Notification and clearance timetable

Filing formalities

What are the deadlines for filing? Are there sanctions for not filing and are they applied in practice?

There are no legal deadlines for a pre-completion filing. Merger control clearance must be obtained before completion and the filing must be made well in advance of the envisaged completion date. The FAS’s clearance decision is valid for one year from its issue.

Failure to submit a required pre-completion filing can be penalised by fines on legal entities and on managers. These penalties are regularly applied.

In addition, the FAS may apply to a court to invalidate, in full or in part, agreements and other transactions for which its prior authorisation was required but has not been obtained, or to liquidate a company if it was incorporated without prior approval, provided that the relevant transaction or incorporation results in limitation of competition. These penalties are applied rarely.

Which parties are responsible for filing and are filing fees required?

Pre-completion notifications should be filed with the FAS by the acquirer of the shares, rights or assets. In the case of incorporation, a filing should be submitted by all parties that take decisions on incorporation. In the case of a joint venture agreement, a filing should be submitted by the parties to the agreement. The administrative liability for failure to submit a filing is borne by the party responsible for the filing. Pre-completion filings are subject to a fee of 35,000 roubles per filing.

What are the waiting periods and does implementation of the transaction have to be suspended prior to clearance?

The FAS is obliged to consider pre-completion filings within 30 days of the filing date. However, if the FAS determines that further disclosure, documents or information is needed or that the transaction may result in limitation of competition, the FAS may extend the term of review by up to another two months. In the latter case, the FAS will publish information on the transaction on its website and invite interested parties to file submissions on the impact of the transaction on the Russian market. Moreover, the FAS may return the filing as incomplete and in this case the review period will start anew as soon as the full set of documents is submitted.

In the event of a possible impact on competition, the FAS may also delay clearance until the parties perform certain actions. The FAS will then set a term for performance of such actions, which may not exceed nine months.

If a transaction is also subject to prior approval in accordance with the Strategic Investments Law or the Foreign Investments Law (see question 8) the antimonopoly clearance will not be issued until the ‘strategic’ or ‘foreign investments’ clearance is granted. The ‘strategic’ process, by statute, may take up to six months but, in practice, may take longer. There is no statutory deadline for the ‘foreign investments’ process (ie, where the Russian target is not a ‘strategic’ entity), but in practice it takes usually one to two months to obtain clearance (which is in fact a FAS letter to the effect that ‘strategic’ clearance is not required).

In pre-completion filings, implementation of the transaction should be suspended until clearance, regardless of whether the statutory waiting period has expired.

Pre-clearance closing

What are the possible sanctions involved in closing or integrating the activities of the merging businesses before clearance and are they applied in practice?

Completion of transactions and integrating the activities of the merging businesses (if such integration results in the acquirer actually beginning to control the target, eg, by way of giving binding instructions to it) before clearance may result in fines and invalidation of the transaction, as in the case of a failure to file (see question 9).

In a recent merger control review, the FAS concluded that the transaction notified also required prior consent under the Strategic Investment Law and extended the review period until receipt by the notifying party of such consent. The notifying party apparently disagreed with the FAS and closed the transaction without applying for consent and, accordingly, before merger control clearance was issued. The FAS viewed such closing as ‘conscious disrespect’ for Russian law, imposed a fine and brought court proceedings seeking to deprive the acquirer of the voting rights at the meeting of shareholders of the Russian target, which is the regular procedure in case of non-compliance with the Strategic Investment Law. The FAS decision was upheld by courts at two instances.

Are sanctions applied in cases involving closing before clearance in foreign-to-foreign mergers?

We are not aware of any sanctions applied for closing before clearance in foreign-to-foreign mergers. However, it can reasonably be assumed that the FAS would apply sanctions in such cases. There are cases involving deals between foreign and Russian legal entities, where the FAS applied sanctions for closing before clearance and the courts upheld the FAS decisions. By way of example, in one case the company made a pre-completion filing two months after the transaction had been completed. The FAS discovered this violation during the review of the filing and applied administrative sanctions.

Sanctions for failure to submit a pre-completion filing may even be applied on formal grounds in circumstances where the parties make a filing, obtain FAS clearance and then change the structure of the transaction with the actual result remaining unchanged. For example, in one case a foreign legal entity applied for FAS consent to the acquisition of the shares in, or direct control over, Russian legal entities and obtained clearance. Subsequently, control over these Russian entities was obtained indirectly by way of acquisition of direct control over a 100 per cent parent company (a foreign entity) of the Russian legal entities. In this case the FAS applied sanctions for closing without clearance and the courts upheld the FAS’s decision.

There have been several cases in which foreign-to-foreign transactions were invalidated by courts or other sanctions were applied on the grounds of non-compliance with the requirement to obtain consent pursuant to the Strategic Investments Law (see question 8).

