Draft law granting Russian companies the right to refuse put options for foreign investors to be reviewed in third reading
Draft law granting Russian companies the right to refuse put options for foreign investors to be reviewed in third reading
The State Duma of the Russian Federation has approved in its second reading Draft Law No. 1059849-7, which introduces a mechanism allowing Russian companies to refuse the exercise of put options by foreign investors returning to the Russian market.
To invoke the right of refusal, all of the following five conditions must be met simultaneously:
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The foreign investor (former owner) is affiliated with an unfriendly jurisdiction;
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The shares (or interest in the charter capital) were disposed of between February 24, 2022 and March 1, 2025;
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The transaction was completed at a price significantly below fair market value;
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At least two years have passed since the conclusion of the sale and purchase agreement;
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The Russian company has duly fulfilled its obligations to employees and creditors.
Compensation in Case of Refusal
The foreign investor (former owner) may request compensation from the buyer, provided the request is submitted within one year from the date of refusal.
However, if the foreign investor had impeded the business operations of the Russian company, the compensation may be denied or reduced proportionally.
Option Prohibition
A government authority may impose a ban on the exercise of a put option if the foreign investor is found to exert a material influence on the socio-economic development of the Russian Federation.
“The purpose of this draft law is to protect Russian businesses that have undergone a complex recovery process following the withdrawal of foreign companies from the Russian market.
On one hand, it grants Russian companies an additional tool — the ability to refuse to honor a contractual obligation to repurchase a stake, if doing so is in their best interest.
On the other hand, it establishes a balance of interests by entitling the foreign investor to compensation — provided their behavior was not detrimental to the company.
However, the lack of clarity surrounding the compensation valuation methodology **may trigger future disputes.”
— Aleksei Chichirenkov, Senior Associate, BBNP
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