Current restrictions on dividend payments to foreign shareholders

Russia has introduced a bankruptcy moratorium for the period from 01 April 2022 to 01 October 2022. During the moratorium companies are, among other things, protected from insolvency and various fines, but simultaneously not allowed to distribute profits to their shareholders regardless of whether the shareholders are foreign persons or not. The moratorium can however be waived simply by uploading a corresponding statement to the Unified Federal Register of Bankruptcy Information account (bankrot.fedresurs.ru/).

Furthermore, in accordance with the 04 May 2022 decree Nr. 254 by the Russian Federation president, dividends paid to companies from so-called “unfriendly states” (inter alia, EU member states, US, UK, Japan, Switzerland – de facto those nations that have imposed sanctions) must not exceed RUB 10 million per month or an equivalent amount in foreign currency (at the exchange rate of the Russian Central Bank as of the 1st of the payment month). Larger amounts are to be credited to a special “C”-type account located in Russia and providing for no practical ways to transfer funds. They may only be used in a limited number of operations (e.g. payment of Russian taxes by the foreign shareholder), unless special permission to pay out the dividends is granted by the Governmental Commission for the Control of Foreign Investment.

The above restrictions present a major obstacle to profits distribution for large MNEs operating worldwide, while SMEs are affected in a lesser degree, with the ability to gradually pay dividends every month.

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