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05.09.2019

A guide to opening an LLC in Russia

Before focusing on the ways for foreign founders to establish a legal presence in Russia, it would be helpful to say a few words near common forms of local business structures for non-resident investors.

Distributorship contract

This form of business does not crave opening a company in Russian federation. Distributorship contract is an economically feasible options for foreign small-scale businesses. At an early on phase, when there are no regular employees and no reliable distribution channels, a foreign legal entity (FLE) may allow the Russian companies to sell the FLEs' goods in Russia.

Cooperation between the manufacturer and the official distributor may accept several forms. A FLE may grant a Russian distributor exclusive rights to import appurtenances and sell them in Russia. A FLE may choose several distributors for various groups of goods or impose territorial restrictions requiring the customers to purchase products just from a sure distributor. Most commonly a distributor grants smaller dealers the rights to work with clients and focuses on production promotion and partner network expansion.

Representative office or branch. A branch and representative part (RO) of a FLE are stand-solitary subsidiaries governed by a parent company and performing all or some of its functions. In do, branches and representative offices are the most common forms of business for medium and big FLEs. They may open and shut accounts in the Russian and strange banks, make transactions and sign contracts. Branches and representative offices are managed past an appointed head/director.

FLEs' branches or representative offices registered in Russia pay taxes in line with the Russian revenue enhancement legislation and international agreements. Double taxation treaties between Russian federation and FLE's countries of origin are meant to forestall double taxation. To work in Russia, branches and representative offices are subject to accreditation, which takes about xxx days and requires a 120,000 roubles fee.

Joint venture. There is no such thing every bit a joint venture (JV) in Russian law. Substantially, it is an unofficial proper name for an organization established by local and strange businessmen in Russian federation. JV is registered as an ordinary visitor, a articulation stock visitor (JSC) or a limited liability company (LLC).

To form a joint venture a foreign investor may establish a new company or purchase a stake in an existing Russian-endemic enterprise by acquiring a participatory involvement in the company'southward charter uppercase or by becoming a participant through an increment in the charter capital.

The advantages of this blazon of business in Russia include the ability to tap several markets and potent economical growth. What is more than, the Russian partners are fully aware of the market place climate, well versed in legal matters and take the required expertise and contacts.

A company with a foreign founder.

The most pop forms of company registration in Russia are articulation stock companies and limited liability companies. Such legal entities operate under their own charter and in line with the Russian laws. The incorporation procedures for a JSC and an LLC are very similar, the difference is that after JSC incorporation, information technology is necessary to additionally register the shares issue and delegated the powers of keeping the register of shareholders to a professional registrar. The liability of the participants for the company's debts is limited to the payment of their shares in the lease capital. LLC may opt for a simplified revenue enhancement organization (STS), a preferential tax regime offered by the state, which is benign to minor and medium businesses.

This article will focus on registration of an LLC with non-resident founders, every bit the near familiar and easy-to-use business organization form for foreigner investors.

Before going into details, it is necessary to outline the existing terms for establishing an LLC with foreign participation in Russian federation.

Is it possible to open an LLC with strange participants (foreign national or a FLE) in Russia? Under par. 4 of fine art. 66 of the Russian Ceremonious Code the participants in the economic companies and the investors in the limited (commandite) partnerships may exist the citizens and the legal entities. The law may prohibit or restrict the participation of the private categories of citizens in the economic partnerships and companies, with the exception of the public joint-stock companies. The similar rule is fix out in par. 1 of art. 7 of the Federal police force "On Limited Liability Companies" (On LLC) dated 08.02.1998 N14-FZ.

Registration of LLC with foreign participation
+7(495) 589-05-39 and info@ur-help.ru

On the basis of par. seven of art. eleven of the Police N xiv-FZ registration process for LLC with strange participation is determined by the federal law.

Under art. 6 of the Federal Law of 09.07.1999 N 160-FZ "On Foreign Investment in the Russia" (hereinafter – Law N 160-FZ) the foreign investor is entitled to implement investment on the territory of the Russian Federation in any forms not prohibited past the legislation of the Russian federation.

When registering an LLC, foreign individuals and foreign legal entities may act as founders (participants). Nevertheless, Russian federation'due south Federal Police "On Limited Liability Companies" No. fourteen-FZ dated 08.02.1998 (art. 7 par. ii, sec. 3) sets out the following restriction with respect to LLC incorporation: A company may not have some other economical company consisting of one person as the simply participant.

The provisions of this Federal Police force shall extend to companies with one participant inasmuch as this Federal Constabulary does not stipulate otherwise and inasmuch every bit this does not contradict the substance of appropriate relations.

