Newsletter: "Possible improvements to the permission procedure related to dividend payments to foreign shareholders"

The Russian President has instructed the Government to prepare proposals to clarify the procedure for issuing permissions from the Ministry of Finance for the payment of dividends. The respective instruction was published following the results of the plenary session of the Congress of the Russian Union of Industrialists and Entrepreneurs (RSPP) and is to be implemented by May 20th, 2023.

 

Currently, the total amount of payments restricted under anti-crisis measures (including dividends, interest on loans) may not exceed RUB 10 million per month if such payments are actually made to companies associated with so-called “unfriendly” states (EU member states, the US, the UK, etc.). Otherwise, restricted payments are made to a Type-C account, with further disposal of the funds restricted. Alternatively, permission of the Ministry of Finance for payment in excess of RUB 10 million may be obtained (permission procedure).

 

Although the permission procedure is generally regulated by law, a number of issues remain unclear. For instance, the term for processing an application for granting a permission is not specified. The criteria for granting permissions for payment of dividends are in place and include, inter alia, the introduction of KPIs (key performance indicators (e.g., production volume, number of employees) to be achieved by the end of a quarter) by the relevant ministry, the quarterly payment of dividends subject to the fulfillment of KPIs, etc. At the same time, it is not always obvious which ministry should develop the KPI. In this regard, clarification of the permission procedure and the relevant criteria could provide some clarity.

 

Of particular interest to foreign “unfriendly” companies is that the permission procedure should also be clarified for companies planning to expand their business in Russia. This could mean that special regulations or more lenient requirements may be developed for companies that wish to continue operating in Russia and investing in the Russian economy. However, it remains to be seen what changes the Government will propose.