The admission of a foreign investor depends not only on the size of the acquired share. Control, buyer group, industry, licenses, subsoil, financial status, competition and applicable special measures are all important. The permit route must be part of the term sheet and SPA.
- The general regime is set by the law on foreign investment, but special control applies to strategic companies.
- Applying for economic concentration and agreeing on a strategic investment solve different problems.
- For banks and other financial organizations, separate requirements of the Bank of Russia apply.
- Transactions with subsoil users require site analysis, a license and the ability to establish control.
- Temporary special measures are subject to change and their relevance is checked immediately before signing and closure.
01
Five test circuits
General legal regime of a foreign investor.
Control over strategic business companies.
Economic concentration and competition.
Banks, mineral resources, communications, defense and other regulated assets.
Current permits, invoices and restrictions as of the date of the transaction.
02
Control is more important than formal interest
Voting rights, contractual vetoes, the power to appoint authorities, trust management, member agreements and group actions are analyzed. Several related acquisitions may be assessed collectively.
Before choosing an instrument - a share, option, convertible loan, pledge or shareholder agreement - it is checked whether it creates control or an agreement obligation.
03
Strategic Societies
Law No. 57-FZ establishes preliminary control for investments in companies conducting activities of strategic importance. The competence of the Government Commission and the Federal Antimonopoly Service, the composition of the documents and the buyer’s assessment are included in the transaction schedule.
If prior approval is required, failure to comply creates the risk of invalidity, sanctions and loss of corporate rights.
04
Subsoil use
The type of mineral, site status, license, operator, project obligations and final control are verified. The transaction with the shares of a subsoil user and the transfer of the license itself are legally different processes.
The SPA includes the conditions for obtaining approvals, maintaining a license, fulfilling obligations and the consequences of changing its parameters.
05
Banks and financial organizations
The Bank of Russia evaluates the acquisition of significant participation and the establishment of control in cases established by law, as well as the financial position, sources of funds, ownership structure and business reputation. For insurance, non-state pension funds, management and other regulated organizations, their own requirements apply.
Acquisition financing and the source of funds are prepared to withstand not only contractual, but also regulatory scrutiny.
06
Economic concentration
FAS analyzes the group's assets and revenue, the target of the acquisition, control rights and relevant markets. The transaction may require prior consent or subsequent notification. Foreign investment approval does not replace merger control and vice versa.
07
Investor documents
- 01
Full group structure and ultimate beneficiaries.
- 02
Constituent documents and powers of signatories.
- 03
Financial statements and source of funds.
- 04
Description of business and government relations.
- 05
Transaction structure and all related agreements.
- 06
Information about the facility, licenses and markets.
- 07
Financing, pledges, options and veto rights.
08
How to reflect permissions in SPA
Approvals are formalized as conditions precedent with the responsible person, deadline, standard of effort, obligation to provide information and long-stop date. Separately regulated are remedies or conditions of the body, prohibition of premature control, return of advance payment and termination.
Before signing and immediately before closing, special measures, sanctions lists, group composition and regulatory changes are re-checked.
09
Working sequence
- 01Screening
Parties, control, industry and object.
- 02Pre-consultation
Competent authorities and controversial issues.
- 03Filings
Packages, translations, answers and commitments.
- 04Signing
Conditions precedent and standstill.
- 05Closing
Re-verification and execution of permits.