Handbook «DOING BUSSINESS IN RUSSIA»

Lex est norma recti

Law is a rule of right

DOING BUSINESS IN RUSSIA ST. PETERSBURG

BRIEF LEGAL GUIDE2012

Edited by Vladimir Kilinkarov, PhD and Maxim Avrashkov

Doing Business in Russia: Brief Legal Guide / edited by Vladimir Kilinkarov, Maxim Avrashkov. – St. Petersburg: Russian Collection, 2012. - 184 p.

Written by:

General information, Business restructuring (with Natalia Zelentsova)

Regulation of business activity (with Vladimir Kilinkarov and Artur Osipov); Real Estate & Construction (with Ksenia Melnikova); Insolvency

Joint ventures, Acquisition of a business, Protection of competition, Intellectual Property; Legal status of foreign nationals. Immigration Issues, Setting up a new business, Employment, Contract law issues (with Natalia Zelentsova); Regulation of business activity (with Sergey Bakeshin and Artur Osipov), Russia and the WTO (with Artur Osipov)

Taxation, Customs regulation (with Artur Osipov)

Real Estate & Construction (with Sergey Bakeshin)

Regulation of business activity (with Sergey Bakeshin and Vladimir Kilinkarov); Russia and the WTO (with Vladimir Kilinkarov); Taxation, Customs regulation (with Elena Kilinkarova)

General information, Business restructuring (with Maxim Avrashkov); Legal status of foreign nationals. Immigration Issues, Setting up a new business, Employment, Contract law issues (with Vladimir Kilinkarov); Judiciary System

Maxim Avrashkov

Sergey Bakeshin

Vladimir Kilinkarov

Elena Kilinkarova

Ksenia Melnikova

Artur Osipov

Natalia Zelentsova

ISBN 978-5-901440-82-7

65.9(2)09 + 67.404(2 ) 334(470+571) + 347.1(470+571)

This is the 2nd edition of the Maxima Consulting & Law guide to the principal legal aspects of conducting business in Russia. The handbook offers a brief overview of key elements of the Russian legal regulation covering corporations, tax, customs, immigration, contracts, real estate & construction, public regulation, WTO, insolvency, intellectual property, protection of competition and dispute resolution. The book is recommended to foreign businessmen working or planning to develop their business in Russia, lawyers, and anybody who would like to know more about the Russian legal system and relevant requirements for doing business in Russia.

All information presented in the handbook has been thoroughly revised and updated to re ect the last amendments to the Russian legislation (up to the 01 May, 2012) as well as the most actual draft amendments, acts and trendlines in certain areas of Russian law.

This book is copyright. No reproduction or other usage of any part may take place without written permission of Maxima Consulting & Law LLC.

Published with support of Maxima Consulting & Law LLC.

ISBN 978-5-901440-82-7

Doing Business in Russia

Brief Legal Guide

Edited by Vladimir Kilinkarov and Maxim Avrashkov Maxima Consulting & Law LLC, Russia

Dear Friends!

This is the 2nd edition of the guide to the principal legal aspects of conducting business in Russia. It has been written by practicing lawyers of Maxima Consulting & Law LLC for foreign businessmen working or planning to develop their business in Russia, lawyers, and anybody who would like to know more about the Russian legal system and relevant requirements for doing business in Russia.

The guide offers a brief overview of key elements of the Russian legal regulation covering corporations, tax, customs, immigration, contracts, real estate & construction, public regulation, WTO, insolvency, intellectual property, protection of competition and dispute resolution. We recommend this information to anybody who has business in Russia or plans to do so in future.

All information presented in the handbook has been thoroughly revised and updated to reflect the last amendments to the Russian legislation (up to the 01 May, 2012) as well as the most actual draft amendments, acts and prospects in different areas of Russian law. Should you have any questions or wish to obtain additional information on any issue, please feel free to contact us. Our contact information is listed at the end of this brochure.

We hope you will find this information interesting and useful. Our

With kind regards,

Maxim Avrashkov and Vladimir KilinkarovMaxima Consulting & Law

Contents

1 General information

9 Legal status of foreign nationals

15 Setting up a new business

41 Joint ventures

51 Acquisition of a business

57 Business restructuring

Insolvency

Regulation of business activity

84 Protection of competition

91 Russia and the WTO

99 Contract law issues

110 Real estate & construction

125 Intellectual property

Employment

Taxation

151 Customs regulation

Judiciary System

170 Our contacts

1GENERAL INFORMATION | DOING BUSINESS IN RUSSIA

General Information

* by Maxim Avrashkov, Natalia Zelentsova

Background information:

