Media & Resources
The EU Has Imposed a Bban On Servicing Russia-Related Entities
DATE: April 13, 2022 | AUTHOR: AT
EU Council Regulation No. 2022/576 of April 08 amended the EU Council Regulation No. 833/2014, including the introduction of a new Article 5m, prohibiting the creation of new companies and servicing of existing companies and structures and with beneficiaries from the Russian Federation.
- It is prohibited to provide registration services, provision of office, management, trustee services, and other similar services.
- It is prohibited to act as a fiduciary, nominee shareholder, director, secretary, or in a similar capacity for a trust or similar legal arrangement.
The prohibition applies to companies or structures in which the beneficiary with a share of more than 50% is:
- a citizen of the Russian Federation or a person residing in the Russian Federation;
- a legal entity and an organization established in the Russian Federation;
- a legal entity, organization or body, which is directly or indirectly owned by more than 50% by a natural person or legal entity from the Russian Federation.
The ban does not apply to beneficiaries who, along with Russian citizenship, also have the citizenship of an EU member state, a temporary or permanent residence permit in an EU member state.
It is prohibited to establish new companies and structures starting from April 8;
The provision of services to existing companies and structures is prohibited since 10 May.
The practical consequences of these bans for Russian clients include:
-Inability to make transactions with the assets of a foreign company;
-Inability to approve transactions of a Russian subsidiary;
-Fine of up to 700 thousand rubles per year for failure to hold an annual meeting;
- Finef up to 500,000 rubles per year for failure to perform duties of a CFC’s controlling person; fines for failure to pay taxes on CFC’s profits;
-Inability of directors of a foreign company to fulfill their obligations, their resignation, failure to submit annual reports and removal of the company from the register (a status similar to liquidation), which would make it impossible to transfer the company’s assets to another person.