Russia adopts law establishing administrative liability for violations of laws on economically significant organisations

On 22 June 2024, Federal Law No. 152-FZ “On Amending to the Code of Administrative Offences of the Russian Federation” (“Law 152-FZ”) entered into force, which establishes administrative liability for violations of the laws on so-called economically significant organisations (“ESOs”) whose status is regulated by Federal Law No. 470-FZ dated 4 August 2023 “On the Specifics of Regulation of Corporate Relations in Business Companies that are Economically Significant Organisations” (“ESO Law”).

We have previously analysed the provisions the ESO Law and amendments to it.

We consider the main provisions of Law 152-FZ in more detail below.

Grounds for administrative liability (article 15.23.2 of the Code of Administrative Offences of the Russian Federation)

Failure to fulfil the obligation to take direct ownership of the shares/participation interest

The ESO Law providesESO Law, article 7, clause 1 that following a decision of the Moscow Region Arbitrazh Court to suspend the exercise of corporate rights by a foreign holding company (“FHC”) in respect of an ESO (“Decision”), persons (i) who indirectly hold shares (or participation interest) in the ESO owned by FHC and (ii) who are citizens and/or residents of the Russian Federation (“Russian Beneficial Owners”) are required to take direct ownership of such shares (or participation interest) (“Direct Ownership”).

The algorithm for taking Direct Ownership could be summed up as followsESO Law, article 7, clauses 3-4.1:

• the ESO will, within 20 business days of the date of the Decision, give notice to that effect to all Russian beneficial owners known to it;
• Russian Beneficial Owners shall, within three months of the date of receiving such notice, send to the ESO an application containing the information required to take Direct Ownership;
• if the Russian Beneficial Owners fail to fulfil such obligation, the ESO shall, within 10 business days after the expiry of the abovementioned deadline, notify the Russian Federal Financial Monitoring Service (“Rosfinmonitoring”); and
• upon a review of such notice, Rosfinmonitoring will send the Russian Beneficial Owners an order to eliminate the identified violations specifying the deadline for compliance (“Order”).

However, until recently, Russian laws did not provide for any liability for non-compliance with the Order by Russian Beneficial Owners.

In this connection, Law 152-FZ provides that the failure by Russian Beneficial Owners to fulfil the obligation to send the ESO the information required for taking Direct Possession, after the sending of the Order, shall result in the imposition of an administrative fine:

• on citizens: in the amount of RUB200,000 to RUB400,000;
• on officers: in the amount of RUB300,000 to RUB500,000; and
• on legal entities: in the amount of RUB500,000 to RUB700,000.

Failure by the ESO governing bodies to fulfil their duties under the ESO Law

The ESO Law providesESO Law, article 12 for the obligation of an ESO’s governing bodies to submit applications and perform other acts stipulated under the ESO Law. Such actsESO Law, article 5, clause 2 may include, for example, the obligation of the sole executive body or a member of the board of directors of an ESO to file an application with the Moscow Region Arbitrazh Court to suspend the exercise of the FHC’s corporate rights in relation to the ESO.

Rosfinmonitoring will superviseESO Law, article 12 the fulfilment of the obligations of the ESO governing bodies provided under the ESO Law.

Law 152-FZ, in its turn, establishes administrative liability in the form of an administrative fine for the non-performance or late performance by the ESO governing bodies of the duties imposed on them:

• on citizens: in the amount of RUB200,000 to RUB400,000;
• on officers: in the amount of RUB300,000 to RUB500,000; and
• on legal entities: in the amount of RUB500,000 to RUB700,000.

Body considering administrative offence cases

The provisions of Law 152-FZ stipulate that cases under the new article 15.23.2 of the Code of Administrative Offences of the Russian Federation related to violations of the ESO laws will be considered by Rosfinmonitoring.

Period of limitation for administrative liability

In addition, Law 152-FZ supplements article 4.5 of the Code of Administrative Offences of the Russian Federation by establishing that the statute of limitations for a violation of the provisions of the new article 15.23.2 of the Code of Administrative Offences of the Russian Federation is one year after the date on which the administrative offence is committed.