GENERAL INFORMATION | DOING BUSINESS IN RUSSIA

Fundamentals of the Constitutional System

Constitution of the Russian Federation. RF Constitution

State Structure

Local government

President of Russia

Legislative authority

Executive authority

Judicial authority

Federal Form of Government

Foreign Policy

7GENERAL INFORMATION | DOING BUSINESS IN RUSSIA

Investment Policy

LEGAL STATUS OF FOREIGN NATIONALS | DOING BUSINESS IN RUSSIA

Legal Status of Foreign Nationals. Immigration Issues

Temporary Stay in Russia

staying temporarily

Immigration Registration

11LEGAL STATUS OF FOREIGN NATIONALS | DOING BUSINESS IN RUSSIA

immigration registration

Temporary and Permanent Residence in Russia

A temporary residence permit

residence permit

political asylum

Employment

employed

SETTING UP A NEW BUSINES | DOING BUSINESS IN RUSSIA

Setting up a New Business

Business AcquirementJoint Ventures

Legal Forms

individual entrepreneur, or to company

Individual Enterprises

individual entrepreneur

17SETTING UP A NEW BUSINES | DOING BUSINESS IN RUSSIA

Legal Forms of Legal Entities

Business partnerships

Business entities

Business Partnerships

A partnership general

limited partnership (special partnership)

Business Entities

limited liability company

stock company

LLC CJSC OJSC Economic Partnerships

other items or Monies, items or

interests or other

on the assessment

shares +

have a

shares in the

alienation in

has the

alienate their shares

her share in share

interest may be

the shares

or not the other

shall have one vote,

into the share

on interests the event that no

Agreements of Participants of an LLC and Shareholders of a JSC

Economic Partnership

Intellectual Property

State Registration

JOINT VENTURES | DOING BUSINESS IN RUSSIA

Joint Ventures

joint activity agreement

corporate cooperation model

Starting-up a new business

Business restructuring

Acquisition of a business

Investment Partnership

Investment Partnership Law

The Principal Advantages and Restrictions of an Investment Partnership

Particular Features of an Investment Partnership

What distinguishes an investment partnership from an ordinary partnership?

ACQUISITION OF A BUSINESS | DOING BUSINESS IN RUSSIA

Acquisition of a Business

Acquisition of Interest/Shares in a Russian Entity. Merger with a Russian Entity

Employment Aspects

inter alia

Acquisition of Certain Assets of a Company

Selection of the Executive of an Acquired Company

Employment

BUSINESS RESTRUCTURING | DOING BUSINESS IN RUSSIA

Business Restructuring

* by Maxim Avrashkov, Natalia Zelentsova

consolidations, mergers and transformations

Business Restructuring and Protection of Competition

Guarantees of the Rights of Creditors

INSOLVENCY | DOING BUSINESS IN RUSSIA

Insolvency

General Description of Legal Regulation

Parties to Bankruptcy Proceedings

Bankruptcy Procedures

supervision

external management

Receivership proceedings

into a settlement agreement

Special Characteristics of the Bankruptcy of Certain Parties

REGULATION OF BUSINESS ACTIVITY | DOING BUSINESS IN RUSSIA

Regulation of Business Activity

Setting up a new business

Customs regulationTaxation

Licensing

Accreditation

Technical Regulation

71REGULATION OF BUSINESS ACTIVITY | DOING BUSINESS IN RUSSIA

of conformity

is a mark of conformity

Foreign Trade Regulation

foreign trade

Customs and tariffs regulation

Customs Regulation

without a license

national legal treatment

bans and restrictions on the foreign trade in goods, services and intellectual properties

Temporary restrictions

retorsion

Currency Control

77REGULATION OF BUSINESS ACTIVITY | DOING BUSINESS IN RUSSIA

Instruction

A passport of transaction passport sdelki

passport of transaction is

Criminal and administrative liability

Opening of Bank Accounts in Banks Located Outside the Russian Federation by Residents of the Russian Federation

Export Control

Trade Regulation

Protection of Consumer Rights

Special Trade Regulations Relating to Certain Types of Commodities

PROTECTION OF COMPETITION | DOING BUSINESS IN RUSSIA

Protection of Competition

Abuse of a Dominant Position

Agreements or Concerted Actions on Limiting Competition

Unfair Competition

Acts and Actions (Omissions) of Authorities Restricting Competition

Government Control of Economic Concentration

Consequences of a Breach of the Antimonopoly Law

RUSSIA AND THE WTO | DOING BUSINESS IN RUSSIA

Russia's Accession to the WTO

Effects of Russia's Accession to the WTO

several ways of bringing national legislation into line with WTO legal regulations

has decided to make national laws which would include the WTO regulations, sometimes verbatim

the emergence of a sui generis

principles and rules

law enforcement

Effects of Russia's WTO entry for the Consumer

imported drugs

chemical market

processing, building, scientific and metering equipment

computers, their means of production and hardware components

consumer electronics

vehicles

new automobiles

used cars

milk, cream powder and concentrated cream and butter

animal foodstuffs

deficient raw materials for the food industry

beef, pork and poultry

CONTRACT LAW ISSUES | DOING BUSINESS IN RUSSIA

Contract Law Issues

A contract

liberty of contract, i.e.

