Once you have discussed all of your options with an experienced business advisor, you may decide that a limited liability company (LLC, or OOO in Russian) is the best option for your business entity in Russia.
Under the structure of an LLC, the authorized capital is divided into shares and the “participants” are only liable for company losses in the amount of their initial investment—thus the designation “limited” liability. Unlike establishing a branch or representative office of a foreign company in Russia, an LLC is a full legal Russian entity and will be governed by Russian law and policy.
Key Requirements of an LLC
Part of what distinguishes a limited liability company from other types of business entities—such as partnerships or joint stock companies—are the rules governing who can establish one and the amount of charter capital needed to get started. Specifically, LLCs must adhere to the following:
Participants. A limited liability company (LLC) may be established by one or more individuals or legal entities (“participants”). An LLC may not have as its sole participant another business entity consisting of a single person. The liability of each participant in this type of company is limited to the value of his share in the charter capital. The number of participants in a limited liability company cannot exceed 50.
- Charter capital. The charter capital of a limited liability company determines the minimum size of the company’s property, thereby guaranteeing the interests of its creditors. The minimum charter capital of a limited liability company should come to at least RUB 10,000 (approximately $150 US). The full amount of the charter capital amount must be paid within four months of the LLC’s registration date. Contributions may be made in cash or in-kind, and certain customs benefits may be available for in-kind contributions made by foreign investors. The charter capital may be increased only after the original charter capital has been paid in full.
Rights and Obligations of Participants
The participants own “participation interests” in the LLC. A participation interest in an LLC is not considered a security under current Russian law. Therefore, in contrast to the shares of a joint stock company, LLC participation interests do not need to be registered.
Participants may sell their participation interests to a third party, subject to a right of first refusal held by the other participants to purchase them at the same price offered to the third party. Participants in an LLC also have the right to withdraw from the LLC and to be compensated for their participation interests.
Finally, a participant or group of participants holding a participation interest of 10% or more may demand the expulsion of any other participant who grossly violates his obligations as a participant, or who substantially hinders the LLC in its legitimate activities.
The participants in an LLC have the right to:
- Participate in the management of the LLC in accordance with procedures established by LLC law and the LLC foundation documents.
- Obtain information concerning the activities of the LLC and have access to its accounting and other documents in accordance with procedures established by the LLC foundation documents.
- Participate in the distribution of profits.
- Withdraw from the LLC without first seeking the approval of the other participants.
- Receive a portion of the assets left after settlement with creditors in the event of the liquidation of the LLC.
LLC law grants participants other rights as well. Beyond these statutory rights, additional rights may be granted to the participants in the original LLC charter.
Along with these guarantees, participants in an LLC are subject to certain requirements, including:
- Making contributions to the charter capital as specified in LLC law and LLC foundation documents and within the time periods specified in LLC law.
- Keeping all information concerning the activities of the LLC confidential.
LLC law imposes other obligations upon the participants. Additional obligations may be set forth in the LLC charter and may also be imposed upon all participants at a later time by a decision of the LLC’s General Participants’ Meeting, but unanimous consent is required.
Management Structure of an LLC
A limited liability company’s management structure is similar to that of a joint stock company. Limited liability companies are considered to be non-public and, thus, may enjoy more flexible options in regards to organizing their management structure, relations between shareholders, and other aspects of their activity.
The General Participants’ Meeting is the highest governing body of an LLC, and almost all matters fall within its exclusive competence. Even if the LLC participants choose to create a board of directors, the General Participants’ Meeting may nonetheless only delegate a limited number of matters to the board.
The General Participants’ Meeting has exclusive rights to:
- Amend the charter.
- Define the basic goals and directions of the LLC.
- Delegate to a commercial organization or to an individual entrepreneur the authority reserved to the LLC executive and approve the conditions of the agreements with such organizations or persons.
- Assign supplemental rights and duties to the participants in the LLC.
- Approve the annual financial report and the distribution of profits.
- Alter the amount of the charter capital of the LLC.
- Approve the regulations governing the internal activities of the LLC.
- Reorganize or liquidate the LLC, appoint a liquidation commission, and approve the liquidation balance sheet of the LLC.
Process for Registering an LLC in Russia
Activities connected with the state registration of LLCs and with their registration as taxpayers in Russia are currently under the auspices of the local tax inspectorates. The following documents are required for registration purposes:
- The application for the state registration of the new entity.
- The foundation agreement of the LLC (if the LLC has more than one founder/participant).
- The protocol of the founders’ meeting or, if the LLC has only one founder, the resolution of the founder in the establishment of the LLC.
- The Charter of the LLC.
- Power of Attorney issued by the founder for filing the application for the state registration of the LLC.
- The registration certificate, Certificate of Incorporation, an excerpt from the trade register, or certificate of good standing of the foreign participant.
- The Charter (Articles of Association, By-laws) of the foreign participant.
- Confirmation of payment of the state registration fee.
All documents from a foreign legal entity must be notarized and legalized in the country of preparation. Any document supplied in a language other than Russian must be accompanied by a notarized Russian translation.
Jus Privatum Can Streamline This Process for You
If reading this overview makes you feel overwhelmed by the process, don’t hesitate to call the professionals at Jus Privatum to assist you in the establishment of your LLC in Russia. We will help you every step of the way to make sure your business gets off to a successful start. Complete the contact form below or click one of our social media links on this page to connect with us today.