.07.1999 North 160-FZ "On Strange Investment in the Russian Federation" (hereinafter – Police force N 160-FZ) the foreign investor is entitled to implement investment on the territory of the Russian Federation in any forms not prohibited by the legislation of the Russian Federation.

When registering an LLC, strange individuals and foreign legal entities may human activity every bit founders (participants). Nevertheless, Russia'due south Federal Constabulary "On Express Liability Companies" No. fourteen-FZ dated 08.02.1998 (art. vii par. ii, sec. 3) sets out the post-obit restriction with respect to LLC incorporation: A company may not take another economical company consisting of 1 person as the only participant.

The provisions of this Federal Law shall extend to companies with i participant inasmuch as this Federal Police does non stipulate otherwise and inasmuch as this does not contradict the substance of appropriate relations.

Challenges and difficulties of establishing an LLC with 100% strange participation by a foreign visitor consisting of ane person in Russia.

Features of registration of an LLC with a foreign founder. Registration of LLC with strange participation is a rather popular service in the Moscow legal services market.

Requirements for the preparation and submission to the registering body of an application for registration of an LLC with strange capital letter. Bidder.

Until recently, it was rather easy to establish an LLC with foreign investments. Opening an LLC by foreign nationals was even easier, if the newly established company consisted of both foreign individuals or companies on the 1 manus and Russian founders on the other mitt.

If a founder of an LLC was a foreign individual or a legal entity and for some reasons could not come to Russia, a Russian national used to become the founder of an LLC. This was the easiest and most frequently used pick, the bespeak being that both nationals (foreign and Russian) used to become the founders of the LLC.

The share of a Russian national in the charter capital could have been 001%, i%, or of whatever other insignificant size. In line with the minutes of the meeting of founders, the Russian national was ordered to register the company. It was this national who could have acted as an bidder responsible for filing the documents for state registration of the company.

The procedure allowed to avoid many bug with the signature'south certification by a delegate or translation of applications and their certification by foreign notaries. Afterwards registration of an LLC with foreign participation, the share owned past a Russian national could accept been sold to a foreign national, or the Russian national could have left the LLC, upon application, and his share was subject to distribution or buyback by a foreign participant.

Just the Society of the Federal Revenue enhancement Service of Russia No. MMV-7-6-/25@ "On Approval of Forms and Requirements for the Execution of Documents to be Filed with the Registering Body for Country Registration of Legal Entities, Self-Employed Individuals and Peasant (Farm) Holdings" dated 25.01.2012 has significantly complicated registration of LLC with foreign participation.

In line with the new forms for legal entities registration, all founders of the company were charged with responsibility to deed every bit applicants for company incorporation, i.e., it was no longer possible for one of them to take on powers delegated by other applicants. (Previously, 1 applicant for registration of an LLC with few founders was enough.) Therefore, if the future legal entity is founded by two or more than persons, the awarding for the LLC registration in cavalcade ii.20. Listing N of the application "Information about the Bidder" is be filled with data about all founders (including foreign ones). The application's listing "Information about the applicant" is signed by the specified person and notarized.

Therefore, strange individuals, as well equally heads of strange entities who are willing to register an LLC in Russia, take to come to Russia and certify their signatures in the awarding for the company registration. If at that place are 3 or 5 or more participants, all of them take to utilise to Russia'southward notary offices and notarize their signatures in the awarding.

Fortunately, when registering an LLC, foreign founders don't take to come up to a notary all at once, information technology is possible one by one, and come up to dissimilar notaries, still, the new requirements accept significantly complicated the registration of an LLC with foreign participation.

Do I need to come to the Russia to register an LLC with foreign founders?
When registering an LLC with foreign investments in Russian federation, there are a number of difficulties associated with the impossibility of a foreign national - founder or head of a foreign legal entity – to come to Russia for registration.

Nevertheless, the founders are effectively required to come to Russia. As was mentioned earlier, during registration of an LLC in Russia, the application on the state registration of a legal entity when incorporated (form P11001) is filed with the registering body, and the application should be signed by all founders of the legal entity, and their signature should be certified past a notary.

According to par. 1 of art. 9 of the Federal Police force dated August eight, 2001, No. 129-FZ "On State Registration of Legal Entities and Individual Entrepreneurs" the following individuals may act as applicants during registration of a legal entity when incorporated:

founder (founders) of a legal entity at the time of its institution;
head of a legal entity acting as a founder of a legal entity being registered;

Russia's legislation therefore does non allow signing an application for state registration of a legal entity when incorporated by a person acting under power of attorney. A founder of a company or the caput of a FLE that is the founder of an LLC has to personally come up to a notary.

