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Buying business in Russia

08.01.2022
Меркулов Игорь Петрович
Author:
MERKULOV IGOR
Заместитель генерального директора
Legal services

The main way to buy a business is to buy a share in the authorized capital of an LLC. In some cases, it is more convenient for a buyer of a business to purchase a business through a buyout of assets - real estate, property rights, results of intellectual activity, cars and other. Such a transaction is complex and requires a complex approach to verify the legal compliance of assets and the structuring of the transaction.

In this article we will discuss the purchase of shares in the authorized capital of a limited liability company in Russia. The procedure for formalizing the purchase of a share in the authorized capital depends on whether the purchaser is a participant in the LLC, and also on the requirements of the company's Articles of Association and the corporate agreement to that effect.

  • If a share in the authorized capital is acquired by another participant(s) of the LLC (sale of a share within the LLC), check the Articles of Association for any restrictions on the size of shares held by the company's participants or a ban on changing the ratio of participants' shares, as well as for any provision on the need to obtain the company's consent to such an alienation. In addition, if the participants of the LLC have entered into a contract on the exercise of the rights of participants, it should also be checked for any provisions governing the procedure for the transfer of shares between participants. The other participants in the LLC in this case do not have the right of first refusal.
  • If a share in the authorized capital is acquired by a third party, check the Articles of Association to see if they contain a prohibition on the alienation of shares to a third party, as well as the need to obtain the consent of LLC participants and (or) the company itself. Also check the contract on the exercise of the rights of participants (if any) to see if there are provisions governing the transfer of shares to third parties. When selling a share in the LLC to a third party, participants use the right of pre-emption. The Articles of Association may not exclude this right, but the Articles of Association may also grant the right of first refusal of other participants from this right to the company itself. In addition, the Articles of Association of a company may provide for longer periods of use of the pre-emptive right to purchase a share, as well as provisions establishing the pre-emptive right to purchase a share or part of a share in the authorized capital by participants of the company or by the company at a price predetermined by the Articles of Association, including the procedure for changing the size of such price or the procedure for determining it, the possibility of using the pre-emptive right to purchase not the entire share or not the part of the entire share in the authorized capital of society, which are offered for sale. Unlike the right of pre-emptive purchase at sale of a share in the authorized capital to the third person which always acts irrespective of the contents of the Articles of Association, necessity of consent of participants of the LLC or a company to sale of a share in the LLC can be provided only by the Articles of Association or the law (in separate cases), that is an additional restriction of sale of share in the authorized capital.

Therefore, if you have decided to buy a share in the LLC, check the Articles of Association for restrictions, share purchase conditions, limitations on the size of the share of one participant before proceeding with the share purchase transaction.

Step-by-step instruction “Buying a share in the authorized capital of LLC”

If you are planning to buy a share in the authorized capital of the LLC and at the same time are not a participant, we recommend to use the following algorithm:

Step 1. Verifying the Articles of Association for restrictions and special conditions on the sale of a share in the LLC

Before buying a participation, it is necessary to verify the Articles of Association:

  • The prohibition on selling a share to a third party
  • Requirement of preliminary consent of the participants to sell their shares
  • Special conditions of realization of the right of pre-emptive purchase of shares in the LLC

If there is a prohibition on selling a share to a third party, the purchase of such a share is impossible without entering amendments into the Articles of Association.

Step 2. Verifying “legal compliance” of the transaction of buying a business and preparing documents for the sale of shares in the LLC

To verify the legal compliance of the transaction and conclude a contract for the sale of a share in the LLC, the seller will be required to provide the following documents:

  • Documents that confirm the seller's authority to dispose of the share (the seller's grounds for acquiring the share in the LLC)
  • Documents that confirm payment for the LLC share
  • Articles of Association of the company in which the interest is alienated
  • Agreement on the establishment of the company, the share in which is alienated, or decision of the sole founder on creation of the company (in the case of alienation of the share by the founder of the company)
  • Documents that confirm the consent of the competition authority to execution of a transaction, in cases prescribed by the Federal Law No. 135-FZ “On Protection of Competition” dated 26.07.2006 and the Federal Law No. 57-FZ “On the Procedure of Foreign Investment in Business Entities of Strategic Importance for National Defense and State Security” dated 29.04.2008
  • Documents that confirm compliance with the pre-emptive right to purchase
  • Documents that confirm the consent to the alienation of shares, if under the Articles of Association a share may be alienated to third parties only with the consent of the LLC participants
  • Documents that concern the seller and his representative

