On 6 December 2014, amendments (the “Amendments”) to the Federal Law on Investments in Strategic Companies No. 57-FZ (the “Law”) entered into force.
The Amendments exempt from the scope of the Law transactions resulting in acquisition of control over strategic companies exercised by foreign investors controlled by the Russian Federation, its constituent territories or citizens of the Russian Federation who are tax residents of the Russian Federation and have no other citizenship. Previously the Law did not apply only to situations when both parties to the transaction were entities under the control of the Russian Federation, its constituent territories or citizens of the Russian Federation who were tax residents of the Russian Federation and who did not have any other citizenship.
The Amendments also remove the need for preliminary clearance for transactions with strategic companies operating subsoil plots of federal significance if the foreign investor owns more than 75% of the shares (participatory interests) in such companies before the execution of the transactions.
The Amendments expand the scope of the Law and now the Law also covers the acquisition by a foreign investor of the main production facilities of strategic companies having a value of 25% or more of the balance sheet value of the company’s assets.
The Amendments restrict intra-group transactions that were previously exempt from the Law. Now the exemption applies only to acquirers controlled by the entity controlling the strategic company (the criterion for control is direct or indirect possession of more than 50% of the votes). As previously, this exemption does not apply to transactions related to strategic companies operating subsoil plots of federal significance.
The Amendments tighten the control criteria for foreign states, international organizations and organizations under their control: now any Russian company will be considered as being under the control of foreign investors (and, as a result, will itself be considered a foreign investor), if more than 50% of the votes in such company are held by foreign states, international organizations and organizations under their control, even if they do not constitute a group of persons among themselves.
Amendments to strategic types of activity
The Amendments clarified and supplemented the list of strategic activities:
- not all activities related to the use of infectious disease agents are considered strategic, but only those which are subject to licensing; moreover the manufacturers of food products are entirely exempted;
- the provision of services in ports of the Russian Federation (in accordance with the list to be approved by the Government) will be a strategic activity;
- the criteria for when the activity of editorial boards, publishing houses and the founders of periodical printed publications is considered a strategic activity have been clarified.
It is now necessary to inform the authorized federal body of the completion of transactions and other actions for which preliminary consent was previously obtained.