Government Decree No. 1772, published on 16 December, 2024, amends the rules governing how the Government Commission for Control over Foreign Investment in the Russian Federation (“Commission”) issues these permissions.
Previously, this authority rested with the Ministry of Finance; however Presidential Decree No. 767 dated 9 September, 2024 transferred it to the Commission, which is now also empowered to impose specific payment conditions. While permissions were theoretically possible under the earlier system, they were rarely granted in late 2024.
Decree No. 1772 formalizes the application process and allows for the issuance of permissions. Applications must be submitted to both the Commission and the relevant industry regulatory body, which then provides an opinion to the Commission without a specified timeframe. While the overall application process remains similar to the previous procedure under the Ministry of Finance, the new decree sets out the following key points to be outlined in the application:
- The purpose, content, and key terms of the dividend payment.
- KPIs and targets (if applicable) for the paying company, proposed as conditions for the dividend payment.
- Dividend payment amounts for the past five years.
- Any other information the applicant deems relevant.
While these clarified rules suggest a more formalized process, practical application remains uncertain. As the amendments do not introduce fundamentally new conditions, we anticipate the Commission will likely continue to apply similar criteria as under the previous procedure, including:
- Dividends not exceeding 50% of the previous year's net profit.
- Consideration of past dividend payments.
- The foreign shareholder's commitment to continue operations in Russia.
- Assessments of the organization's significance by relevant authorities, including the Bank of Russia.
- The applicant's fulfillment of KPIs in the past (if they were imposed on the applicant).
- Potential for quarterly dividend payments contingent on meeting established KPIs.