Challenges and difficulties of establishing an LLC with 100% strange participation by a foreign visitor consisting of one person in Russia.

Features of registration of an LLC with a foreign founder. Registration of LLC with foreign participation is a rather pop service in the Moscow legal services market.

Requirements for the preparation and submission to the registering body of an application for registration of an LLC with foreign majuscule. Bidder.

Until recently, it was rather easy to establish an LLC with foreign investments. Opening an LLC by strange nationals was even easier, if the newly established company consisted of both foreign individuals or companies on the ane hand and Russian founders on the other manus.

If a founder of an LLC was a foreign individual or a legal entity and for some reasons could not come to Russian federation, a Russian national used to become the founder of an LLC. This was the easiest and most frequently used pick, the point being that both nationals (strange and Russian) used to go the founders of the LLC.

The share of a Russian national in the charter capital could accept been 001%, one%, or of whatever other insignificant size. In line with the minutes of the meeting of founders, the Russian national was ordered to register the visitor. Information technology was this national who could have acted every bit an applicant responsible for filing the documents for state registration of the visitor.

The procedure allowed to avoid many problems with the signature'south certification by a consul or translation of applications and their certification past foreign notaries. Later on registration of an LLC with foreign participation, the share owned by a Russian national could have been sold to a foreign national, or the Russian national could have left the LLC, upon application, and his share was bailiwick to distribution or buyback past a foreign participant.

But the Order of the Federal Tax Service of Russia No. MMV-vii-6-/25@ "On Approval of Forms and Requirements for the Execution of Documents to be Filed with the Registering Body for State Registration of Legal Entities, Self-Employed Individuals and Peasant (Farm) Holdings" dated 25.01.2012 has significantly complicated registration of LLC with foreign participation.

In line with the new forms for legal entities registration, all founders of the visitor were charged with responsibility to act as applicants for company incorporation, i.e., it was no longer possible for one of them to take on powers delegated past other applicants. (Previously, one applicant for registration of an LLC with few founders was plenty.) Therefore, if the future legal entity is founded by two or more than persons, the awarding for the LLC registration in column 2.20. List N of the application "Information about the Applicant" is be filled with data most all founders (including foreign ones). The application's listing "Information near the applicant" is signed by the specified person and notarized.

Therefore, strange individuals, likewise as heads of strange entities who are willing to annals an LLC in Russian federation, have to come to Russia and certify their signatures in the application for the company registration. If there are 3 or 5 or more participants, all of them accept to apply to Russia'southward notary offices and notarize their signatures in the application.

Fortunately, when registering an LLC, strange founders don't take to come to a notary all at once, it is possible ane past 1, and come to dissimilar notaries, however, the new requirements accept significantly complicated the registration of an LLC with foreign participation.

Do I need to come to the Russia to register an LLC with foreign founders?
When registering an LLC with foreign investments in Russia, there are a number of difficulties associated with the impossibility of a foreign national - founder or head of a foreign legal entity – to come up to Russian federation for registration.

Withal, the founders are effectively required to come to Russia. As was mentioned earlier, during registration of an LLC in Russia, the awarding on the state registration of a legal entity when incorporated (form P11001) is filed with the registering body, and the application should be signed by all founders of the legal entity, and their signature should be certified by a notary.

According to par. 1 of art. 9 of the Federal Law dated August 8, 2001, No. 129-FZ "On State Registration of Legal Entities and Individual Entrepreneurs" the following individuals may act every bit applicants during registration of a legal entity when incorporated:

• founder (founders) of a legal entity at the time of its establishment;

• head of a legal entity acting as a founder of a legal entity being registered;

Russia's legislation therefore does not let signing an awarding for country registration of a legal entity when incorporated by a person acting under power of attorney. A founder of a visitor or the head of a FLE that is the founder of an LLC has to personally come to a notary.

Every bit for signing the decision on establishing an LLC, this decision may be signed by a person acting on the basis of a verified power of chaser. The application on state registration of a legal entity can be submitted to the registering trunk under the power of attorney, the certificate of state registration of a legal entity and the company's articles of association can too be received by a representative under the power of chaser.

What if a foreign national cannot come to Russia to certify the signature by a notary? There are several options.

Certification of an awarding for state registration in a consular office. According to art. 1 of the Russian police force on notaries public, notarial acts on behalf of Russia in the territory of other states are performed by the authorized officials of Russia's consular offices.

Still, practice shows that there are many pitfalls in this procedure, and information technology is necessary to ask about the possibility of certification of the founder'due south signature in each particular consulate.

For example, there are conventions in force, co-ordinate to which "a consular official has the right to certify signatures of nationals of the represented land", which ways that only signatures of Russian nationals are subject field to certification.

