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Business in St. Petersburg, Page 2

4.4.1.1 Branch Accreditation

Pursuant to Federal Law ¹160-FZ of 9 July 1999 "On foreign investment in the Russian Federation", branches of foreign companies should be accredited in accordance with the procedure established by the government of the Russian Federation.

In accordance with Resolution of the Government of the Russian Federation ¹1419 of 21 December 1999, branches of foreign companies must be accredited by the State Registration Chamber of the Ministry of Justice of the Russian Federation. Accreditation is currently carried out in accordance with the temporary provisions approved by the Order of the Ministry of Justice of the Russian Federation of 31 December 1999.

To accredit its branch in the Russian Federation, the foreign legal entity submits a set of documents to the State Registration Chamber. The list of necessary documents has been established by the Ministry of Justice of the Russian Federation. The Registration Chamber is authorised to request that additional information be provided about the activities of the foreign legal entity, that which is not included in the list mentioned above.

The State Registration Chamber should complete the accreditation process within 30 days of receiving all the necessary documents. The accreditation application may be denied if any of the necessary documents are not made available or in some specific cases stipulated by legislation.

A branch is considered to be accredited once it is included in the State Register of Branches of Foreign Companies Accredited in Russia, and once an accreditation certificate is issued.

The accreditation period for branches may not exceed five years. Upon expiry of the accreditation period, the branch must discontinue its operations. If a foreign company files a written application at least 30 days before the accreditation period is to expire, the accreditation may be extended.

Fees charged to obtain the accreditation are established by the Ministry of Justice. Accreditation fees range from 500 to 1,500 USD, depending on the length of the accreditation period. A fee of 500 USD is charged for extending the accreditation period.

An additional fee of 500 USD is charged to obtain 'rush' accreditation or accreditation extensions (within 7 days).

4.4.1.2 Representative office Accreditation

Accreditation is performed in Moscow by the Ministry of External Economic Affairs, the Ministry of Science and Technical Policies, the Ministry of Finance, the State Registration Chamber of the Ministry of Justice of the Russian Federation,, the Chamber of Industry and Commerce and a number of other authorities for a period of one to three years with a possibility of extension. Accreditation may involve a fee ofupto»3,500.

In order to accredit a representative office with the Chamber of Industry and Commerce of the Russian Federation, a foreign legal entity must apply to the St. Petersburg Chamber of Industry and Commerce.

Accreditation with the Chamber of Industry and Commerce takes approximately 1 month. Once accredited, a representative office must be entered into the State Register of Representative Offices of Foreign Companies kept by the State Registration Chamber. The advantages of having an accredited representative office include obtaining the right to open rouble bank accounts for effecting current transactions (see below).

The leasing of office space by a foreign legal entity accredited as a representative office is not subject to value-added tax if a similar privilege is provided to Russian nationals or

legal entities in the country of incorporation of the foreign legal entity or if this condition is stipulated in that country's double tax treaty with Russia.

Representative offices of foreign legal entities are accredited by lodging necessary documents with the relevant registration authorities.

For more details regarding accreditation and registration issues, you may contact the Chamber of Trade and Commerce, other registration authorities or legal advisors.

4.4.2 Legal Entities

Market oriented entities established in St. Petersburg must be registered with the Registration Chamber of St. Petersburg.

However, if the amount of foreign investment in the charter capital of a legal entity is over 100,000 roubles, this entity must be registered with the Moscow State Registration Chamber of the Ministry of Justice of the Russian Federation.

Legal entities with foreign investments are registered within 30 days.

4.4.3 Resytricting Competition and Monopolistic Activity

If the total value of the assets of all founders of a newly founded company exceeds 100,000 minimum statutory monthly wages, the regional department of the Ministry of the Russian Federation for Antimonopoly Policy and Business Support must be notified of the company's foundation.

Moreover, a person who purchases shares of already existing Russian companies and acquires the right to dispose of more than 20% of the shares is required to obtain the approval of the Ministry of the Russian Federation for Antimonopoly Policy and Business Support, if the aggregate value of assets of both the company and the buyer of the shares exceeds 100,000 minimum statutory monthly wages.

Approval of the Ministry of the Russian Federation for Antimonopoly Policy and Business Support must also be obtained in a number of other cases stipulated by Law ¹948-1 of 22 March 1991 «On Competition and Restricting Monopolistic Activity in Commodity Markets».

4.4.4 Company Liquidation. Bankruptcy

A legal entity may be liquidated:

  • in accordance with the decision of its founders, e.g. if the life period of the legal entity has expired, the objective of the legal entity's foundation has been achieved, or if the court deems the registration of the legal entity to be invalid due to unamenable violations of the law and other legal regulations which occurred during the company's foundation; and
  • in accordance with the decision of the court, if the legal entity commits severe legal violations or is declared bankrupt.

Legal entities are liquidated by a liquidation committee appointed by the founders (shareholders) of the legal entity or a body which has taken a liquidation decision. When the liquidation process is completed, the founders (shareholders) of the legal entity obtain the part of the legal entity's property which is left after the creditors' claims have been satisfied.

The bankruptcy procedure for legal entities is stipulated in Federal Law N°6-FZ of 8 January 1998 «On Bankruptcy».

In accordance with the Law, the debtor himself, his creditors, the prosecutor, tax and other authorised agencies are entitled to claim in court that the debtor be declared bankrupt.

The following bankruptcy procedures are applied to debtors:

  • supervision (temporary management when the debtor may only carry out certain transactions if they are approved by the temporary manager appointed by the court);
  • external management (a temporary manager appointed by the court takes measures aimed at recovering the debtor's solvency);
  • receivership (an auction and credit claim manager appointed by the court sells the debtor's property and satisfies its creditors' claims); and
  • amicable agreement (the debtor and its creditors agree to discharge and/or terminate the debtor's obligations).

The Law also stipulates a simplified bankruptcy procedure, which is applied to debtors who are either liquidated or absent.

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