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Konstantin Kandakov explains to new procedure for paying profits to foreign investors in context of counter-sanctions

On 4 May 2022, a decree was signed “On Temporary Procedures for Execution of Financial Obligations in the Sphere of Corporate Relations to Certain Foreign Lenders”. According to the act, Russian LLCs, business partnerships and production cooperatives will temporarily be able to pay profits in rubles to their foreign creditors. The Russian Central Bank and the Ministry of Finance have been granted the right to authorise exceptions to this rule. Petrol Chilikov Senior Associate Konstantin Kandakov explained how the decree changes the procedure for fulfilling obligations.

Kandakov notes that the May decree changes the way Russian legal entities and foreign investors fulfil their obligations:

– from the point of view of Russian jurisdiction, performance under the decree would be proper,

– the foreign investor may consider that the obligation to pay profits has not been fulfilled or has been improperly fulfilled.

In addition, the legal mechanism for obtaining permission from the Ministry of Finance and the Central Bank to meet profit-sharing obligations without observing the interim procedure is not yet clear. There are no criteria for obtaining such permission, which will be established at a later date, the expert notes.

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