Russian Legal Forms

When starting your own business in Russia, the first question is which legal form to choose. The most common legal forms for a foreign company in Russia are: representative office, branch or limited liability company (LLC; in Russian Obschestvo s Ogranichennoy Otvetstvennostyu or OOO). This guide explains which of these legal forms is best suited for your Russian project and provides a general overview of the key issues required to set up a business in Russia (in the form of an LLC). A public company has the right to make an open subscription of its shares – among an unlimited group of persons and a closed subscription (a predetermined limited group of persons), if the possibility of making a closed subscription is not limited by the articles of association or legal acts of the company. Shareholders do not have the right to subscribe to acquire shares sold by other shareholders of the Company. The number of shareholders is unlimited. [3] Read more about the most common legal form in Russia All Russian legal entities are classified into single entities (no “participation” in the founder(s)) and companies. Companies, on the other hand, can be public or private. Private companies will provide their members with greater flexibility on corporate governance issues and will be subject to more limited disclosure requirements.

Conversely, public bodies will have to disclose more information about their activities and the management structure of public bodies will be further regulated by binding rules. A foreign company may be a shareholder in an LLC. A foreign parent company cannot own 100% of the LLC`s shares if the parent company itself has only one shareholder – the so-called “grandchild ban.” A second shareholder (a corporation or person) must be brought into the LLC in this case. A small stake of the second shareholder (e.g. 0.1% or 0.01%) is sufficient. A branch may perform all the functions of a representative office and engage in commercial activities. As part of the parent company, a branch carries on business activities on its behalf. In other words, all contracts are concluded by the branch exclusively in the name of the parent company. Every company in Russia must have a registered legal address – in other words, rent or buy real estate and register their address there. The legal address serves as the company`s primary contact address, which is necessary for communicating with government agencies and counterparties. Both the tax authorities and the banks deal with this issue very strictly.

The legal address will be communicated to the tax authorities for the registration of an LLC. To confirm a legal address, the owner issues a letter of guarantee and a copy of their certificate of ownership. Registration of an LLC will be refused if the LLC has no legal address or a false legal address. Russian law prevents an LLC from being wholly owned by another company (“khozyaystvennoye obshchestvo”) if that holding company itself is wholly owned (i) by another legal entity; or (ii) a single person. There are other specific forms of legal entities, such as economic partnership, which mainly aims at the joint management of intellectual property rights (but beyond that, it is not very applicable). Any type of activity (subject to authorization) with the exception of the creation of other legal entities, the issuance of bonds and other issuing securities, advertising In order to facilitate the comparison between the legal entities described above, we refer to the following comparative table: However, a representative office may perform representative functions on behalf of the parent company, including the organization of marketing and advertising in Russia. It can also assist in other commercial and legal transactions between the parent company and Russian organizations, including the rental of real estate. A limited liability company (“obshchestvo s ogranichennoy otvetstvennostyu” – an “LLC”) is referred to by the abbreviation “OOO” or “LLC” before or after its name.

It is one of the simplest forms of Russian legal entity and is often used by foreign investors for a wholly-owned subsidiary. A representative office and a branch are separate permanent subdivisions (integral parts) of its parent company and not separate legal entities. The business partnership (“khozyaystvennoye partniorstvo”) is designed for the new technology sector and aims to offer its participants more flexibility than the existing LLC and JSC forms. LLC is formed by one or more persons (legal and/or natural persons), their initial capital is divided into participating shares, and LLC participants are not responsible for the obligations of the company and bear the risk of loss in the amount of contributions they make. The number of shareholders may not exceed 50. [1] Please consult your lawyer for detailed legal advice. A JSC only discloses its founding shareholders in its commercial register of the Russian tax register. Founding shareholders are listed in the same section of the document that discloses ownership of LLCs (“Information about founders (participants) of the legal entity”), but the date corresponding to the amount of equity is only a start date. Russian companies may have one of different types of legal status. A company may operate as a limited liability company or as a public or private corporation, or may be managed by a sole proprietor. Other types of commercial and non-commercial organizations are also recognized.

A representative office (“predstavitelstvo”) is not an independent legal person, but a body set up to represent the interests of the parent company. In practice, this does not prevent them from doing business in Russia (as many representative offices do) and being treated by the tax authorities as a separate profit center from the parent company. However, in civil law, the absence of a representative office with its own legal personality limits the nature of the economic activity it may carry out. For example, a representative office may neither officially import goods for purposes other than its own use, nor may it register ownership of real property in its own name. A representative office may also have difficulty obtaining licences and permits for certain types of businesses.