Every bit for signing the determination on establishing an LLC, this decision may be signed by a person acting on the basis of a verified power of attorney. The application on state registration of a legal entity can be submitted to the registering body under the ability of chaser, the certificate of state registration of a legal entity and the company's articles of association tin can besides be received past a representative nether the power of attorney.

What if a strange national cannot come to Russia to certify the signature by a notary? At that place are several options.

Certification of an awarding for country registration in a consular function. Co-ordinate to art. 1 of the Russian police on notaries public, notarial acts on behalf of Russia in the territory of other states are performed by the authorized officials of Russia'south consular offices.

However, practice shows that in that location are many pitfalls in this procedure, and it is necessary to inquire about the possibility of certification of the founder'due south signature in each particular consulate.

For example, there are conventions in force, co-ordinate to which "a consular official has the right to certify signatures of nationals of the represented state", which means that simply signatures of Russian nationals are subject to certification.

Moreover, in accord with par. 12 of Annex i to the Order of the Federal Tax Service of Russia of 01.eleven.2004 North SAE-3-09/16@ "On methodological clarifications for filling the forms of documents used in the state registration of legal entities and private entrepreneurs" section 12 of an application for country registration of a legal entity when incorporated is filled by a notary in line with article lxxx of the Russian police on notaries public.

If department 12 is filled in by a consul rather than a notary, the Federal Revenue enhancement Service may officially refuse registration of an LLC with foreign participation. In the best-example scenario, at that place's a notary in a Russian consulate.

Certification of an awarding for registration of an LLC by a foreign notary, apostilization.

Alternatively, a notary may agree to certify an awarding in Russian, for instance, if 1 translates an application merely to ensure a notary understands the purport of the document without certifying the information specified in the application and certifies the signature of a signee. In this example, a notary verifies the authority and certifies the signature of an applicant on a split page, and attaches it to the application in Russian, and then the documents are apostilized, translated (apostille + notary'due south signature sail), the translation is certified by a notary and then the documents are submitted to the registration body. This is the virtually pop style of registration of an LLC by a foreigner, with no need to come to Russian federation.

Information technology should be noted that all strange documents are accepted only with the marks of consular legalization or apostilized, likewise as with a notarized translation of these documents. Other requirements are set for participants from countries that have signed a common assistance treaty with Russian federation, countries that take signed and countries that have not signed the Hague Convention of 1961. Thus, for the countries that signed the treaty "On legal assistance and legal relations" dated Oct 07, 2002 (Ukraine, Belarus, Czech Republic, Latvia, etc.), documents notarization is plenty. Residents of countries that signed the 1961 Hague Convention submit apostilized documents to the Russian registration trunk. Both the documents themselves and the apostille must exist translated into Russian, and a translation must be certified by a notary public. Documents of strange investors from countries that accept non signed the Hague Convention are legalized in Russia's consular offices located in these countries.

Registration of an LLC without participation of a foreign national or a legal entity, followed by incorporation of foreigners into an LLC. An LLC is being registered with the participants who can certify their signatures in the awarding for registration of the LLC with a Russian notary public. After that, a foreign national or a strange legal entity is incorporated into a registered LLC on the footing of a sales understanding or by an increase of charter upper-case letter of the company through contributions of third parties accepted into the visitor. Of form, this process takes longer, consists of several stages of registration of an LLC with strange participation. All the same, it requires much less money that could have been spent for travelling to Russia, adaptation, etc. Though, equally practice shows, foreigners still prefer more "traditional" options, they are non used to looking for loopholes of "uncomfortable" legislation.

Ownership a ready-made company, followed by re-registration and incorporation of foreign participants into an LLC.

Less attractive option for foreigners. Still, we have to mention it besides.

If a foreign national or a foreign legal entity are planning to be the merely participants of the registered LLC and cannot come up to Russian federation to annals a company, take no partners in Russia, who could act as founders for the time to come LLC, it is possible to buy an already registered company. Subsequently the purchase of a set up-made company, the head of the legal entity may submit documents to the registration body to modify the participants of the LLC and contain foreign participants into the LLC. Actually, we're going back to pick four. While changing participants of an LLC a former participant who used to be a founder leaves the company, and his share is bought out or distributed amidst strange participants.

Documents required from foreign founders for registration of an LLC with foreign participation.

If a foreign company is the founder, the extract from the register of foreign legal entities of a corresponding country of origin or other equivalent legal proof of the juridical status of the foreign legal entity, also equally a Russian translation of the passport of the head of the investor's company, is submitted for registration of the LLC.

Information technology should be noted that if an application for registration is notarized by a Russian notary, the latter will ask the managing director of the investor's company to provide a certified translation of the company's charter and a decision to appoint him as the head of the company. A notary volition need these documents to ostend the authority of the director, they are not submitted for registration. Moreover, if the manager of a foreign visitor does non speak Russian, a certified translator volition be required, as the manager must confirm that he or she is conscious of his or her deportment and intentions to annals the company.

