Establishing a foreign company in the RF

This is not quite so. Indeed, a simple notification, which is all that is required in some countries, would not be sufficient in Russia. The Russian Law provides for a formal procedure for the accreditation of representative offices of foreign companies.

Under this accreditation procedure a foreign company must file the necessary documents to the State Registration Chamber of the Ministry of Justice of the RF. The list of documents required for accreditation is the following:

All documents of foreign origin must be translated into Russian and duly notarized by the Consular Offices of the Russian Federation abroad (the Consulate stamp or the apostille).

In case of a favourable decision the accrediting body shall within 21 business days issue a permit for establishing a representative office and the certificate confirming that the representative office is listed in the Consolidated State Register. This certificate shall serve as the confirmation of the official status of the representative office and will be required to open bank accounts, register with the tax authorities, issue Russian visas and undergo customs procedures. Accreditation is normally issued for the period of 1, 2, or 3 years and is extendable.

The answers to your questions were provided by the RusBusinessNews legal department jointly with Maxim Stepanov, the Director General of the consulting company OOO Nalogi i Pravo (Taxes and Law)(e-mail: m_stepanov@rusnalog.ru).

The fundamental law in this respect is the Civil Code of the Russian Federation.

The Civil Code of the RF stipulates that carrying out entrepreneurial activity aimed at systematic earning of profit (from the use of property, sales of goods, carrying out works, or providing services) is within the rights of duly registered legal entities or individuals.

The Federal Law № 128-FZ "On Licensing of Certain Types of Activities" dated 8 August 2001 lists the types of activities which can only be carried out after the appropriate license has been obtained.

Amongst the many organisational legal forms of legal entities falling into the category of commercial organisations listed in the Civil Code of the RF the most common are the business entities created in the following formats:

Joint Stock Companies.

A joint stock company is a commercial organisation registered capital of which is divided into a certain number of shares certifying contractual rights of the participants of the company (shareholders) in respect of the company. Shareholders are not responsible for the company's liabilities and carry the risk of losses related to the company's operations only up to the value of their shares. Shareholders have the right to divest the shares they own without consent of other shareholders and the company; the shareholders of a closed joint stock company have the preferential right to purchase the shares in question.

Individuals and legal entities may become shareholders of a joint stock company. Such company cannot have just one shareholder - another company consisting of a single individual.

A minimal registered capital: 

A joint stock company must have a company name and a round company seal (stamp).
Names "Россия" (Rossiya - Russia), "Российская Федерация " (Rossiyskaya Federatsiya - Russian Federation), the word "федеральный" (federalnyy - federal) and words and phrases derived from these may be used in the name of a legal entity subject to permission obtained from the Governmental Committee; there are no requirements to company names other than these.

The Articles of Association is the constituent document of the company.

The shareholders' general meeting is the supreme authority of the company.
The general management of the operation of the company is performed by the Board of Directors.
The management of the current operation of the company is performed by a sole executive authority of the company (director, director general) or by a sole executive authority of the company and a collegial executive authority of the company (executive committee, directorate).

The location of the company is determined by the place of its state registration of the location of the permanent executive body.

Limited Liability Company.

A limited liability company is a company established by one or several persons; the share capital of such company is divided into shares determined by the constituent documents; shareholders of the company are not responsible for the company's liabilities and carry the risk of losses related to the company's operations up to the value of their investment. Issues concerned with the possibility of transferring a shareholder's property rights to the share in the capital to third parties are regulated by the company's articles of association.

The company cannot have just one shareholder - another company consisting of a single individual.
The minimum registered capital is 10,000 roubles (hundred times minimal monthly wage as set in the RF).

The company must have a round seal (stamp) that has its full company name in Russian and an indication of the company's location.
Names "Россия" (Rossiya - Russia), "Российская Федерация " (Rossiyskaya Federatsiya - Russian Federation), the word "федеральный" (federalnyy - federal) and words and phrases derived from these may be used in the name of a legal entity subject to permission obtained from the Governmental Committee; there are no requirements to company names other than these.

The company's members enter the association agreement and approve the articles of association of the company. The association agreement and the articles of association of the company are the company's constituent documents. If the company is established by a single person then the articles of association approved by this person is the constituent document of the company. If the number of shareholders increases to two or more then they must enter the association agreement (from 01.07.09 association agreement is not considered to be a part of constituent documents).

The shareholders' general meeting is the supreme authority of the company.
The management of the current operation of the company is performed by a sole executive authority (director, director general) elected by the shareholder's general meeting for the period of time stipulated in the articles of association.

The location of the company is determined by the location of its state registration in accordance with the location of its permanent sole executive authority.

Individual entrepreneur.

A citizen has a right to carry out entrepreneurial activities without having to establish a legal entity from the moment of the state registration as an individual entrepreneur.

