Since 2022, Russia has been implementing restrictions on businesses from so called "unfriendly" countries, primarily focusing on significant transactions like asset sales. However, a recent court case (No. А21-5127/2023) has broadened the interpretation of these restrictions. The court invalidated a director change in a Russian LLC because the controlling shareholder (80% ownership) was from an "unfriendly" jurisdiction and had not obtained prior permission from the Government Commission for Control over Foreign Investment in the Russian Federation (“Commission”).
For the last several months, this decision led to inconsistencies among Russian notaries. Many refused to certify director change resolutions for companies with "unfriendly" shareholders, while others continued to do so. Importantly, existing regulations did not explicitly require Commission approval for routine director changes. Official guidance from the Ministry of Finance only mandated approval when outsourcing the entire management function of an LLC, not for simple director replacements.
This ambiguity was finally resolved on 3 February, 2025. Ministry of Finance Explanation No. 3 explicitly states that the restrictions do not apply to the appointment or dismissal of sole executive bodies of LLCs (e.g., General Directors, Presidents) in accordance with the Russian Labor Code. This means that standard director changes do not require approval from the Commission. However, on 13 February 2025, despite the Ministry of Finance's Explanation, the court of cassation unexpectedly refused to overturn the decision of the court of first instance in the case No. А21- 5127/2023. Neither the document itself nor the position of the Ministry of Finance was mentioned by the court. These conflicting interpretations highlight the persistent uncertainty surrounding corporate actions in Russian LLCs with foreign shareholders.
Solstico Legal strongly advises seeking legal counsel before making any director changes to your Russian LLC. This will allow for a tailored assessment of your specific circumstances and help ensure compliance with the evolving regulatory environment.