Moreover, in accordance with par. 12 of Annex 1 to the Order of the Federal Tax Service of Russia of 01.11.2004 Northward SAE-3-09/16@ "On methodological clarifications for filling the forms of documents used in the state registration of legal entities and private entrepreneurs" department 12 of an application for land registration of a legal entity when incorporated is filled past a notary in line with commodity 80 of the Russian law on notaries public.

If department 12 is filled in past a consul rather than a notary, the Federal Tax Service may officially refuse registration of an LLC with strange participation. In the best-case scenario, there's a notary in a Russian consulate.

Certification of an application for registration of an LLC by a foreign notary, apostilization.

Alternatively, a notary may agree to certify an application in Russian, for instance, if one translates an awarding only to ensure a notary understands the purport of the document without certifying the data specified in the application and certifies the signature of a signee. In this case, a notary verifies the say-so and certifies the signature of an applicant on a separate page, and attaches information technology to the application in Russian, and then the documents are apostilized, translated (apostille + notary's signature sheet), the translation is certified by a notary and and then the documents are submitted to the registration torso. This is the nearly pop fashion of registration of an LLC by a greenhorn, with no need to come to Russian federation.

It should be noted that all foreign documents are accepted only with the marks of consular legalization or apostilized, as well equally with a notarized translation of these documents. Other requirements are ready for participants from countries that take signed a common assistance treaty with Russia, countries that accept signed and countries that take non signed the Hague Convention of 1961. Thus, for the countries that signed the treaty "On legal assistance and legal relations" dated October 07, 2002 (Ukraine, Belarus, Czechia, Latvia, etc.), documents notarization is enough. Residents of countries that signed the 1961 Hague Convention submit apostilized documents to the Russian registration body. Both the documents themselves and the apostille must be translated into Russian, and a translation must be certified by a notary public. Documents of strange investors from countries that have not signed the Hague Convention are legalized in Russia'south consular offices located in these countries.

Registration of an LLC without participation of a foreign national or a legal entity, followed by incorporation of foreigners into an LLC. An LLC is being registered with the participants who can certify their signatures in the application for registration of the LLC with a Russian notary public. Later on that, a foreign national or a foreign legal entity is incorporated into a registered LLC on the basis of a sales understanding or by an increase of charter capital of the company through contributions of third parties accepted into the company. Of course, this process takes longer, consists of several stages of registration of an LLC with strange participation. Still, it requires much less money that could have been spent for travelling to Russian federation, adaptation, etc. Though, as practice shows, foreigners still prefer more "traditional" options, they are not used to looking for loopholes of "uncomfortable" legislation.

Ownership a ready-made company, followed past re-registration and incorporation of strange participants into an LLC.

Less attractive choice for foreigners. However, we take to mention information technology too.

If a foreign national or a foreign legal entity are planning to be the only participants of the registered LLC and cannot come to Russian federation to register a company, have no partners in Russia, who could human activity as founders for the time to come LLC, it is possible to purchase an already registered visitor. After the buy of a ready-made company, the head of the legal entity may submit documents to the registration body to alter the participants of the LLC and comprise foreign participants into the LLC. Actually, we're going dorsum to selection four. While changing participants of an LLC a old participant who used to be a founder leaves the visitor, and his share is bought out or distributed amidst strange participants.

Documents required from foreign founders for registration of an LLC with foreign participation.

If a foreign company is the founder, the extract from the register of strange legal entities of a corresponding land of origin or other equivalent legal proof of the juridical status of the strange legal entity, as well as a Russian translation of the passport of the head of the investor'due south company, is submitted for registration of the LLC.

Information technology should exist noted that if an application for registration is notarized by a Russian notary, the latter will ask the director of the investor'south visitor to provide a certified translation of the company'due south charter and a decision to appoint him every bit the head of the visitor. A notary volition need these documents to confirm the authorization of the director, they are not submitted for registration. Moreover, if the director of a foreign company does not speak Russian, a certified translator will be required, as the managing director must confirm that he or she is conscious of his or her actions and intentions to annals the company.

Other documents may include a certificate of country registration, a charter and a decision on the establishment. It is recommended that all available documents be provided. Foreign documents must exist translated into Russian, the translation must be notarized, and the documents must be apostilized.

If the founder of a company is a foreign private, a notarized translation of the passport of the strange founder of the LLC will be required.

Regardless of whether the founder of a company with foreign participation is an individual or a legal entity, a notarized power of attorney for submission and receipt of documents from the registering body is required. Of course, the power of chaser must be translated into Russian and the translation must exist notarized. Over again, this power of attorney is issued only to submit and receive documents from the registering trunk, information technology is incommunicable to use it to verify an application for registration of an LLC.

