Setting up a representative office or branch in Russia

July 2009

Moscow church

Contacts

Preface

Foreign investors interested in setting up operations in Russia typically establish one of the following:

  • a representative office
  • a branch
  • a joint stock company or
  • a limited liability company

Described in this guide are the procedural and documentary requirements for establishing either a representative office or branch in Moscow of a company carrying on a business which does not require a specific licence from the Russian authorities. Procedures outside Moscow may vary slightly from those set out in this guide.

General introduction

Under Russian law, a representative office or branch is not regarded as a separate legal entity from its establishing foreign company. Instead, a representative office or branch acts solely as the agent of its establishing foreign company. As a result, neither a representative office nor a branch is able to conclude contracts in its own name with third parties; any such contracts must be entered into in the name of the foreign company which established the representative office or branch.

Both representative offices and branches benefit from certain administrative and business incentives1 which joint stock and limited liability companies do not enjoy. In addition, the required accreditation and registration of a representative office or a branch may be more quickly and easily achieved than the establishment of a joint stock or limited liability company.

Finally, the establishment and operation of all forms of business in Russia are governed by the Russian Civil Code2. Whichever vehicle of operation is selected, all businesses are required to register with the State Tax Authority, State Committee for Statistics, the RF Pension Fund, the Social Security Fund and the Mandatory Medical Insurance Fund.

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Permitted activities of a representative office and of a branch

Since the purpose of a representative office is to represent and promote its establishing foreign company in the Russian market, the activities which it is able to undertake are generally limited to those of a “marketing” and/or “information gathering” nature on behalf of that company.

Branches are virtually indistinguishable from representative offices in most respects. However there is an important difference between them. Unlike a representative office, a branch may engage in a full range of commercial activities (including the functions of a representative office), performing all or part of the functions of its establishing foreign company on behalf of that company.

Footnotes
  1. Such as an exemption from payment of VAT on leases and less scrutiny (historically) from the authorities in respect of activities conducted in the Russian Federation.
  2. The relevant legislation includes: (a) Decision No. 1074 of the Council of Ministers of the USSR of 30 November 1989 “On the Approval of the Regulations for the Opening and Functioning of the Representative Offices of Foreign Firms, Banks and Organisations in the USSR”; and (b) Resolution No. 1419 of the Government of the Russian Federation of 21 December 1999 “On the Federal Executive Body Responsible for the Coordination of the Activities of Federal Executive Bodies to Attract Direct Foreign Investment into the Economy of the Russian Federation and for the Accreditation of Branches of Foreign Juridical Entities”.
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Establishment of a representative office or branch

The establishment of a representative office or branch is a two stage process involving, firstly, its accreditation with the appropriate accreditation authority (normally the State Registration Chamber of the Ministry of Justice (Registration Chamber) – see below) and, secondly, its registration with other relevant authorities. This can be a time-consuming process but completion of the full procedure (including accreditation and registration with the tax authorities and funds such as the social and pension funds) is normally achievable within approximately four to six weeks from submission of documents.

An accreditation permit (Permit) for a fixed period (of one, two or three years3) is normally issued within 18 working days (or five working days if the application is on an expedited basis) of the date of submission of the foreign company’s application together with all required documentation and the fee4 to the Registration Chamber. Simultaneously, the company receives a certificate of registration in the Consolidated State Register of representative offices or of branches of foreign companies accredited in the Russian Federation (Certificate).

Footnotes
  1. The fixed period can be extended at the end of its term by an extension procedure substantially the same as the procedure described in this briefing.
  2. Assuming an exchange rate of approximately thirty-two Roubles to US$1, the Registration Chamber charges a Rouble fee equal to US$2,500 for a three year Permit or, if the application is on an expedited basis, a fee equal to US$3,000.
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Accreditation authorities

The main accreditation body is the Registration Chamber which is able to both accredit and register new companies. There are other accreditation bodies for specific business sectors. If a Permit is granted by another accreditation body, a separate application must be made to the Registration Chamber to obtain a Certificate.

If the office is to have “expatriate” employees, further consents are needed.

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Accreditation: documentary requirements

The documents required to establish an accredited representative office or branch of a foreign company (Founder) are set out below. It is important to obtain tax advice before deciding on the identity of the Founder (eg, the jurisdiction in which the Founder is established is likely to be an important consideration).

Application letter

A notarised and legalised or apostilled original application letter must be prepared, on the letterhead of the Founder, requesting accreditation from the relevant accrediting body. The letter must contain certain information about the Founder, including the date and place of its incorporation and its current business contacts with Russian companies and/or institutions. An indication of the Founder’s proposed business activities in Russia should also be included in the letter. At least four notarised copies will also be required.

Constitutional documents

A notarised and legalised or apostilled copy of the Founder’s memorandum and articles of association, charter or other relevant documentation. Additional notarised copies should be held available.

Confirmation of Incorporation of the Founder

A notarised and legalised or apostilled extract from the commercial register of the country of origin of the Founder or, if this does not exist, a notarised and legalised or apostilled copy of the Founder’s Certificate of Incorporation or Certificate of Registration. At least four notarised copies will also be required.

Regulations of the representative office or branch

A notarised and legalised or apostilled copy of the regulations defining the rights and obligations of the representative office or branch in relation to the Founder and the obligations of the head of the representative office or director of the branch. At least two notarised copies will also be required.

