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Obtaining of Approval (Notification) of Antimonopoly Agency.


      1. Obtaining of Approval or Notification of Antimonopoly Agency in Case of Consolidation (Merger) of Profit-Making Organizations.

      In certain circumstances Russian Law provides for obtaining of an approval or notification of the Antimonopoly Agency in case of consolidation (merger) of profit-making organizations.

      The above issues are regulated by Article 17 of the Law of the Russian Federation dated 22 March 1991, # 948-1, On Competition and Restriction of Monopolistic Activities on Commodity Markets (hereinafter - the Antimonopoly Law).

      In order to prevent profit-making organizations from possible abuse of the dominating position or to restrict competition, the Federal Antimonopoly Agency exercises the public control, in particular over consolidation and merger of profit-making organizations, if the aggregate value of their assets according to the latest balance-sheet exceeds 100 K labour remuneration minimal rates (para 1, Art. 17 of the Antimonopoly Law).

      In the above event the persons or agencies resolving on reorganization (consolidation or merger) of profit-making organizations submit to the Federal Antimonopoly Agency the documents and information in compliance with the Regulations On the Procedure of Submission of Petitions and Notifications to the Antimonopoly Agencies in Compliance with the Requirements of Articles 17 and 18 of the Law of the RSFSR On Competition and Restriction of Monopolistic Activities on Commodity Markets (approved by the Order of the Antimonopoly Ministry of Russia dated 13.08.99, # 276).

      The Federal Antimonopoly Agency informs the applicant of its resolution in writing within maximum 30 days from receipt of the required documents. If necessary, the above term may be prolonged by the Federal Antimonopoly Agency, though maximum for 15 days (para 2, Art. 17 of the Antimonopoly Law).

      The Federal Antimonopoly Agency is entitled to deny the petition in case, if granted, it may result in the appearance or strengthening of the dominating position of a respective organization and (or) in restriction of competition, or if examination of the documents presented reveals that the information contained therein and meaningful for taking a resolution is unreliable. The Federal Antimonopoly Agency is entitled to grant the petition in case the requirements ensuring competition are met. Besides, the said requirements and due dates of their fulfillment should be specified in the resolution of the Federal Antimonopoly Agency on approval of consolidation (merger) of the profit-making organizations.

      The Antimonopoly Agency is entitled to grant the petition even if the above adverse consequences are possible, provided that the persons or agencies resolving on reorganization (consolidation or merger) of profit-making organizations prove that a positive effect of their actions, including that in the social and economic sphere, will prevail over negative consequences for the commodity market in question. (para 3, Art. 17 of the Antimonopoly Law).

      The Federal Antimonopoly Agency is to be notified by an application of the founders (one of the founders) within 15 days from the date of the statutory registration (entry of amendments to the State Register) of the consolidation (merger) of the profit-making organizations, if the aggregate value of their assets (of the reorganized profit-making organizations) in the balance sheet exceeds 50 K labour remuneration minimal rates.

      When notifying the Federal Antimonopoly Agency, the applicant provides, along with the application, the information similar to that communicated in the petition for approval of the reorganization (see above) (para 4, Art. 17 of the Antimonopoly Law).

      If after preliminary examination of the information the Federal Antimonopoly Agency concludes that the consolidation (merger) of the organizations it has been notified of may result in restriction of competition, it decides to check additionally whether the consolidation (merger) of the profit-making organizations complies with the requirements of the Antimonopoly Law.

      The above decision is communicated to the applicant within 15 days from the date the Federal Antimonopoly Agency receives the application for notification.

      The final resolution is adopted by the Federal Antimonopoly Agency within the period equal to that needed for the resolution on approval of reorganization (see above), whereof the applicant is informed in writing (para 5, Art. 17 of the Antimonopoly Law).

      In those cases when the consolidation (merger) of profit-making organizations may result in restriction of competition, the founders of the profit-making organizations, persons or agencies that have resolved on the consolidation (merger) are obliged, at the request of the Federal Antimonopoly Agency, to take measures for restoration of indispensable competition conditions (para 6, Art. 17 of the Federal Antimonopoly Agency).

      Whenever pursuant to para 1, Art. 17 of the Antimonopoly Law the Antimonopoly Agencys approval is required for consolidation (merger) of profit-making organizations, the statutory registration of these organizations is effected by the registration authorities only with a preliminary approval of the Federal Antimonopoly Agency.

      The statutory registration of the profit-making organizations reorganized without a preliminary approval of the Federal Antimonopoly Agency may be recognized invalid through a court procedure, against an action filed by the Federal Antimonopoly Agency (or its territorial agency within the latters jurisdiction) (para 8, Art. 17 of the Antimonopoly Law).