Intricacies related to the participation of a foreign investor in the direction of a company registered in Russian federation. Is a work permit required?

The most important affair is that the founder may lack a work let or residence permit to register a company with foreign participation. Moreover, as mentioned above, the registration tin be carried out in the founder's absence, therefore a visa is not required. In other words, a foreign national may be both the founder and the caput of the visitor to exist established in Russia.

Withal, in order for the head of the company to piece of work successfully, it is still recommended that a foreigner apply for a work permit in Russian federation. Since work permits and visa invitations are issued for elevation-managers without quota, hiring of highly qualified specialists (HQS) is greatly simplified.

There's no need to apply for a let to recruit strange workers, to mail a vacancy in the employment centre, to provide a Russian language certificates and medical certificates.

The highly qualified specialists (HQS) according to Russian law include foreign nationals earning over ii one thousand thousand roubles per year under agreements/contracts. It is assumed that these employees take strong cognition and experience in their surface area of specialization. A three-year work permit is granted to them nether a simplified procedure compared to other strange workers.

Chiefly, if you rent a greenhorn for an executive position when registering a company in Russia and plan to event a piece of work permit for him/her, information technology is not recommended that y'all register him/her as a director at once!

The procedure for obtaining a work permit for HQS from visa countries implies issuing invitations and work visas. Therefore, if you first register a foreigner as a director of the future company, and and so apply for a work permit for him, you will face difficulties and will have to brand changes to the annals of legal entities and lay him/her off. Therefore, 1 should follow the dominion: first work permit, and and then registration as a director.

Restrictions on LLCs with foreign participation

The Russian legislation does not provide for any restrictions on the use of a simplified tax arrangement (STS) past Russian entities formed by foreign founders. These restrictions are listed in art. 346.12 and 346.13 of the Russian Tax Code.

The Russian legislation provides for rather strict regulation of participation of entities with non-resident founders in certain sectors of Russia's economic system.

The constabulary imposes restrictions on foreign investors' participation in the charter capital of entities accounted strategic for Russia's defense and security. The post-obit sectors have been defined as strategic: repairing, disposal of weapons and military equipment, using radioactive materials, TV and radio broadcasting with a large coverage, publishing a journal print publication with the apportionment at least 1 m copies for each event and 39 more than industries. Under the Federal Police force No. 57-FZ dated Apr 29, 2008 and the Federal Police force No. 58-FZ dated April 29, 2008, a strange investor seeking control over strategic business entities has to either apply for a prior authorization or notify the authorized body of a planned transaction. The procedure for applying for a prior authorization is explained in art. 12 of the Law.

There are restrictions on foreign investments in insurance and banking sectors. The Constabulary "On Organisation of Insurance Concern in the Russian federation" dated 11.27.1992 Northward 4015-1, Federal Deed "On banks and cyberbanking activity" dated 02.12.1990 Northward 395-1;

Restrictions also employ to foreign ownership and leasing of land plots.

Under par. ii, art.xv of the Russian State Lawmaking, foreign legal entities shall not have title of plots of state located in the border territories recorded in the list established by the President of the Russian federation in compliance with the federal legislation on the State Border of the Russian federation and other territories of the Russia specifically indicated under federal laws.

This ways that the land plots in the border territories and within the seaport boundaries cannot be in the ownership of strange citizens or foreign organisations (par. three. art. fifteen, Land Lawmaking; par. 2. art. 28 of 261-FZ dated 08.xi.2007).

Foreign citizens, foreign legal entities, stateless persons, as well as the legal entities in whose authorized (pooled) capital the share of foreign citizens, foreign legal entities and stateless persons exceeds 50%, may simply possess land plots pertaining to subcontract lands on a leasehold basis, except for cases provided for by the 119-FZ dated 05.01.2016 (art. 3 of 101-FZ "On Farm land turnover").

These are certain land plots in sure edge territories, within the boundaries of seaports, etc. Russian companies with a foreign participation of more than 50% cannot ain agricultural land, strange investors may merely lease agronomical land.

Sectional Processing services in the field of registration of LLC with foreign participation.

Our company has been working in the legal services market since 2006.

Our master business concern focuses on state registration of legal entities and individual entrepreneurs. We will assist you to register your visitor in Moscow in the shortest possible time and on favourable terms.

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LLC registration by a non-resident, our services

Change of LLC participants by ways of shares sale agreements.

Incorporation or withdrawal of LLC participants past increasing the charter uppercase

Source: https://www.businessgarant.com/announce/2019/09/05/a_guide_to_opening_an_llc_in_russia/

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