Under Russian law, the head of a representative office and the director of a branch have very wide executive powers over its day-to-day operations. Careful selection of this officer and other risk management checks are therefore of key importance.

Resolution of the board of directors

A notarised and legalised or apostilled copy of the resolution establishing the Founder’s representative office or branch in Russia and the appointment of the head of the representative office (or director in the case of a branch), drafted in accordance with the requirements of the relevant accreditation authority. The resolution must be signed in accordance with the constitutional documents of the Founder and dated no earlier than 30 days before it is submitted to the accreditation authority. At least four notarised copies will also be required.

Bank reference letter

A notarised and legalised or apostilled original letter, dated no earlier than six months before the date it is submitted to the relevant authority, from the Founder’s bank which states the Founder’s bank account number and that the Founder is known to the bank as a reliable client.

Power of attorney

A notarised and legalised or apostilled original power of attorney for the head of the representative office or director of the branch and for the person who is to make the application for accreditation. The power of attorney must be valid for at least one year but for no more than three years. At least four notarised copies will also be required.

Address

A document which confirms the address in Russia of the representative office or branch of the Founder, such as a guarantee letter issued by the owner of the premises or a notarised lease contract, as well as a notarised copy of the certificate evidencing the owner’s ownership right.

It is essential that the representative office or branch establishes genuine business premises. In Russia, it is generally not possible (nor advisable, for security reasons) to have an address of convenience at the business premises of another organisation (the “brass plate” option available in some other jurisdictions).

Local authorities

If the representative office or branch is to be located outside Moscow or Saint Petersburg, evidence of the grant of all necessary consents by the relevant local authorities.

Information card

An information card in the form prescribed by the relevant accreditation authority providing all required details of the representative office or branch.

Certificate of tax registration

A certificate issued by the tax authorities of the country of origin of the Founder, confirming its registration. At least four notarised copies will also be required.

Passport

A notarised and legalised or apostilled copy of the passport of the head of the representative office or the director of the branch.

In the case of a representative office only, letters of support

At least two original letters of recommendation, dated no earlier than 30 days before they are submitted to the relevant authority, provided by Russian business partners who are clients of the Founder or with whom the Founder has commercial links. Each letter must bear the original signatures of the recommending Russian company or organisation.

It is strongly recommended that there should be the greatest possible consistency between the documents listed above (eg, as to signatories, place of signature, dates etc.) in order to reduce queries from the Russian authorities and consequential delay.

The Russian authorities will accept only original documents (and will not work with faxed or emailed copies). When sending documents from outside Russia, it is recommended that these are hand-delivered or, if sent by courier, sent in several packages to reduce the risk of delay caused by lost documents or customs hold-ups.

A notarised Russian translation of each document listed above (including of the notarised copies referred to at paragraphs: application letter, constitutional documents, confirmation of Incorporation of the Founder, regulations of the representative office or branch, resolution of the board of directors, power of attorney and certificate of tax registration is also required. Please see below for further details of the process of notarisation of documents and the preparation of translations.

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Registration authorities

Upon receiving a permit and certificate the representative office or branch must register with the following authorities:

  • State Tax Authority (registration takes about five working days from filing of documents, following which the State Tax Authority will issue a Certificate confirming the Tax Identification Number of the representative office or branch).
  • State Committee for Statistics (Goskomstat) (registration takes from three to five working days from filing of documents, following which Goskomstat issues a letter confirming the statistics code assigned to the representative office or branch).
  • Pension Fund (a Certificate of Registration is normally issued within one working day of filing of documents).
  • Medical Insurance Fund (a Certificate of Registration is normally issued within one working day of filing of documents).
  • Social Insurance Fund (a Certificate of Registration is normally issued within one working day of filing of documents).

Notarised copies of many of the documents required for accreditation are required for registration with these registration authorities.

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Opening of bank account(s)

The time taken to open a bank account for the representative office or branch will vary, depending on whether or not the Founder has a pre-existing relationship with the bank concerned. In any event the bank will require Certificates of Registration with the Registration Authorities listed above.

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Notarisation and legalisation/apostillisation

It is a common procedural requirement of the Russian authorities that documentation be notarised to prove its authenticity. If a document is prepared in the Russian Federation, only notarisation of that document is required. However, if a document is prepared outside the Russian Federation, that document must first be notarised and then legalised or “apostilled”.

A document may be legalised (authenticated) by a Russian embassy or consulate in the country where the document is notarised. Alternatively, the client may have the document apostilled if the country is a party to the Hague Convention Abolishing the Requirement of Legalisation for Foreign Public Documents of 5 October 1961 (Hague Convention). As the Russian Federation is a party to the Hague Convention, the affixing of an “apostille” to a document allows the Russian authorities to accept the document as authentic.

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Translation

All documents prepared in a foreign language must be translated into Russian. If the Russian translation is prepared in Russia, then (i) the translator must certify and sign it before a notary public; (ii) the translation must be attached to the original notarised and legalised/apostilled document; and (iii) the translation and the original document must be notarised.

If the Russian translation is prepared outside Russia, then the translation is attached to the original notarised and legalised/apostilled document and (ii) the translation and the original are notarised and legalised/apostilled.

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Contacts

Valentina Gluhovskaya, Partner

Dmitry Gravin, Partner

Caroline Hurley, Partner

Chris Owen, Partner

Andrei Yakovlev, Partner

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