How to set up a business in Russia

About Yuriy Isayev

Yuriy Isayev is international lawyer, who has more than 10 years’ experience in practicing corporate and M&A, cross-border taxation and commercial law. He now works at international law firm Garese&Associates LLC in Moscow www.isayevyv.blogspot.co.uk

Types of legal entities

The most common types of legal entities for conducting business in Russia are Limited Liability Companies and Joint Stock Companies (open or closed). LLCs are simpler to organize and manage than JSCs (no need to register the issue of shares, to keep register of shareholders and etc.). It should be noted that Russian legislation doesn’t restrict foreign entities from owning shares in Russian companies, except for specific branches of defence and other sensitive industries.

Name and share capital

According to Russian law there are several restrictions for naming a company, such as:

a) It should differ from the name of another already registered company, which performs the same activities as you plan;

b) If a company isn’t a bank or credit organization its name must not contain the words “bank” and “credit organization”; and

c) Such words as “Russian Federation”, “Russia”, “Moscow” and so on are allowed to be used only after receipt of special permission from the state authorities.

Thus, it’s better to choose a unique name for your company in order not to have any claims from third parties.

As for share capital, it should be issued and paid as follows:

a) For LLCs, not less than 50% of share capital before registration of a company and the rest within 1 year after registration; and

b) For JSCs, not less than 50% of share capital within 3 months after registration of a company and the rest within 1 year after registration.

Payment of shares in the share capital can be made via monetary funds, securities, other property or property rights or other rights having monetary value.

Incorporation steps

1. State registration is effected by the specialised offices of the Federal Tax Service within five working days after a company submits its notary certified application in the respective form, which contains the company’s full and abbreviated name, its legal form and the address of the permanent executive body of a company

Together with an application the following documents shall be submitted:

a) Decision on setting up a company;

b) Statutory documents (Memorandum and Articles of Association);

c) Evidence of status of a foreign founder – legal entity: excerpt from the Trade Register of a corresponding country or other evidence of the status of a foreign legal entity (if there will be a foreign founder);

d) Company’s address confirmation (Certificate of Ownership or/and Guarantee Letter of owner); and

e) Receipt of state duties payment.

Within one working day after the company is registered, a document is issued to the applicant (a person who submit an application for state registration) which certifies that the entry into the State Register has been made. The applicant also obtains Codes of Statistics and Taxpayer’s Identification Number (TIN).  Information about state registration is included into the Unified State Register of legal entities. This information is open to public, except for passport details, other personal information and details on the company’s bank accounts.

2. To begin business activity a JSC should also register the issue of their shares with the Federal Service on Financial Markets.

3. All companies should be also registered with state non-budgetary funds: the Pension Fund, the Social Security Fund and the Medical Insurance Fund. This registration is carried out automatically. Within five working days after the company passes state registration the registering body submits information from the State Register to state non-budgetary funds for registration.

In addition to the above it should be taken into account that some types of companies’ activities are subject to licensing according to the Russian legislation.

Should you have any questions or interest in doing business in Russia or another country please contact the author Yuriy Isayev, and Associate at Garese & Associates LLC via e-mail: isayevyv@gmail.com or skype: yuriy1384

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