The following transaction categories are subject to antimonopoly regulation in the RF:
- incorporation of a legal entity, provided (1) that its authorized capital is paid for with the shares of another for-profit company or the entity being incorporated acquires shares/property of another for-profit company and (2) the incorporation of the legal entity results in:
- The acquisition of more than 25%, 50% or 75% of the voting shares of a Russian joint-stock company;
- The acquisition of more than one-third, one-half or two-thirds of the equity interests in the authorized capital of a limited liability company;
- The acquisition of the right to own, use or possess the fixed assets or intangible assets of another competitor, where the book value of the target's assets exceeds 20% of the value of the fixed and intangible assets of the legal entity selling such assets (10% in the case of purchasing the assets of a financial institution);
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The acquisition of rights in respect of another for-profit company allowing the purchaser to direct the business activities of the latter.
- conversion by merger or consolidation;
- acquisition of more than 25%, 50% or 75% of the voting shares in a Russian joint-stock company;
- acquisition of more than one-third, one-half or two-thirds of the equity interests in the authorized capital of a Russian limited liability company;
- acquisition of the right to own, use or possess the fixed assets or intangible assets of another for-profit company, where the book value of the target's assets exceeds 20% of the value of the fixed and intangible assets owned by the for-profit company selling such assets (10% in case of purchasing assets of a financial institution);
- acquisition of rights allowing the purchaser to determine the terms of the commercial operations of another competitor (e.g., under trust management or agency agreements, etc.).
These transactions (actions) are subject to the FAS of Russia control if:
- the statutory thresholds are exceeded, calculated on the basis of the financial performance of the entities that are parties to the transaction and their groups; and/or
- if an entity that is a party to the transaction is listed in the Registry of Business Entities as holding a market share in a particular commodity market exceeding 35% or is dominant in a certain commodity market (hereinafter, the 'Register'). The Register is displayed on the FAS of Russia's official website.
The FAS of Russia exercises control by way of prior transaction approval and review of notices regarding completed transactions.
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Prior transaction (action) approval is required for exceeding the following thresholds:
- the value of the assets of the buyer (its group) and the assets of the target entity (its group) is in excess of RUR 7,000,000,000 (RUR 3,000,000,000 for mergers (consolidations)); provided that the total value of the assets of the target entity (group) exceeds RUR 250,000,000; or
- the value of the proceeds of the buyer (its group) and the target entity (its group) is in excess of RUR 10,000,000,000 (RUR 6,000,000,000 for mergers (consolidations)); provided that the total value of the assets of the target entity (its group) exceeds RUR 250,000,000; or
If an entity exceeds the thresholds provided below, it must duly notify the FAS of Russia: the value of the assets of the entities involved in a transaction (action) and their groups exceed RUR 400,000,000, and the total value of the assets of the entity being purchased, established, restructured, etc. (its group) exceeds RUR 60,000,000.
The thresholds for financial organizations are established in a separate regulation approved by the RF Government and are currently as follows: for preliminary clearance of transactions (actions) - more than RUR 33 billion; for subsequent notification – more than RUR 2.5 billion
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It is typical for a group to maintain internal control over relations between individuals and/or legal entities that meet one of 15 statutory criteria. The key criteria are as follows: the entity that is in a position to control over 50% of the total votes attributed to the voting stock of a company; the person acting as the chief executive officer; the entity that is in a position to give binding instructions to the company, etc.
As a general rule, intragroup deals (actions) are subject to the control of the FAS of Russia.
In certain cases, there is no need to obtain prior FAS of Russia approval for intragroup transactions. However, this does not exempt the parties from the obligation to subsequently notify the FAS of Russia that the transaction has been concluded.
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It is possible to enter into transactions (actions) without obtaining the prior approval of the FAS of Russia in the circumstances described below:
- the transactions (actions) are performed by entities that form a group based on the criteria of having control of over 50% of the total votes attributed to the voting stock (shares);
- the transactions (actions) are performed by entities that form a group based on other statutory criteria, provided that they disclose information on their group on the FAS of Russia website no later than one month before the transaction and provided that the group remains unchanged through the date of the transaction;
- the transaction (action) is authorized by order of the RF President or the RF Government.
Even if a transaction is exempt from the prior approval rule, the party to the transaction (normally, the buyer) must subsequently notify the FAS of Russia that it has entered into the transaction by the statutory deadline.
There are no exceptions provided from having to make subsequent notification.
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The procedure for obtaining prior FAS of Russia approval for a transaction includes the following steps:
- Submission of an application to the FAS of Russia, along with documents pertaining to the applicant's group and the target company being acquired/incorporated, as well as other data related to the business operations of the companies and their groups.
- The FAS of Russia considers the application. The consideration period is 30 days, but may be extended by 2 months. Where a transaction is also subject to approval under the Law for Investing in Strategic Entities, the consideration period may be extended until a decision approving the transaction under the Law for Investing in Strategic Entities is obtained.
- Based on the results of the application review, the FAS of Russia issues a decision:
- to grant the application; or
- to grant the application and issues a prescription to perform certain actions aimed at securing competition; or
- to deny the application in the event that the transaction (action) restricts competition, as well as in cases where unreliable data has been provided.
The approval of a transaction by the FAS of Russia remains valid for one year from the approval date.
The subsequent notification process includes: (1) submission of a notice within 45 days after the transaction date with the same documents that would have been provided along with an application for prior transaction approval; and (2) review of this notice by the FAS of Russia (the review period is not regulated, but in actual practice generally amounts to 30 days). Based on the review of the notice, a prescription may also be issued to perform certain actions aimed at securing competition.
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The following penalties may be imposed for breaching the approval or subsequent notification procedures:
- attachment of an administrative penalty in the form of a fine (up to RUR 500,000 for legal entities);
- a transaction may be held to be invalid based on a lawsuit filed by the FAS of Russia, if it is proved that it restricted or may restrict competition;
- based on a lawsuit filed by the FAS of Russia, a for-profit company that has been established, including by merger or consolidation, may be liquidated or reorganized through a spin-off or de-merger, if it is proved that establishing the company restricted or may restrict competition.
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