Changing the status of a foreign shareholder: Implications for a Belarusian company

In modern business, closely linked to international markets, changes in the status of foreign shareholders are common occurrence. Whether it involves change of citizenship of an individual, reorganization of a foreign parent company or its “relocation” to a new jurisdiction (redomiciliation), all of this has direct legal consequences for the Belarusian legal entity in which such a foreign entity is a shareholder. Ignoring these processes or incorrectly formalizing them can lead to a range of problems: from administrative fines and tax assessments to invalidating corporate decisions and transactions.

What changes in the status of foreign shareholders are most significant?

The spectrum of such changes is quite broad.

For foreign individuals these may include:

• Change of personal data (e.g., due to marriage);
• Change of citizenship;
• Change of tax residency (a key point for the application of double taxation avoidance agreements (hereinafter – DTAA));
• Death (entailing the inheritance process).

For foreign legal entities the list of potential changes is even more extensive:

• Various forms of reorganization (merger, acquisition, division, spin-off, transformation);
• Liquidation or bankruptcy;
• Change of company name or legal address;
• Redomiciliation;
• Any changes in its ownership structure (especially if they affect the ultimate beneficial owners).

Why is this so important for a Belarusian company?

Untimely or incorrect reflection of these changes in the documents of a Belarusian company can trigger a chain reaction of negative consequences.

Corporate Aspects

As a rule, information about shareholders is an integral part of the Articles of Association. Their change requires amendments and state registration (it is important to note that not all of the listed changes require state registration, but only the most significant ones, which most often entail changes in the composition of shareholders). Discrepancies between information about shareholders in the Company's Articles of Association or state registers and the actual state of affairs may be grounds for invalidating decisions of general meetings where the vote of such a shareholder was taken into account, including on the basis of violation of the notification procedure (since such a foreign shareholder was notified using outdated information). This is especially important against the background of changes in the Civil Code since November 19, 2024 which expanded the list of subjects who have the right to invalidate decisions of meetings.

Tax Aspects

Changes in the jurisdiction or tax residency of a shareholder affect, for example, the correct application of tax rates on income of foreign organizations or personal income tax when paying dividends. To be able to apply preferential rates under DTAAs, it is necessary not only to have such an agreement, but also for the foreign shareholder to provide timely confirmation of its tax residency, valid at the time of income payment.

Banking Regulation and Compliance

Belarusian banks thoroughly check documents and information about entities when making any transactions (whether it is the payment of dividends abroad or the return of a loan issued by a foreign shareholder to the company). Discrepancies in the payment documents or the absence of up-to-date confirmation of the status of shareholder may lead to refusal to conduct the transaction or its significant delay.

Countering Money Laundering, Terrorism Financing and Proliferation of Weapons of Mass Destruction (AML/CFT)

Companies that fall under the criteria established by AML/CFT legislation, such as banks, are obliged not only to identify their beneficial owners, but also to maintain this information up-to-date. Any changes in the status of foreign shareholders may entail changes in the ultimate beneficial owner status of the Belarusian company, which requires updating the company's internal data and, in some cases, notifying the relevant authorities that monitor compliance with AML/CFT legislation.

Special Regulatory Requirements

If changes in the status of foreign shareholders are related, for example, to the alienation of shares (stocks) of a Belarusian company by a person from an “unfriendly” state, Decree of the President of the Republic of Belarus No. 93 “On Additional Measures to Ensure the Stable Functioning of the Economy” (hereinafter – Decree No. 93) “comes into play”, establishing the need to obtain permission from the Government for such alienation.

How to formalize the implications of changes in the status of foreign shareholders for a belarusian company?

1) Submit Information and Documents

The first step is to send official, legalized documents from the foreign shareholder confirming the changes, with a notarized translation into Russian or Belarusian (extracts from trade registers, new passports, certificates, court decisions, etc.). The process of legalization and translation, as well as sending documents to Belarus, may take some time, which needs to be taken into account.

2) Internal Analysis and Preparation

Next, Belarusian company analyzes the received documents for completeness, legal force, and content. Specific changes that need to be made to the Articles of Assosiation are determined, and a draft of such changes or a new version of the Articles of Association is prepared.

At this stage, it is crucial to check whether the change in the status of a foreign shareholder (if it is related to the alienation of shares (stocks) of a Belarusian company) falls under the Decree No. 93 and whether Governmental permission is required. If permission is required, obtaining it becomes a priority before registration to avoid invalidation of such registration in court.

3) Implementation of Corporate Procedures

The decision to amend the Articles of Association must be approved by the general meeting of shareholders of the company in accordance with all the requirements of the Law “On Business Companies” and the current Articles of Association of the Company.

4) State Registration of Changes

State registration of changes to the Articles of Association in connection with a change in the composition of founders must be completed within two months from the date of the decision by the general meeting of shareholders.

5) Notification of Relevant Bodies and Organizations

After state registration of changes, it is usually necessary to notify the servicing banks (to update the card with specimen signatures and KYC data), as well as key counterparties, if this is provided for by contracts or is important for cooperation.

In conclusion, legally competent and timely formalization of all implications associated with a change in the status of foreign shareholders is not just a formality, but an important element of ensuring the stability of corporate governance, legality, and predictability of the activities of a Belarusian company. This allows you to avoid unnecessary risks and build long-term and trusting relationships with international partners.

Authors:

Violetta Liudchyk, Associate, Co-head of “Corporate law and M&A”, GRATA International Belarus

Kristina Panchenko, Junior associate, GRATA International, Belarus.