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Restrictions on Dividend Payments to a Foreign Participant or What to Do?

20 July 2022
Maxim Barashev
Managing partner
Corporate Practice
Litigation & Arbitration
Investment projects
Maxim Barashev
Managing partner
Corporate Practice
Litigation & Arbitration
Investment projects
In Russia, commercial companies are entitled to distribute profit and pay dividends to their participants.

In 2022, however, certain restrictions were imposed on dividend payments due to bankruptcy moratorium introduced by Decree No. 497 of the Government dated 28/03/2022, as well as on dividends to be paid to foreign participants from unfriendly countries.

Decree No. 497 of the Government of the Russian Federation dated 28/03/2022 introduced a moratorium on bankruptcy proceedings initiated by creditors' claimes.

This decision applies to citizens, sole proprietors, as well as to all organizations, except for debtor developers (if apartment buildings and other real estate have been already included in the Unified Register of Trouble Objects as of the date of This Decision Taking Effect.)

It is not the moratorium itself that is important, but the relevant restrictions and preferences for companies falling within the ambit thereof. The core of these restrictions and preferences is set out in Article 9.1.(3) of the Federal Act No. 127-FZ "On Insolvency (Bankruptcy)" dated 26/10/2002, in particular:
  • It is forbidden to pay dividends, income under participatory interests (investment units), as well as distribute profits between the founders (participants) of the debtor;
  • General Director and participants are released from the obligation to apply for bankruptcy if there are debts. In fact, it is exemption from subsidiary liability on this basis;
  • Penalties (fines, liquidated damages) and other financial sanctions are not accrued for non-fulfillment or undue fulfillment of financial obligations and mandatory payments, except for current payments;
  • It is forbidden to enforce the rights against the pledged property through foreclosure procedure;
  • Enforcement proceedings against property foreclosure based on claims that arose before the introduction of the moratorium, are suspended.


Proceeding from these circumstances, many companies wishing to pay dividends have decided to refuse from the bankruptcy moratorium. For this purpose, it is necessary to register the company's personal account on the Federal Resource in the section of the Unified Federal Register of Bankruptcy Information. Having registered and credited a personal account with the stamp duty amount, the Company publishes the refusal from the bankruptcy moratorium. Thereafter, the desicion to pay dividends can be made.

In addition to the bankruptcy moratorium, with effect from 4 May 2022, Decree of the President of the Russian Federation entered into force, establishing a temporary procedure for residents (LLC, business partnerships, production cooperatives) to fulfill obligations to pay profit to their participants, who are:
  • foreign persons related to the countries included in the List approved by Decree No. 430-r of the Government of Russia dated 05/03/2022, including if such foreign persons have citizenship of such countries or if such countries are the place of their registration, the principal place of business or the place of primary profit-generating activities.
  • or persons who are controlled by such foreign persons, herewith, regardless of the place of their registration (except in cases where the place of their registration is the Russian Federation) or the principal place of business.


It is envisaged to pay profits (dividends) to foreign participants in the same manner as to fulfil obligations towards foreign creditors, namely, in accordance with Decree No. 95 of the President of the Russian Federation dated 05/03/2022.

In other words, a resident has the right to pay dividends in Russian Rubles. For this purpose, the resident needs to open a C-type account under the name of a foreign participant (lender) in a Russian bank or in a non-banking institution that is a central depository in accordance with Federal Act No. 414-FZ "On the Central Depository" dated 07.12.2011.

C-type account differs from a regular bank account by a number of restrictions on the use of cash held in such a bank account. Cash held in C-type bank account may be used to:
  • pay taxes, stamp duties, charges and other mandatory payments payable in accordance with the budget legislation of the Russian Federation;
  • transfer to buy federal loan bonds placed by the Ministry of Finance of Russia at auctions;
  • transfer to C-type bank accounts;
  • transfer to special C-type broker accounts;
  • pay fees to the authorized bank responsible for account service;
  • cash credited to C-type bank account.


To use the cash held in C-type account for the purposes other than those listed above, it is necessary to obtain a special permit from the Ministry of Finance of the Russian Federation.

The procedure aimed to approve dividend payments without using a special C-type account takes at least 1 month and, at present, there is no practice of positive decisions on this issue. Requests are forwarded by the Ministry of Finance to other agencies, in particular to the Central Bank of the Russian Federation, which, in turn, sends them back.

In accordance with Article 12.7(2)(D) of the Regulation of the Ministry of Finance of the Russian Federation, citizens and legal entities have the right to file a complaint against a decision taken in respect of the complaint or an action (omission) in connection with the consideration of the complaint in an administrative and (or) judicial manner in accordance with the legislation of the Russian Federation.

If the challenge of actions/omission of the Ministry of Finance in the Ministry itself comes to nothing, the dispute will be referred to the court in accordance with Article 218 of the Code of Administrative Proceedings of the Russian Federation.

If the decision, action or omission of the Ministry of Finance have caused losses for the Claimant, it is also possible to file a claim for damages in accordance with Article 15 of the Civil Code of the Russian Federation.

In our opinion, the Ministry of Finance adheres to the position of avoiding clear-cut decisions, which makes it impossible at the moment to resolve the issue of dividend payments. We believe that this situation may persist for a few more months, until the case law on this issue is formed or a unified approach to dividend payments is developed by the Ministry of Finance of the Russian Federation.
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