      The consolidation (merger) of profit-making organizations in violation of the procedure established by para 4, Art. 17 of the Antimonopoly Law (notification of the Antimonopoly Agency), entailing appearance or strengthening of domination and (or) restriction of competition, failure to meet the requirements of the Federal Antimonopoly Agency made pursuant to para 6, Art. 17 (measures to be taken for restoration of indispensable competition conditions) are the cause for judicial invalidation of the statutory registration against an action filed by the Federal Antimonopoly Agency (or its territorial agency within the latters jurisdiction) (para 9, Art. 17 of the Antimonopoly Law).

      2. Receipt of Approval or Notification of the Antimonopoly Agency in Case of Acquisition of Voting Stock (Interest) in the Authorized Capital of a Profit-Making Organization.

      In certain circumstances Russian Law provides for an approval or notification of antimonopoly agencies in the event of acquisition by a person (a group of persons) of voting stock (interest) in the authorized capital of a business entity, in which case such person (a group of persons) acquires the right to dispose of more than 20 percent of the said stock (interest). These issues are regulated by Article 18 of the Antimonopoly Law.

      The preliminary approval of the Federal Antimonopoly Agency for acquisition of more than 20 percent of the said stock (interest) is required in the following cases:

      in case the aggregate balance value of the assets of the stock (interest) acquirer and the business subject, whose stock (interest) is sold (the issuer), exceeds 100 K labour remuneration minimal rates, or

      in case the stock (interest) acquirer or the business subject (the issuer) whose stock (interest) is sold is the subject entered into the Register of business subjects whose share on a specific commodity market exceeds 35 percent, or

      in case the acquirer is a group of persons controlling the activities of the said business subject entered into the mentioned Register (para 1 and 2, Art. 18 of the Antimonopoly Law).

      To consummate the said transactions the persons are obliged to petition the Federal Antimonopoly Agency for approval of consummation of the transactions and to submit information indispensable for adoption of the resolution in accordance with the list of information approved by the Federal Antimonopoly Agency (para 3, Art. 18 of the Antimonopoly Law).

      The list of the documents and information to be presented to antimonopoly agencies in the above case is specified by the Regulations On the Procedure of Submission of Petitions and Notifications to the Antimonopoly Agencies in Compliance with the Requirements of Articles 17 and 18 of the Law of the RSFSR On Competition and Restriction of Monopolistic Activities on Commodity Markets (approved by the Order of the Antimonopoly Ministry of Russia dated 13.08.99, # 276).

      The Federal Antimonopoly Agency is entitled to deny the petition in case, if granted, it may entail enhancement of the domination of a business subject (a group of persons) and (or) restriction of competition, and in case the communicated information meaningful for adoption of a resolution proves to be unreliable.

      The Federal Antimonopoly Agency is entitled to grant the petition in case all the requirements for ensuring the competition are met. Besides, all said requirements, as well as the due dates of their fulfillment, should be specified in the resolution of the Federal Antimonopoly Agency approving the transaction.

      The Federal Antimonopoly Agency is entitled to grant the petition even if the competition may be restricted, provided the parties to the transaction prove that the positive effect of their actions, including that in the social and economic sphere, will prevail over the adverse consequences for the commodity market in question (para 4, Art. 18 of the Antimonopoly Law).

      The Federal Antimonopoly Agency must be notified by an application of a legal entity or natural person within 15 days after consummation of the transactions, if the aggregate balance value of the assets of the acquirer of over 20 percent of the stock (interest) and those of the business subject whose stock (interest) is acquired (the issuer) exceeds 50 K labour remuneration minimal rates (para 5, Art.18 of the Antimonopoly Law).

      If after preliminarily examination of the information the Federal Antimonopoly Agency concludes that the consummation of the transaction it has been notified about may entail the appearance or enhancement of the dominating position of the business subject (a group of persons) and (or) restriction of competition, the Antimonopoly Agency resolves to check additionally the compliance of the transaction with the requirements of the Antimonopoly Law (para 6, Art. 18 of the Antimonopoly Law).

      Consummation of a transaction in violation of the procedure established by Article 18 of the Antimonopoly Law and the failure to implement the resolutions of the Federal Antimonopoly Agency entails invalidation of the transaction against an action filed by the Antimonopoly Agency. Violation of Article 18 of the Antimonopoly Law respecting an approval (notification) of the Federal Antimonopoly Agency for consummation of transactions is the cause for imposing a fine (para 9, Art. 18 of the Antimonopoly Law).

      Russian laws are not applicable on the territory of other states. At the same time, it should be taken into account that pursuant to Art. 2 of the Antimonopoly Law the latter is applicable also in those cases when actions and agreements undertaken or entered into, including by foreign persons outside the Russian Federation, entail or may entail restriction of competition, or bring about other adverse consequences on the markets of the Russian Federation.

