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- They mean like this: foreign investors may be prohibited from repurchasing company shares
They mean like this: foreign investors may be prohibited from repurchasing company shares
A foreign company may be prohibited from repurchasing shares of a Russian company if it significantly affects the socio-economic development of the Russian Federation. The State Duma Committee on Property, Land and Property Relations has sent such amendments to the law "On Foreign Investments in the Russian Federation" to the government for approval. Izvestia has reviewed the document. Thus, Russia will receive a legal basis for refusing to buy back shares to foreigners in leading industries such as food production, trade and others.
What are options and which companies have signed them?
For foreign investors who have left the Russian Federation, having concluded an option (repurchase of shares in the future) with domestic partners, it will be seriously difficult to return to the country. Russia will be able to ban a deal on the return of shares of an enterprise if it has a serious socially significant impact on the economy, Izvestia has learned. The State Duma Committee on Property, Land and Property Relations has prepared amendments to the law "On Foreign Investments in the Russian Federation" (the editorial office has the document).
Moreover, the decision on such a ban will be made by the agency that regulates a specific sector of the economy. This bill has already been sent to the government for approval, and the Ministry of Economic Development is forming a review of the Cabinet.
The press service of the department confirmed to Izvestia that the deputy bill is under consideration by the ministry: its position will be presented on time. The Ministry of Economy also noted that the issue of the conditions for the return of foreign investors is complex and requires a balanced approach.
The bill stipulates other significant details of the return of foreign companies. For example, a new, now Russian, owner may cancel the option unilaterally. Moreover, this is possible in several cases at once: if the headquarters of a foreign organization is located in a state that commits unfriendly actions towards the Russian Federation, as well as if the company's shares were sold to the Russian side between February 24, 2022 and March 1, 2025.
Plus, the transaction will not take place if the option price is lower than the market price or two years or more have passed since its conclusion, and at that time the domestic owner fulfilled and fulfills his obligations to employees and creditors. Such amendments were proposed immediately for the second reading of the bill already submitted to the State Duma — it has already passed the first approval of deputies, its author is Vladislav Reznik, a member of the State Duma Committee on Property, Land and Property Relations.
It was not possible to get his comment, the head of the State Duma Committee on Property, Land and Property Relations, Sergei Gavrilov, did not respond to a request from Izvestia. The government redirected the editorial board's questions to the Ministry of Economic Development. The publication also addressed them to the Ministry of Industry and Trade, the Ministry of Agriculture, the Federal Antimonopoly Service and the Ministry of Finance.
From February 2022 until today, foreign companies have been concluding deals, as a result of which shares of foreign investors are transferred to Russian ones. These are the leading sectors of the economy: industry, including energy, gas, oil, trade, clothing, finance, transport, software, food, alcohol and beverages, and so on, with more than 15 areas in total.
Interestingly, a significant part of them concluded agreements on their possible return to the country. For example, in May 2023, Denis Manturov, then deputy Prime Minister and head of the Ministry of Industry and Trade, told Izvestia that half of the foreign companies that sold their businesses in Russia could return within 10 years. "About half of the foreign organizations that have sold their businesses in Russia have an option to buy back assets in the horizon of 3-10 years," the official said at the time. In February 2024, he reported that about 100 European companies out of 500 operating in our country and 66 American companies out of 350 located in the Russian Federation had left.
The most famous deals, of course, were contracts for 1 ruble. For example, French Renault and American McDonalds were leaving. It is known that the first company transferred its Russian assets with the right to repurchase shares within six years. As the media wrote, similar conditions were with the restaurateurs from Deliciously, Period, which, however, did not disclose its terms of the deal.
What are the alternatives for banning options?
The issue of the return of foreign brands to Russia is relevant now. Against the background of warming relations with the United States and the first news that foreign organizations themselves began to show interest in the prospects of cooperation, a discussion began in the government on the conditions under which their return was possible. After all, foreign businesses, when leaving the country, often violated their obligations in Russia — to partners, creditors, employees and, eventually, to consumers.
Therefore, officials led by the Ministry of Finance are now forming the necessary approaches to how relations with Western partners should be restored. So far, it is known that foreign business must receive approval from the Cabinet of Ministers. But many other aspects remain on the agenda: whether a foreign company should additionally localize production here, invest a fixed amount in the domestic economy as a kind of deposit, and many other conditions.
But whether it is necessary to immediately address the bans remains a question, because in fact, all industries in which foreigners have curtailed their active participation can be assessed as socially significant, Georgy Ostapkovich, director of the HSE Center for Economic Studies, told Izvestia. To complicate the situation, Russian legislation does not provide for such a concept, so it is unclear which options are at risk. But at first glance, these are the areas of nutrition, trade, industry and all others that have a direct impact on human well-being, he explained.
— It is absolutely clear that when Western business returns to Russia, companies must submit a plan to the government: what development prospects the brand has outlined, what range of goods it is ready and will produce in the Russian Federation, at what prices. This will allow us to assess what kind of competition the returning investor will create for domestic manufacturers," he said. — After all, we have areas in which Western experience is really important to us, for example, in technology, and there are those where we manage on our own.
Difficulties will arise from the legal side, the lawyers interviewed by Izvestia agreed. For example, if adopted, such a law should have retrospective effect, because the ban will apply to a previously concluded option, said Vyacheslav Kosakov, managing partner of Legal Group Novator, lawyer.
— It should be borne in mind that share repurchase transactions were concluded on specific terms: Often, foreign companies transferred business to Russian partners for 1 ruble on the condition that in the future they would be able to buy back their assets at an agreed price. The new proposed ban creates an ambiguous situation, and the question arises whether such a restriction would allow Western partners to renegotiate all the terms of the deal," he added.
Dmitry Pashin, the lawyer of MK Klishin & Partners, agrees with him, noting that the whole logic of the concluded contract breaks down. The very essence of optional agreements between the parties is violated — the basic principle of freedom of contract. A foreign company will be able to apply to the Constitutional Court for clarification on whether such a law complies with the norms of the Civil Code, he added.
Izvestia sent inquiries to the Association of European Businesses, the Russian Union of Industrialists and Entrepreneurs, the Chamber of Commerce and Industry, Delovaya Rossiya, as well as Rusprodsoyuz, Rusbrand, and AKORT.
Vladimir Gamza, Chairman of the CCI Council on Financial, Industrial and Investment Policy, is convinced that the measure proposed by the deputies is fair. This is primarily dictated by the "completely ugly withdrawal of some foreign companies from the Russian market," he noted.
— We understand that many foreign investors have concluded deals specifically with the right to buy back their business in Russia in the coming years. These companies have always been interested in the domestic market and, observing the sanctions that were supposed to harm the country, expected to easily return to their enterprises. But in such a situation, we must think about our own interests — to protect Russian manufacturers and the market from aggressive competition," the expert noted. — In the history of our country, there are examples of the active development of foreign enterprises and the squeezing of domestic industries from the market, which were observed in the 90s.
In his opinion, the current situation requires protective measures for our market in those sectors of the economy that have a key impact on the economic development of the country.
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