Business restructuring and M&A in Russia

1) In what forms can the reorganization of a legal entity be carried out?

The reorganization of a legal entity can be carried out in the following forms: 

• merger;
• accession;
• division;
• separation;
• transformation;
• with a simultaneous combination of various specified forms. 

Two or more legal entities, including those established in different organizational and legal forms, may participate in reorganization if a law provides for the possibility of converting a legal entity into a legal entity of another organizational and legal form.

2) What are the procedures for the division or merger of a company?

Both separation and merger, the decision on reorganization must be made by the general meeting of participants/shareholders of the reorganized company decides on reorganization. In case of division, the general meeting approves the dividing balance sheet, and the general meeting of each newly created company approves its articles of association and elects the company's management bodies. In the case of a merger, the general meeting of each company participating in the merger approves the merger agreement, the articles of association of the new company and the transfer act. After making a decision on a merger or separation, it is necessary to send a notification to the registration authority, as well as notify creditors. The reorganization is considered completed from the moment of state registration of legal entities created as a result of the reorganization.

3) How to separate a specific type of activity into an independent company?

In order to carry out reorganization in the form of a separation, the general meeting of participants/shareholders of the company must decide on such reorganization, on the procedure and conditions of separation, on the creation of a new company (new companies) and on the approval of the transfer act. The general meeting of participants/shareholders of the separated company approves its articles of association and elects the company's management bodies.

It is also necessary to send a notification to the registration authority about taking a decision on the separation and then notify creditors. 

4) Is it possible to reorganize a company in case of bankruptcy?

If a monitoring procedure has been introduced in relation to the debtor organization, according to Federal Law No. 127–FZ dated 26.10.2002 "On Insolvency (Bankruptcy)", the debtor's management bodies are not entitled to make decisions on reorganization of the debtor. 

Where a financial rehabilitation procedure is introduced, the debtor organization does not have the right, without the consent of the creditors' meeting/committee and the person or persons who provided the security for its obligations, to make a decision on its reorganization.

5) Which government agencies' approvals should be obtained for mergers and acquisitions?

According to art. 27 of Federal Law No. 135-FZ dated 26 July 2006 "On Protection of Competition", it is necessary to obtain the prior consent of the Federal Antimonopoly Service, in particular, for the merger of commercial organizations and the accession of one or more commercial organizations to another commercial organization, if the total value of their assets (assets of their groups of persons) exceeds 7 billion rubles, or the total revenue of such organizations (their groups of persons) from the sale of goods for the calendar year preceding the year of reorganization exceeds 10 billion rubles. 

In accordance with the Decree of the President of the Russian Federation dated 8 September 2022 No. 618, permission from the Government Commission for the voluntary reorganization of a limited liability company is required if in such reorganization participate foreign persons associated with foreign states that are unfriendly to the Russian Federation, or persons who are under the control of such foreign persons.

Author: Yana Dianova, Counsel