Member Article

On July 16, 2023 the President of the Russian Federation signed Decree 'On Amendments to the List of Movable and Immovable Property, Securities, Shares in the Authorized (share) Capital of Russian Legal Entities and Property Rights, in respect of which Interim Administration is introduced, approved by the Decree of the President of the Russian Federation dated April 25, 2023 No. 302' No. 520 (“Decree No. 520”)1. Decree No. 520 comes into force immediately as of the date of its publication.

By Decree No. 520 shares in the Russian divisions of the brewing company Baltika Brewing Company LLC (“Baltika”) and Danone Russia (“Danone”) held by foreign companies were transferred under the interim administration of the Federal Agency for State Property Management (“Rosimushchestvo”). In April, control over Unipro and Fortum similarly changed (see for more details on news and practical implications of mechanism ).

According to Decree No. 520, Rosimushchestvo receives into temporary management:

• 98.56% share in the charter capital of Baltika owned by Carlsberg Sverige Aktiebolag;

• 1.35% share in the charter capital of Baltika owned by Hoppy Union LLC;

• 0.09% share in the charter capital in Baltika owned by Carlsberg Deutschland GmbH

• about 83.3 billion ordinary shares of Danone owned by Produits Laitiers Frais Est Europe;

• 85,000 ordinary shares of Danone owned by Danone Trade LLC.

Interim Administration mechanism means that Rosimushchestvo has all property rights to the assets placed under the Interim Administration. At the same time, Rosimushchestvo only operates and exploits the assets and has no right to dispose of them. In other words, the original shareholders will be temporarily deprived of the rights of possession and use over the affected assets but will keep the legal ownership title to them.

Revenues received as a result of asset administration are used to compensate the expenses incurred during Interim Administration. Rosimushchestvo is also responsible for ensuring the inventory and safekeeping of the assets handed over under the Interim Administration.

Interim Administration can only be terminated by a relevant act of the President of the Russian Federation.

Although formally any assets under control of persons associated with “unfriendly” states can be targeted by the Interim Administration mechanism, the current application of this mechanism to four companies from the top 50 foreign companies playing significant role in the security of the state and economy in Russia indicates that this mechanism is likely to affect only some foreign businesses taking into account their potential impact on these areas.

You can read the Decree by clicking here. In Russian only.

 

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