Indirect transactions involving LLCs
Edict No. 618 mentions transactions that indirectly entail changes in rights pertaining to an LLC, and formal permission may be needed even for transactions that don’t involve an LLC directly. For example, the sale of a foreign holding company that has an interest in a Russian LLC indirectly entails a change in the rights pertaining to such LLC. The edict thus establishes something similar to antitrust regulation, where approval is required even for a transaction carried out entirely outside the country.
From the standpoint of the Russian Civil Code, a transaction that violates a law or regulation is invalid (voidable or void, depending on the situation), but it remains unclear in practice how to monitor and contest transactions between nonresidents that indirectly entail changes in the rights to interests in Russian LLCs.
Transactions with interests in foreign LLCs
In our opinion, Edict No. 618 can be interpreted even more broadly: the edict makes no mention of the lex societatis of LLCs on which restrictions are imposed. In other words, it can be understood as restricting not only transactions with interests in Russian LLCs, but also with interests in foreign LLCs. Such an interpretation would seem excessive (again in terms of how transactions are controlled), but the practical implementation of previous edicts introducing various restrictions has shown that the conservative view usually proves correct. If the government has decided to restrict unfriendly parties' transactions with any securities, including foreign, why shouldn’t it follow suit with LLC interests? In our opinion, Russian residents in particular should take this interpretation seriously until official clarifications are issued to the contrary.
For now, we can conclude that Edict No. 618 definitely does not apply to transactions with unfriendly parties involving credit institutions and non-credit financial institutions or to transactions carried out under Edicts No. 416 and No. 520 (the Sakhalin project and strategic companies prohibited from carrying out such transactions through the end of 2022).
Other new provisions
Edict No. 618 clarifies that its rules do not apply to unfriendly members of an LLC that are under the control of Russian entities (provided that their membership is disclosed to the Russian tax authorities) or to persons from friendly countries. The edict extends this exception (on unfriendly members controlled by Russian entities) to include the distribution of an LLC’s profit, a much-discussed gap in Edict No. 254.
In addition to the new rules for transactions with LLCs, Edict No. 618 (1) allows Russian credit institutions under foreign sanctions to meet their foreign-currency obligations in rubles if their clients are resident legal entities, and (2) allows an LLC with members that are mineral resource users listed as strategic enterprises not reject providing its unfriendly members information on business of such LLC.