Regulations applicable to commercial organisations apply to the entrepreneurial activities of a citizen who has not established a legal entity.

An individual entrepreneur is responsible to his obligations with all his property excluding property which in accordance to the law can not be requisitioned (for instance household items, personal belongings, the only housing premises if these are not mortgaged by a mortgage agreement etc.).

Foreign individuals and legal entities.

Foreign individuals and legal entities have the right to participate in the establishment on the territory of the Russian Federation of business partnerships and companies or to acquire a share in the registered capital or shares in already established legal entities. Moreover, a foreign legal entity may open on the territory of the Russian Federation its own representative office or a branch which will not become independent legal entities.

For the purposes of the protection of the constitutional regime, morals, health, rights and legal interests of other persons, securing the country's defence and security of the state there are certain exemptions of the limiting nature stipulated by Federal Laws for foreign investors in the Russian Federation.

Relationships concerning the state guarantees for foreign investors' rights while investing on the territory of the Russian Federation are regulated by the Federal Law № 160-FZ "On Foreign Investment in the Russian Federation" dated 9 July 1999.

A representative office of a foreign legal entity is a separate subdivision which does not assume either property or personal non-property rights and cannot be either a claimant or a respondent in court. A representative office is always located on the territory of Russia where it represents and protects the interests of the foreign legal entity and does not carry out independent industrial economic activities.

A branch of a foreign legal entity is created for the purposes of carrying out on the territory of the Russian Federation of those activities which are carried out by the parent organisation outside of the Russian Federation and is liquidated on the strength of the decision of the foreign legal entity - the parent organisation.The state control of the establishment, activities, and the liquidation of the branch of a foreign legal entity is effected by its accreditation in accordance with the procedure determined by the Government of the Russian Federation.

A foreign citizen may carry out entrepreneurial activities on the territory of the Russian Federation from the moment of the state registration as an individual entrepreneur.

The answers to your questions were provided by the RusBusinessNews legal department jointly with Maxim Stepanov, the Director General of the consulting company OOO Nalogi i Pravo (Taxes and Law) (e-mail: m_stepanov@rusnalog.ru). 

The state registration of a legal entity is carried out in accordance to the Federal Law № 129-FZ "On State Registration of Legal Entities and Individual Entrepreneurs" which stipulates that when registering a legal entity being established the following must be presented to the registering authority - the territorial Federal Tax Service Inspectorate at the location of the permanent executive body:

The documents are submitted to the registering authority by the applicant directly or are mailed as a parcel with the value declared and the content listed when posted. The application submitted to the registering authority is signed by the applicant; this signature must be witnessed by a notary public.

The applicant specifies the passport data, or, in accordance with the legislation of the Russian Federation data of another personal identification document, and the taxpayer identification number (if available). When carrying out the state registration of a legal entity the following persons may be applicants: the legal entity founder; a manager of the legal entity which is a founder of the legal entity being registered.

Each document consisting of more than 1 page is submitted stitched and numbered. The number of pages is confirmed by the applicant's signature or that of a notary public on the reverse of the last page of the document in the place of the stitching.

The day when the registering body receives the documents is counted as the date of the submission of the documents for the state registration.
The applicant is issued with a copy of the receipt for the documents with the list of documents and the date when the documents were received by the registering body. When the registering body receives documents via mail, the receipt is sent out on the day following the day of the receipt of the documents by the registering body to the address stipulated by the applicant with delivery notification.

The registration is carried out and the legal entity state registration certificate (form R51001) is prepared, or the decision to refuse the state registration is issued within 5 working days. One copy of the decision is issued personally or is sent via mail. The second copy is filed into the registration file.

The state registration certificate (or the decision to refuse) is issued no later than 5 working days from the day of submitting the documents. The name stipulated in the state registration certificate is in precise correspondence with the name in the constituent documents. The entering of the appropriate record into the state register by the tax authority is considered to be the moment of the state registration.

The applicant receives the following document after the registration: The Legal Entity State Registration Certificate, the Tax Authority Registration Certificate, the extract from the Uniform State Register of Legal Entities, and copies of constituent documents verified by the registering authority, if two copies were submitted; the decision to refuse the registration of the legal entity.

Documents confirming the registration of the legal entity in the nonbudget funds (Social Insurance Fund, Mandatory Medical Insurance Fund, Pension Fund) will be delivered to the address of the legal entity stipulated in the constituent documents.

The registering authority ensures the registration and safekeeping of all documents submitted for the state registration. The registering authority does not have the right to demand the submission of documents other than those listed in the Federal Law "On State Registration of Legal Entities and Individual Entrepreneurs".

A sample sequence of actions when state registering a limited liability Company:

The answers to your questions were provided by the RusBusinessNews legal department jointly with Maxim Stepanov, the Director General of the consulting company OOO Nalogi i Pravo (Taxes and Law) (e-mail: m_stepanov@rusnalog.ru).