To fully verify the “legal compliance” of a business purchase transaction, we recommend that you contact a lawyer to analyze the documents, verify the seller and obtain an opinion on the risks of the transaction. Additionally, when buying a transaction, it is important to verify the company itself, in which an interest is acquired: accounting statements, tax debts and debts to other contractors, court records, enforcement proceedings, availability of property registered as the property of the company, according to the documents and not according to the seller's words, pledge of property, and etc. In this you can also help lawyers and accountant, and the auditor. The Dvitex law firm provides comprehensive services to verify the “legal compliance” of the transaction to purchase a business, as well as registration of the transaction.

Step 3: Drawing up a contract for the sale of a share in the authorized capital

Step 4: Applying to the notary for notarial certification of a contract for the sale of a share

After certification of the contract the notary within 2 working days (if a longer period is not provided by the contract) submits an application for making entries in the Unified State Register of Legal Entities, and also within 3 days sends a copy of the application to the company, provided the contract does not provide for the transfer of rights to the company by one of the parties to the contract (notification of the company of the completed transfer is an important part of the transaction). Thus, in the case of the sale-purchase of a share in the LLC, changes in the Uniform State Register of Legal Entities are made on application to the notary, the company does not submit an application for registration of changes in connection with the sale of a share in the LLC to a third party.

The lawyers of Dvitex will help to assess the risks of buying a share in an LLC, as well as to choose the best scheme for processing the purchase and sale that protects the interests of the client.

Don’t you have time to independently verify the legal compliance of the transaction and registration of business purchases? Contact the lawyers of the company “Dviteks”, we will quickly check the legal compliance of the transaction, draw up all necessary documents and accompany the purchase of a business "turnkey". You can find out the cost of legal services to accompany a business purchase here.

Buying business in Russia

The main way to buy a business is to buy a share in the authorized capital of an LLC. In some cases, it is more convenient for a buyer of a business to purchase a business through a buyout of assets - real estate, property rights, results of intellectual activity, cars and other. Such a transaction is complex and requires a complex approach to verify the legal compliance of assets and the structuring of the transaction.

In this article we will discuss the purchase of shares in the authorized capital of a limited liability company in Russia. The procedure for formalizing the purchase of a share in the authorized capital depends on whether the purchaser is a participant in the LLC, and also on the requirements of the company's Articles of Association and the corporate agreement to that effect.

  • If a share in the authorized capital is acquired by another participant(s) of the LLC (sale of a share within the LLC), check the Articles of Association for any restrictions on the size of shares held by the company's participants or a ban on changing the ratio of participants' shares, as well as for any provision on the need to obtain the company's consent to such an alienation. In addition, if the participants of the LLC have entered into a contract on the exercise of the rights of participants, it should also be checked for any provisions governing the procedure for the transfer of shares between participants. The other participants in the LLC in this case do not have the right of first refusal.
  • If a share in the authorized capital is acquired by a third party, check the Articles of Association to see if they contain a prohibition on the alienation of shares to a third party, as well as the need to obtain the consent of LLC participants and (or) the company itself. Also check the contract on the exercise of the rights of participants (if any) to see if there are provisions governing the transfer of shares to third parties. When selling a share in the LLC to a third party, participants use the right of pre-emption. The Articles of Association may not exclude this right, but the Articles of Association may also grant the right of first refusal of other participants from this right to the company itself. In addition, the Articles of Association of a company may provide for longer periods of use of the pre-emptive right to purchase a share, as well as provisions establishing the pre-emptive right to purchase a share or part of a share in the authorized capital by participants of the company or by the company at a price predetermined by the Articles of Association, including the procedure for changing the size of such price or the procedure for determining it, the possibility of using the pre-emptive right to purchase not the entire share or not the part of the entire share in the authorized capital of society, which are offered for sale. Unlike the right of pre-emptive purchase at sale of a share in the authorized capital to the third person which always acts irrespective of the contents of the Articles of Association, necessity of consent of participants of the LLC or a company to sale of a share in the LLC can be provided only by the Articles of Association or the law (in separate cases), that is an additional restriction of sale of share in the authorized capital.

