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Under what circumstances is a transaction caught by merger control legislation?

The Competition Law contains a comprehensive list of situations covered by the merger control rules. This list includes:

  • the acquisition by a person or group of persons of more than 25%, 50% or 75% of the shares in a Russian target stock company or more than 33.3%, 50% or 66.6% of the participatory interest in a Russian target limited liability company;
  • the acquisition by a person or group of persons of more than 20% of production or intangible assets situated in Russia (eg, machinery and production facilities – but not including plots of land, non-industrial buildings, unfinished buildings, structures, constructions, premises or parts of premises) from a target company;
  • the acquisition by a person or group of persons of:
    • direct or indirect rights to determine the terms of business of a Russian target company (including as a result of a change in indirect control over a Russian target company or through a shareholders’ agreement); or
    • the right to perform the functions of its executive bodies;
  • the acquisition by a person or group of persons of:
    • more than 50% of the shares in a foreign target company;
    • rights to determine the terms of business of such foreign target company; or
    • the right to perform the functions of its executive bodies;
  • the incorporation of a new company, if its charter capital is to be paid by the shares, participatory interest, assets or rights stipulated above; and
  • the merger or consolidation of several companies.

The above triggers do not apply to mergers and transactions involving companies that are connected with each other through effective corporate control chains (ie, direct and indirect holdings of more than 50% of the respective shares).

Do thresholds apply to determine when a transaction is caught by merger control legislation?

Acquisitions
Under certain circumstances, the following acquisitions are subject to the prior consent of the Federal Anti-monopoly Service (FAS):

  • the acquisition by a person or group of persons of more than 25%, 50% or 75% of the shares in a Russian target stock company or more than 33.3%, 50% or 66.6% of the participatory interest in a Russian target limited liability company;
  • the acquisition by a person or group of persons of more than 20% of production or intangible assets situated in Russia (eg, machinery and production facilities – but not including plots of land, non-industrial buildings, unfinished buildings, structures, constructions, premises or parts of premises) from a target company;
  • the acquisition by a person or group of persons of:
    • direct or indirect rights to determine the terms of business of a Russian target company (including as a result of a change in indirect control over a Russian target company or through a shareholders’ agreement); or
    • the right to perform the functions of its executive bodies; and
  • the acquisition by a person or group of persons of:
    • more than 50% of the shares in a foreign target company;
    • rights to determine the terms of business of such foreign target company; or
    • the right to perform the functions of its executive bodies.

The circumstances in which prior approval are required are as follows:

  • The aggregate book value of the assets of the purchaser and the target (including any group of which it is a member) exceeds Rb7 billion (approximately $134.5 million or €123 million) and the book value of the total assets of the target (including any group of which it is a member) exceeds Rb250 million (approximately $4.8 million or €4.4 million);
  • The aggregate annual revenue earned by the purchaser and the target (including any group of which it is a member) from the sale of goods in the past calendar year exceeds Rb10 billion (approximately $192 million or €175 million) and the book value of the total assets of the target (including any group of which it is a member) exceeds Rb250 million (approximately $4.8 million or €4.4 million); or
  • Either the purchaser or the target (including any group of which it is a member) is included in the FAS register of dominant entities or legal entities with a Russian market share exceeding 35%, irrespective of its assets and revenue.

The book value of the seller and companies within the seller's group should not be considered for the purposes of the above thresholds if the seller loses control over the target as a result of the acquisition.

With respect to foreign acquisitions of the type outlined above there is an additional mandatory threshold: the target foreign company must have direct import sales to Russia in the amount exceeding Rb1 billion (approximately $19 million or €17.5 million) during the year preceding the filing date.

Incorporations
The incorporation of a new company whose charter capital is to be paid by the shares, participatory interest, assets or rights stipulated above is subject to the prior consent of the FAS if:

  • the aggregate book value of the assets of the founder (and any group of which it is a member) whose shares, participatory interest, assets or obligations are contributed to the charter capital of the new company exceeds Rb7 billion (approximately $134.5 million or €123 million);
  • the aggregate annual revenue earned by the founder (and any group of which is a member) whose shares, participatory interest, assets or obligations are contributed to the charter capital of this new company exceeds Rb10 billion (approximately $192 million or €175 million); or
  • the company whose shares, participatory interest, assets or obligations are contributed by the founders to the charter capital of this new company is included in the FAS register of dominant entities or legal entities with a Russian market share exceeding 35%.

Mergers and consolidations
Mergers or consolidations of several companies are subject to the prior consent of the FAS if:

  • the aggregate book value of assets of the participating companies (and any groups of which they are members) exceeds Rb7 billion (approximately $134.5 million or €123 million);
  • the aggregate annual revenue earned by the participating companies exceeds Rb10 billion (approximately $192 million or €175 million); or
  • one of the participating companies is included in the FAS register of dominant entities or legal entities with a Russian market share exceeding 35%.

Implementation
Regarding implementation of the above thresholds, the value of assets and revenue must be calculated on a worldwide basis (ie, regardless of whether they are Russia related), based on figures from the latest balance sheet as of the filing date.

None of the thresholds apply in the financial sector (eg, insurance and banking services), which has its own complex thresholds criteria.

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