Types of Russian companies

There are 5 main types of Russian companies:

• Limited liability company (OOO)
• Closed joint stock company, privately held (ZAO)
• Open joint stock company, publicly held (OAO)
• Representative or branch office of a foreign company
• Individual private entrepreneur.

 

LLC with minimum share capital of 10,000 Roubles (~€ 225) (in Russian – OOO) and PLC with minimum share capital is 100,000 Roubles (~€ 2250) (in Russian – AO) are the most popular forms of legal entities in Russia.

Licenses are required for licensed types of activities

The number of shareholders cannot exceed 50. There are no restrictions on Russian or foreign shareholding. Minimum individual shareholder — 1. Minimum directors — 1

Newly formed company is required to register with Tax authorities, State Committee for Statistics and three non-budgetary funds (Pension fund, Obligatory Medical Security fund and Social Security fund).

At least 50 per cent of the authorized capital to be paid up

50 per cent of the authorized capital of PLC shall be paid-up within 3 month of registration.

LLC and PLC have a three-level management structure consisting:

• General Meeting
• Board of Directors
• Executive Body

General meeting is the highest management body and must be held at least once a year. Board of Directors undertakes general supervision of the company activities that are not referred to at the General meeting. Executive body of a company may be represented by both an individual and collegial body. The executive body acts according to the Charter document.

Russian companies should provide monthly VAT reports and quarterly tax reports.

If a Company plans to employ foreign citizens it must apply for a special permit. All foreign employees of a company must apply for their respective individual Working Permits. A separate work visa would also be required.

(2) Private joint stock company (in Russian ZAO) and (3) Public joint stock company (in Russian OAO) are subdivisions of foreign companies.

RO and Branch of a foreign legal entity are not considered as a separate legal entity. RO and Branch are subdivisions of a foreign company that are classified as Russian non-resident entities for currency control purposes.

ROs are not officially allowed to undertake commercial activity in Russia.

Branch as a subdivision of a foreign legal entity may conduct commercial activity.

ROs and Branches shall be registered with State Registration Chamber (GRP), Chamber of Trade and Commerce, various Ministries of the Russian Government, Tax authorities, State Committee for Statistics and three non-budgetary funds (Pension fund, Obligatory Medical Insurance fund and Social Security fund).

There is no requirement for the authorized capital.

Head of RO or Branch should be appointed by the foreign legal entity. Such executive body acts according to the POA issued by the foreign legal entity.

Reporting for Branch or taxable RO is almost similar to any other Russian legal entity. Monthly VAT reports and quarterly tax reports are made to the special Tax inspectorate, which deals only with ROs and Branches.

If RO or a Branch plan to employ foreign citizens it must apply for an Employment permit. All foreign employees of a company must apply for their respective individual Working Permits. A separate work visa would also be required.

Russia has unique requirements in the field of safety.

The conformance to certain standards and requirements is determined by State Expertise at the stage of approvals.

The following Products are subject to mandatory certification

(1)     Products, services and tools assuring safety for life and health of consumers (e.g. foodstuff, drugs, textiles, electrical appliances, related equipment etc);

(2)     Alcoholic products and equipment for their production;

(3)     Production sites;

(4)     Technical installations at dangerous production sites (e.g. pressure vessels, lifting and hoisting machines, pumps, equipment for mining, petrochemical, oil & gas, metallurgical and other industries);

(5)     Fire-related products;

(6)     Livestock;

(7)     Products assuring safety for life and health of animals (feed, vaccines etc);

(8)     Pesticides and agrochemicals;

(9)     Products and services containing results of genetic engineering activity;

(10)   Energy-consuming products and energy resources;

(11)   Telecommunication equipment, tools and services;

(12)   Information systems, databases and tools to protect them;

(13)   Transportation units, products and services;

(14)   Aerospace machinery;

(15)   Geodesic, cartographical and topographical products;

(16)   Forestry raw materials;

(17)   Gas and coal;

(18)   Nuclear industry products and technologies;

(19)   Arms.

Starting a business in Russia in the franchising formula has certain advantages: more freedom, as the franchisee takes on major responsibilities; minimal expense; lower cost and higher profits; potential for fast growth; brand building.

Disadvantages might rely almost exclusively on performance of your franchisees.