|Member of SovereignLaw
In association with the BCC
European Business Club
Russian business vehicles (legal entities) formation
| This memorandum is intended to provide a brief outline of major
legal issues related to establishment of Russian business vehicles (including
fully-held subsidiaries) enjoying status of an independent legal identity and
is therefore confined to the category of vehicles generally referred to in the
Russian civil law as "commercial" or profit-generating (business) legal
|1 Russian commercial (business) legal entities: overview
Generally, Russian commercial (or business) legal entities may be formed either
as partnerships or as companies.
Unlike UK partnerships, partnerships formed under the Russian civil law possess
a separate legal identity; therefore, the principal difference between partnerships
and companies formed under the Russian civil law lays with the rule of members'
(shareholders') and partners' liability allocation and limits. In partnerships,
partners bear unlimited liability under the partnership obligations, whereas in
companies members' (or shareholders') liability is limited to the value of participatory
interests (shares) in the company equity capital held by a company member (shareholder)
(with the exception of Supplementary Liability Companies (see Clause 3 (a) below)
as well as a few statutory reservations affecting all companies regardless of
Although there are very few cases where the law or subordinate legislation provide
that certain business shall be operated though a company only, the combination
of unlimited liability rule and the immature professional liability insurance
system results in the partnerships being significantly less popular with Russian
entrepreneurs and foreign investors as compared to companies. Besides, tax treatment
of partnerships under Russian tax law is exactly the same as that of companies,
which adds to the lack of popularity of partnerships as compared with other forms
of legal entities allowed to be formed under the Russian civil law.
We therefore have further limited the scope of this memorandum to companies only.
|2 Formation procedure and timeframe
Russian companies are formed by way of state registration and, as matter of Russian
civil law, legally become fully operational as from the date of such registration.
Nevertheless, in practice certain additional filings and official registrations
are required for a newly established Russian business to be fully launched. In
particular, a new company shall obtain tax registration, statistics registration
and state non-budget funds registration (Pension Fund, Social Security Fund and
Mandatory Medical Insurance Fund).
Statutory timeframe for registration of a newly established Russian company is
five business days. However, taking into account certain preparatory work preceding
filing of a company documents for state registration as well as additional filing
and registration requirements referred to above, launching of a new Russian company
normally requires 2 - 4 weeks. It should be further taken into consideration,
however, that Government authorities and agencies involved in formation of new
Russian companies are frequently failing to observe statutory time limits which
results in extended formation schedule.
Moreover, as shall be discussed in Clause 8 hereof, launching of business through
an already established company may be further delayed in case transacting of such
business shall require a license (special permit).