Resolution of the Government of the Russian Federation No. 295 dated 6 March 2022, which establishes the general procedure for issuing permissions for deals prohibited by presidential decrees, was amended by Resolution of the Government of the Russian Federation No. 40 dated 22 January 2024 (“Resolution No. 40”).
The amendments concern the list of documents and information that should be submitted to the subcommission of the Government Commission for Control over Foreign Investments in the Russian Federation (“Commission”) to obtain permission for deals with securities (shares, contributions) of Russian legal entities.
Thus, according to Resolution No. 40, the application to the Commission should be supplemented with the following documents and information:
- an independent valuation report on the market value of the asset (securities, shares and contributions) prepared by an appraiser included in the list of recommended appraisers;
- key performance indicators (KPIs) and their target values (if any) set for asset buyer as conditions for deals.
Additional requirements for authorization of transactions with entities from “unfriendly” states, including the provision of a valuation report and KPIs, were previously already contained in the Extract from the Decision of the Commission dated 7 July 2023 No. 171/5. The market value of the asset specified in the valuation report is used by the Commission to calculate the voluntary contribution to the budget of the Russian Federation in the amount of 15% of the market value1, as well as to establish a discount for the sale of the asset in the amount of at least 50% of its market value.
Moreover, Resolution No. 40 clarifies that monitoring of the achievement of key performance indicators (KPIs) and their target values is carried out by the ministry responsible for state control in the industry in which the Russian company or party to the transaction operates.
At the same time, Resolution No. 40 establishes that the submission of an independent valuation report on the market value of the asset (securities, shares and contributions) and the proposal of key performance indicators (KPIs) and their target values (if any) is not required to obtain Commission's permissions for:
- intergroup deals (a group of entities is defined in accordance with the Russian legislation on the protection of competition);
- deals between entities from “unfriendly” states.
Thus, the new rules may exempt applicants for intergroup deals and deals between “unfriendly” entities from making a voluntary contribution to the budget of the Russian Federation and setting a 50% discount due to the lack of requirement to make a market valuation of the subject of the transaction – securities, shares and contributions of Russian companies.
1 Extract from the minutes of the meeting of the subcommission of the Government Commission on Control over Foreign Investments in the Russian Federation dated 26 September 2023 No. 193/4