Therefore, if you have decided to buy a share in the LLC, check the Articles of Association for restrictions, share purchase conditions, limitations on the size of the share of one participant before proceeding with the share purchase transaction.

Step-by-step instruction “Buying a share in the authorized capital of LLC”

If you are planning to buy a share in the authorized capital of the LLC and at the same time are not a participant, we recommend to use the following algorithm:

Step 1. Verifying the Articles of Association for restrictions and special conditions on the sale of a share in the LLC

Before buying a participation, it is necessary to verify the Articles of Association:

  • The prohibition on selling a share to a third party
  • Requirement of preliminary consent of the participants to sell their shares
  • Special conditions of realization of the right of pre-emptive purchase of shares in the LLC

If there is a prohibition on selling a share to a third party, the purchase of such a share is impossible without entering amendments into the Articles of Association.

Step 2. Verifying “legal compliance” of the transaction of buying a business and preparing documents for the sale of shares in the LLC

To verify the legal compliance of the transaction and conclude a contract for the sale of a share in the LLC, the seller will be required to provide the following documents:

  • Documents that confirm the seller's authority to dispose of the share (the seller's grounds for acquiring the share in the LLC)
  • Documents that confirm payment for the LLC share
  • Articles of Association of the company in which the interest is alienated
  • Agreement on the establishment of the company, the share in which is alienated, or decision of the sole founder on creation of the company (in the case of alienation of the share by the founder of the company)
  • Documents that confirm the consent of the competition authority to execution of a transaction, in cases prescribed by the Federal Law No. 135-FZ “On Protection of Competition” dated 26.07.2006 and the Federal Law No. 57-FZ “On the Procedure of Foreign Investment in Business Entities of Strategic Importance for National Defense and State Security” dated 29.04.2008
  • Documents that confirm compliance with the pre-emptive right to purchase
  • Documents that confirm the consent to the alienation of shares, if under the Articles of Association a share may be alienated to third parties only with the consent of the LLC participants
  • Documents that concern the seller and his representative

To fully verify the “legal compliance” of a business purchase transaction, we recommend that you contact a lawyer to analyze the documents, verify the seller and obtain an opinion on the risks of the transaction. Additionally, when buying a transaction, it is important to verify the company itself, in which an interest is acquired: accounting statements, tax debts and debts to other contractors, court records, enforcement proceedings, availability of property registered as the property of the company, according to the documents and not according to the seller's words, pledge of property, and etc. In this you can also help lawyers and accountant, and the auditor. The Dvitex law firm provides comprehensive services to verify the “legal compliance” of the transaction to purchase a business, as well as registration of the transaction.

Step 3: Drawing up a contract for the sale of a share in the authorized capital

Step 4: Applying to the notary for notarial certification of a contract for the sale of a share

After certification of the contract the notary within 2 working days (if a longer period is not provided by the contract) submits an application for making entries in the Unified State Register of Legal Entities, and also within 3 days sends a copy of the application to the company, provided the contract does not provide for the transfer of rights to the company by one of the parties to the contract (notification of the company of the completed transfer is an important part of the transaction). Thus, in the case of the sale-purchase of a share in the LLC, changes in the Uniform State Register of Legal Entities are made on application to the notary, the company does not submit an application for registration of changes in connection with the sale of a share in the LLC to a third party.

The lawyers of Dvitex will help to assess the risks of buying a share in an LLC, as well as to choose the best scheme for processing the purchase and sale that protects the interests of the client.

Don’t you have time to independently verify the legal compliance of the transaction and registration of business purchases? Contact the lawyers of the company “Dviteks”, we will quickly check the legal compliance of the transaction, draw up all necessary documents and accompany the purchase of a business "turnkey". You can find out the cost of legal services to accompany a business purchase here.

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Buying business in Russia
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