New rules for paying dividends starting May 4, 2022

Yesterday, May 4, 2022, the President of the Russian Federation signed the Decree No. 254 on the provisional procedure for the payment of profits by foreign founders (hereinafter referred to as “the Decree”).

The subject matter is, if a Russian LLC decides to distribute profits to a foreign founder, then the payment of profits is carried out in accordance with paragraphs 2-9 of Decree of the President of the Russian Federation dated March 5, 2022 No. 95 “On the temporary procedure for fulfilling obligations to certain foreign creditors”, providing for the payment debts in rubles.

Paragraph 2 of that Decree provides that the procedure applies to the fulfillment of obligations in excess of 10 million rubles per calendar month, or in the equivalent of the currency at the exchange rate of the Central Bank of the Russian Federation on the 1st day of the month in which such an obligation is fulfilled.

Paragraph 5 of the Decree of the President of the Russian Federation dated March 5, 2022 No. 95 states that the type “C” account mode is maintained in rubles and is established by a decision of the Board of Directors of the Central Bank of the Russian Federation.

In other words, the fulfillment of obligations in excess of 10 million rubles must be carried out in rubles through a type “C” account.

The Central Bank and the Ministry of Finance of the Russian Federation have been given the authority to determine a different procedure for fulfilling residents’ obligations to pay profits to foreign creditors, as well as to issue appropriate decisions without observing the procedure provided for by the decree:

– the Central Bank has been given the authority in relation to residents that are credit institutions and non-credit financial institutions;

– the Ministry of Finance has been given the authority in relation to other residents.

Currently, we are waiting for instructions from the Central Bank of the Russian Federation and the Ministry of Finance of the Russian Federation regarding the type “C” account and will inform you of any changes.