Formation of a contract

a person or a legal entity must be legally capable

general or special legal capacity

must agree on all substantial terms of the contract

unfair practice in the course of negotiations

representation on the circumstances

Form of Contracts.

Real Estate and Construction

invalid

Performance of a contract

Contract remedies

compensation for damages

Penalties

performance of the obligation

Special liability

performance in kind

limited liability

Amendment and Cancellation of Contracts

REAL ESTATE & CONSTRUCTION | DOING BUSINESS IN RUSSIA

Real Estate & Construction

Draft Amendments to the RF Civil Code

111REAL ESTATE & CONSTRUCTION | DOING BUSINESS IN RUSSIA

Real Estate Rights

Right of ownership

means the

Lifetime inheritable possession

Easement

Real estate leasing

Free property use

A mortgage

Amendments to be Introduced to the System of Rights in Rem

competence of ownership

right of ownership and restricted rights in rem

Emphyteusis

Development right

Usufruct

right to acquire another person's object

Right to proprietary consideration

elimination of economic management right

Acquisition of Real Estate Title

State Registration of Real Estate Rights and Transactions Therewith

117REAL ESTATE & CONSTRUCTION | DOING BUSINESS IN RUSSIA

Characteristics of the Purchase of Real Estate by Foreign Nationals

Construction in Russia

Sale and Purchase of Real Estate

Lease of Real Estate

Real Estate Pledges (Mortgages)

Protection of Objects of Cultural Heritage

INTELLECTUAL PROPERTY | DOING BUSINESS IN RUSSIA

Intellectual Property

State Registration of Intellectual Property

Intellectual Property Transactions

Exclusive Right Alienation Agreement

Licensing Agreement

Patent Attorneys

Law on Arbitration Courts

Court for Intellectual Property Rights shall be

jurisdiction

challenging of normative acts issued by the federal executive authorities

EMPLOYMENT | DOING BUSINESS IN RUSSIA

Employment

employeeemployer

The regulation of labor relations

personnel records

sheets etc.

Labor relationsemployment agreement

Social Partnerships in the Labor Sphere

Employment Agreement

Working Time and Time Off

working time

right to time off

Salary

Labor Discipline

Damage Liability

damage liability

Protection of Labor Rights and Liberties

Liability for a Breach of Labor Law

TAXATION | DOING BUSINESS IN RUSSIA

Taxation

The Tax System and the Procedure for Discharging Tax Obligations

B. Regional Taxes:

C. Local Taxes:

the environment, etc.

Transfer Pricing

Value Added Tax (VAT)

Excises

Corporate Property Tax

Transport Tax

Land Tax

CUSTOMS REGULATION | DOING BUSINESS IN RUSSIA

Customs Regulation

The Customs Union of the Republic of Belarus, the Republic

Regulations in the Russian Federation

Customs Clearance

Declaration of Commodities

Customs Payments

www.tsouz.ru

Consequences of Russia's accession to the WTO

Russia and the WTO section.

JUDICIARY SYSTEM | DOING BUSINESS IN RUSSIA

Judiciary System

* by Natalia Zelentsova

three independent judiciary system branches

are binding throughout

Jurisdiction

System of Courts of General Jurisdiction

System of Arbitration Courts

Constitutional Proceedings

Civil and Arbitration Proceedings

RF APC

Proceedings on Cases Involving Foreign Nationals (Entities)

Enforcement of Court Decisions

Administrative Proceedings

RF AOC

Criminal proceedings

Arbitration Courts

International Commercial Arbitration Court

Mediation Procedure

OUR CONTACTS | DOING BUSINESS IN RUSSIA

Our Contacts

Maxima Consulting & Law LLC.

Moscow

171 NOTES | DOING BUSINESS IN RUSSIA

NOTES | DOING BUSINESS IN RUSSIA

DOING BUSINESS IN RUSSIA

Maxim Avrashkov

Handbook «DOING BUSSINESS IN RUSSIA»

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