Other documents may include a certificate of state registration, a charter and a decision on the institution. It is recommended that all available documents be provided. Foreign documents must be translated into Russian, the translation must exist notarized, and the documents must exist apostilized.

If the founder of a visitor is a foreign individual, a notarized translation of the passport of the strange founder of the LLC will exist required.

Regardless of whether the founder of a visitor with foreign participation is an individual or a legal entity, a notarized power of attorney for submission and receipt of documents from the registering body is required. Of grade, the ability of attorney must be translated into Russian and the translation must be notarized. Once again, this power of attorney is issued only to submit and receive documents from the registering body, it is impossible to utilise it to verify an awarding for registration of an LLC.

Intricacies related to the participation of a foreign investor in the management of a visitor registered in Russian federation. Is a work permit required?

The nigh important thing is that the founder may lack a work permit or residence permit to annals a company with foreign participation. Moreover, as mentioned above, the registration can be carried out in the founder's absence, therefore a visa is not required. In other words, a foreign national may be both the founder and the caput of the company to be established in Russian federation.

However, in order for the head of the visitor to piece of work successfully, it is still recommended that a foreigner apply for a work permit in Russian federation. Since work permits and visa invitations are issued for top-managers without quota, hiring of highly qualified specialists (HQS) is greatly simplified.

At that place'due south no demand to apply for a allow to recruit foreign workers, to post a vacancy in the employment heart, to provide a Russian linguistic communication certificates and medical certificates.

The highly qualified specialists (HQS) according to Russian police include strange nationals earning over ii million roubles per year under agreements/contracts. It is assumed that these employees have stiff cognition and feel in their area of specialization. A iii-twelvemonth piece of work permit is granted to them under a simplified procedure compared to other foreign workers.

Importantly, if you hire a foreigner for an executive position when registering a company in Russia and programme to effect a work permit for him/her, it is non recommended that you lot register him/her as a director at one time!

The procedure for obtaining a work let for HQS from visa countries implies issuing invitations and work visas. Therefore, if yous starting time register a foreigner equally a managing director of the future company, and and then apply for a piece of work let for him, you will confront difficulties and will have to make changes to the register of legal entities and lay him/her off. Therefore, one should follow the dominion: first work permit, then registration every bit a managing director.

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Restrictions on LLCs with foreign participation

The Russian legislation does not provide for any restrictions on the utilize of a simplified tax system (STS) by Russian entities formed past foreign founders. These restrictions are listed in art. 346.12 and 346.thirteen of the Russian Tax Code.

The Russian legislation provides for rather strict regulation of participation of entities with non-resident founders in sure sectors of Russia's economic system.

The police imposes restrictions on strange investors' participation in the charter uppercase of entities accounted strategic for Russia'due south defense and security. The post-obit sectors accept been defined as strategic: repairing, disposal of weapons and military equipment, using radioactive materials, Television and radio broadcasting with a large coverage, publishing a periodical print publication with the apportionment at least ane one thousand copies for each issue and 39 more industries. Nether the Federal Police force No. 57-FZ dated April 29, 2008 and the Federal Law No. 58-FZ dated April 29, 2008, a foreign investor seeking command over strategic business concern entities has to either utilise for a prior authorization or notify the authorized trunk of a planned transaction. The process for applying for a prior authorization is explained in art. 12 of the Law.

In that location are restrictions on strange investments in insurance and banking sectors. The Law "On Organisation of Insurance Business in the Russia" dated 11.27.1992 N 4015-one, Federal Human activity "On banks and banking activeness" dated 02.12.1990 N 395-1;

Restrictions besides apply to foreign ownership and leasing of country plots.

Under par. 2, fine art.15 of the Russian State Code, strange legal entities shall not have championship of plots of country located in the border territories recorded in the list established by the President of the Russia in compliance with the federal legislation on the Land Border of the Russian federation and other territories of the Russia specifically indicated under federal laws.

This means that the land plots in the border territories and inside the seaport boundaries cannot be in the ownership of foreign citizens or strange organisations (par. 3. art. 15, Land Lawmaking; par. 2. art. 28 of 261-FZ dated 08.eleven.2007).

Foreign citizens, foreign legal entities, stateless persons, as well as the legal entities in whose authorized (pooled) capital the share of strange citizens, strange legal entities and stateless persons exceeds 50%, may simply possess land plots pertaining to farm lands on a leasehold ground, except for cases provided for by the 119-FZ dated 05.01.2016 (fine art. iii of 101-FZ "On Farm land turnover").

These are certain land plots in certain border territories, within the boundaries of seaports, etc. Russian companies with a foreign participation of more than than l% cannot own agricultural land, foreign investors may only charter agricultural land.

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