Limited Liability Companies in Russia
Foreign investors commonly turn to Limited Liability Companies in Russia in order to conduct their business because this option is not only flexible in terms of endeavors, but they provide a certain level of financial security and protection against monetary losses. Establishing Limited Liability Companies in Russia may be a complicated process, but can be efficiently facilitated by an experienced, professional, and reliable partner. A consulting company that assists with the establishment of an LLC offers a variety of services:
- Collecting and preparing legally pertinent registration documents
- Facilitating the proper registration through the Russian tax inspectorate
- Assisting with the company’s registration as a taxpayer
- Creating and approving the corporate design seal
- Completing the necessary registration with the State Statistics Committee
- Providing additional assistance with the company registration through the various external funding associations (Social Security, Pension, & Compulsory Medical Insurance)
Would you like more information concerning how to start the registration process for Limited Liability Companies in Russia? Feel free to email the experts at Impex Consult (email@example.com), or call one of their suitable offices between the hours of 9:30 and 18:30, Moscow time.
About Limited Liability Companies in Russia
A Limited Liability Company (LLC) can be founded with one or several different individuals, otherwise known as Participants. A Participant that already consists a separate business’s primary entity is not eligible for dual participation. In other words, one person may not establish multiple LLC’s as the primary Participant. LLC’s with greater than 50 Participants must reconstruct the company, within a year’s time, into open joint stock or production cooperative.
Each Participant of an LLC will own “participation interests.” These interests do not require registration, like shares of a joint stock company, because they are not recognized by Russian Law as a security.
If a Participant wishes to sell out of their role, they must first offer their interests to the other Participants of the LLC. If current Participants are not interested in purchasing for the buyout, the interests may be offered to a third party, for equal price as offered to the current Participants. Being compensated for interests upon withdrawing from an LLC is legal.
It takes a 10% participation minimum to demand expulsion of any other Participant from the group. Terms for expulsion include gross violation of obligations or substantial hindrance of legitimate business activities.
Rights of Participants
Participants of an LLC have the following rights:
- Manage the LLC according to specific procedures that have been set forth by the LLC law and the LLC foundation documents. These specific procedures may be compared to the traditional by-laws of a US charter.
- Have full access to accounting and financial information concerning LLC business
- Have full access to business endeavor information
- Receive profits from LLC business
- Sell out or resign participation interests to current Participants within the LLC
- Withdraw participation from the LLC without prior approval from other Participants
- Receive proportional compensation to the assets remaining after creditor settlement in the event of LLC liquidation.
Participants are not limited to the above stated rights. Participants of an LLC may collectively determine additional rights that are conducive to the LLC charter. Implementation of these rights requires unanimous consent from all Participants at an official business meeting. Rights are not necessarily transferable should a Participant choose to withdraw from the LLC. Successive Participants are not the automatic recipients of additionally determined rights.
Obligations of Participants
Requirement of Participants in an LLC include:
- Making time specific contributions according to the determined LLC laws
- Keeping LLC information and activities confidential
Like establishing rights, the LLC participants can mutually agree upon additional requirements. If additional Participant obligations are determined and implemented against one particular Participant, a two-thirds majority must approve. The affected Participant must vote in favor or consent in writing to said obligation. Again, like additional rights approved by LLC participants, obligations do not pass to future Participants who buy into the LLC.
Participation contributions compose the LLC charter capital. Initial capital must be more than 100 times the legal monthly minimum wage set forth for each Participant. Being that the monthly minimum contribution (set forth in 2007) is 100 rubles per Participant, the initial charter capital must be 10,000 rubles or more.
A 50% minimum of the initial charter capital must be paid at the time of the LLC’s registration with the remaining balance due within a year of establishment. The full charter balance must be paid before capital may be increased. Participants may conduct charter contributions via cash or in-kind. Foreign investors may receive additional benefits set for them by customs when choosing to make in-kind contributions.
Meetings that include all participants, otherwise known as General Participants’ Meetings, are the most statutory governance for the management of the company. Regardless if internal sub-groups are created for business delegations, the General Participants’ Meeting must approve those delegations prior. The General Participants’ Meeting has exclusive rights to:
- Adjust, alter, and amend the charter
- Adjust, alter, and amend the foundational agreements
- Establish and define LLC goals and purpose
- Delegate executive authority to external organization
- Determine the agreements associated with external delegation
- Establish additional rights and obligations to the LLC Participants
- Approve the annual financial report
- Approve the distribution of monetary profits
- Adjust, alter, and amend the amount of the LLC’s charter capital
- Approve internal regulations concerning LLC business conductivity
- Approve all necessary details concerning a potential LLC liquidation
In order to legally register your LLC, the Federal Tax Service is the authority that handles and facilitates this process in Russia. They require the following registration documents for Limited Liability Companies:
- State registration application for new entity
- LLC foundation agreement (applicable only if the LLC has multiple founders/Participants)
- Agreements determined by the founders’ meeting, or resolution of the founder
- Official LLC Charter
- Power of Attorney issued by the founder which allows said POA to file the application for the LLC’s state registration
- Certificate of Incorporation, an excerpt from the trade register, or certificate of good standing of the foreign Participant
- Any Charter documentation from foreign Participants
- Payment confirmation of the LLC’s state registration fee
All documents that were established from a foreign legal entity must be legalized (in the form of a notary or other) by the country that originally prepared the document(s). Any translated documents must also be accompanied by a notarized Russian translation.