Federal Law No. 57-FZ “On the Procedure of Foreign Investment in Companies Having Strategic Importance for National Defence and State Security” (as amended) (the Strategic Law) was recently amended.
The list of activities considered of strategic importance for national defence and state security has been extended and now includes rendering services in Russian ports. Further, the amendments specified the criteria for rendering printed press activities strategic.
As a result of amendments the Strategic Law requirements now apply not only to the acquisition of shares in a Russian strategic company, but also to the acquisition of fixed production assets the value of which equals 25% or more of the balance value of the company’s assets.
The amendments provide for a possibility to extend the term of the earlier issued consent of the Russian government for the transaction leading to establishment of control over a strategic company.
In addition, a new requirement has been introduced for where a person in whose favour that consent was issued is now obliged to notify the state authorities on the completion of the relevant transaction.
The amendments clarified the issue with the application of the requirements of the Strategic Law to transactions in relation to strategic entities between companies whose ultimate beneficiaries are Russia or Russian citizens. Previously the law provided that both the seller and the purchaser under these transactions had to be controlled by Russia or be both Russian citizens and Russian tax residents to enjoy the exception from the Strategic Law requirements. Now the law states that the relevant exception applies to situations where only the purchaser is a company controlled by Russia, a Russian constituent entity or a Russian citizen being Russian tax resident.
A number of amendments apply to strategic companies in the sphere of subsoil use. The most notable amendments are:
- The easing of the requirements for foreign investors who already own 75% of shares in a Russian subsoil strategic company. These foreign investors no longer need to obtain the prior approval of the Russian government to increase their shares up to 100%.
- The rules on the application of the exception set out in the Strategic Law with regard to subsoil strategic companies in which the Russian Federation owns more than 50% of shares have been clarified. Now the Strategic Law clearly states that the state ownership may be either direct or indirect and has to be maintained after the transaction has been completed.