What solutions might be acceptable to permit closing before clearance in a foreign-to-foreign merger?

Hold-separate arrangements are not provided for by the LPC and have rarely been used where Russian issues held up a larger foreign-to-foreign transaction. In principle, such arrangements are only possible with regard to the acquisition of the rights to determine the business activities of a company, but even for those transactions they are not a 100 per cent ‘clean’ solution.

Public takeovers

Are there any special merger control rules applicable to public takeover bids?

There are no special merger control rules and notably no exemption from the prohibition on completing the transaction before clearance.

Documentation

What is the level of detail required in the preparation of a filing, and are there sanctions for supplying wrong or missing information?

The LPC lists the documents and information that must be collected for the filing. These include agreements or other documents relating to the transaction, corporate documents of the acquiring party and the target, information on the business activities of the parties and the target with exact production and sales figures for the past two years, information on the companies of the acquirer’s and the target’s groups and also on the ultimate beneficiaries of the groups. Failure to provide all documents and information required under the LPC may result in the FAS rejecting the application as incomplete.

The information and documents included in the filing must be accurate and complete. Provision of false information may be sanctioned by fines on both legal entities and managers and, more generally, serve as a ground for refusing clearance. In practice, incomplete information is qualified by the FAS as false information, and the provision of incomplete information therefore entails the risk of the same sanctions as those for submission of false information.

Documents issued abroad must carry an apostille (if the country where a document is issued is a party to the 1961 Hague Convention on Apostille) or be legalised. They need to be translated into Russian and the translator’s signature must be certified by a Russian notary.

The nature of the filing is rather technical. The waiting period begins after the filing has been submitted to the FAS.

There are specific procedures for filing of certain intra-group transfers. In particular, a post-completion filing is permitted if one of the group entities files a list of its group members with the FAS no later than one month before completion. The list should specify the reasons for inclusion in the group for each of the group members. Within 14 days of receipt of this list, the FAS informs the applicant either that it accepts the submitted list or that the list does not comply with the statutory requirements. The list as filed is published on the FAS website.

Investigation phases and timetable

What are the typical steps and different phases of the investigation?

After submission of the filing, the FAS must decide within 30 days whether to clear the merger or, if the transaction raises competition concerns, whether to enter into a second-stage investigation or impose conditions for clearing the transaction. The second-stage decision must be rendered within a further two months. If clearance is delayed until the parties perform certain actions, the deadline for such actions must not be longer than nine months.

Cases that raise no competition concerns and filings in relation to which are complete and meet all requirements (such as, for example, formalisation of documents) are typically cleared within 30 days of the filing date. At the same time, the timing of the review process is not always predictable, as the FAS has a broad discretion in determining whether the deal gives rise to concerns and, accordingly, whether to extend the review period. If the FAS requires additional information or clarifications, it typically issues a formal written request, which may result in an extension of the review period, and from that perspective it is advisable to try to avoid them, by making the filing as complete as possible and trying to pre-empt the FAS’s queries.

There are no legal means to speed up clearance.

Pre-notification consultations with the authority are not required but are possible. The notifying party may inform the FAS of the proposed transaction prior to submission of the filing, provide the authority with the relevant documents and information and suggest remedies for discussion. Such pre-notification contacts do not influence the timing or procedure of the review of the formal filing and the authority is not bound by the results of such pre-notification discussions. That said, when taking the decision in relation to the deal after it is formally filed, the authority is obliged to take into account the materials disclosed in the course of such pre-notification consultations. As a practical matter, such pre-notification contacts are recommendable in cases that may give rise to competition concerns.

What is the statutory timetable for clearance? Can it be speeded up?

Upon filing, the set of documents and information as filed is forwarded to the department of the FAS dealing with the relevant market sector.

The FAS will review the relevant market shares of the parties to the transaction (including the target market share) and investigate whether the transaction will influence competition in the Russian market. The FAS officials may use, apart from the filed documents, any sources of information, such as statistics from the databases of the Russian Statistics Committee and the Russian Customs Service, their own databases, and information from the internet and press, etc. They may also request additional information directly from the parties, competitors or other companies and individuals concerned.

If the transaction does not limit competition in the Russian market, the FAS is supposed to issue clearance within 30 days of receipt of the filing.

If competition concerns are identified, within 30 days the FAS either issues a prohibition order or informs the applicant in writing that the review period will be extended for up to two months (second-stage investigation) or that clearance can only be provided after the parties have fulfilled certain conditions. After the second stage, the FAS will issue either a prohibition or a clearance decision (conditional or unconditional).

The FAS usually meets the deadlines. That said, the timing of the review process is not always predictable as the FAS has broad discretion in determining whether the deal requires further analysis and, accordingly, whether to extend the review period. As a practical matter, in the absence of substantive issues an extension is unusual.