      The above rule should be taken into account because the change of a shareholder pursuant to Art. 29 of the Federal Law On the Securities Market must be registered in the Register of shareholders, and in the events provided for by the law the charter of the legal entity must be amended accordingly. Such amendments must be made in case the property right to the shares in a closed joint stock company is transferred or in case an interest (its part) in a Russian limited liability company is assigned. These actions will be performed in the Russian Federation with participation of Russian public authorities and legal entities which, as should be assumed, will take into account the above rule of Art. 2 and other rules of the Antimonopoly Law.

      In case of consolidation or any other reorganization of legal entities which are founders of parent companies which, in their turn, own the stock (interest) in Russian companies, Article 18 of the Antimonopoly Law is not applicable, if the said reorganization does not entail the change of the immediate owner of the stock (interest) in Russian legal entities.

      The aforesaid is equally applicable to any other way of change in the owners of the stock (interest) of the said parent companies, including by way of purchase and sale of the shares (interest) in their authorized capital.

      3. Notification of the Antimonopoly Agency About Setting up of a Profit-Making Organization.

      In certain circumstances Russian laws provide for an obligatory notification of antimonopoly agencies about setting up of a profit-making organization.

      The issues related to such notification are regulated by Art. 17 of the Law of the Russian Federation dated 22 March 1991, # 948-1, On Competition and Restriction of Monopolistic Activities on Commodity Markets (the Antimonopoly Law).

      Within 15 days from the date of the statutory registration the Federal Antimonopoly Agency must be notified by an application of the founders (one of the founders) about setting up of a profit-making organization, if the aggregate value of the founders assets exceeds 100 K labor remuneration minimal rates. When notifying the Federal Antimonopoly Agency the applicant presents the information and documents in compliance with the Regulations On the Procedure of Submission of Petitions and Notifications to the Antimonopoly Agencies in Compliance with the Requirements of Articles 17 and 18 of the Law of the RSFSR On Competition and Restriction of Monopolistic Activities on Commodity Markets (approved by the Order of the Antimonopoly Ministry of Russia dated 13.08.99, # 276).

      If upon preliminary examination of the information the Federal Antimonopoly Agency concludes that setting up of the organization it has been notified of may entail restriction of competition, it decides to check additionally whether setting up of the profit-making organization complies with the requirements of the Antimonopoly Law.

      The said decision is communicated to the applicant within 15 days from the date the notification is received by the Federal Antimonopoly Agency. The final resolution is taken by the Federal Antimonopoly Agency within maximum 30 days from the date of receipt of the documents required. If necessary, the said term may be prolonged by the Federal Antimonopoly Agency, though maximum for 15 days (para 5 and 2, Art. 17 of the Antimonopoly Law). In those cases when setting up of a profit-making organization may entail restriction of competition the founders of the profit-making organization upon request of the Federal Antimonopoly Agency must take measures for restoration of indispensable conditions of the competition (para 6, Art. 17 of the Antimonopoly Law).

      In those cases when an obligatory notification of the Federal Antimonopoly Agency is required, the founders, before resolving on setting up a profit-making organization, are entitled to apply to the Federal Antimonopoly Agency for an approval of setting up such organization, and the said agency is obliged to consider the respective petitions in a manner prescribed by para 2, Art. 17 of the Antimonopoly Law for consideration of petitions for such approval. Obtaining of a preliminary approval for setting up a profit-making organization is a right, and not an obligation of the founders (para 7, Art. 17 of the Antimonopoly Law).

      Setting up of profit-making organizations in violation of the procedure established by para 4, Art. 17 of the Antimonopoly Law (obligatory notification) entailing the appearance or enhancement of the dominating position and (or) restriction of competition, the failure to meet the requirements of the Federal Antimonopoly Agency made pursuant to para 6, Art. 17 (measures to be taken for restoration of indispensable competition conditions) are the grounds for judicial invalidation of the statutory registration of the profit-making organization against an action filed by the Federal Antimonopoly Agency (its territorial agency within the latters competence).

      4. Appeal Against the Federal Antimonopoly Agencys Resolutions.

      Pursuant to Article 20 of the Antimonopoly Law in case the applicant does not receive a reply to his petition (application for notification) from the Federal Antimonopoly Agency (or its territorial agency) within 60 days from the date the petition (application for notification) is received by the said Agency, or if he does not agree with the resolution adopted by the Agency concerned, he is entitled to a recourse to a common or arbitration court seeking protection of violated rights.

      The above is equally applicable to petitions and notifications filed to the Federal Antimonopoly Agency pursuant to Articles 17 and 18 of the Antimonopoly Law.

Olga V. Zabelinskaya,
Director and partner

Alexander E. Bessmertnykh,
Chief expert, associate lawyer


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