Government to tighten control of foreign investor powers in Russian fishing companies

In late December 2020, the Russian government law drafting commission gave consent to the bill designed to reduce the risks of unauthorized foreign control in the fishery industry as one of the sectors with strategic importance for defense and security of the state, reports Megafishnet.com.

According to VARPE (All-Russia Association of Fishery Enterprises, Entrepreneurs and Exporters), the respective amendments are to be made in the Federal Law “On Fishery and Conservation of Aquatic Biological Resources” and the Federal Law "On the procedure for making foreign investments in Business Entities of Strategic Importance for Ensuring the Country's Defense and State Security".

In particular, the bill provides for "lowering the threshold" of a foreign investor participation in a Russian fishing company that requires prior approval of the Government Commission, from "more than 50 percent" to "25 percent or more" of the total number of votes attributable to voting shares (stakes) which constitute the Charter capital of such companies".

In fact, the proposed amendments do not prohibit foreign participation in Russian fishing companies with a share of more than 50%, but only "reduce the threshold" which does not require prior government approval.

It is believed that the changes will not totally exclude the risks of full material, technical and financial dependence of Russian companies on foreign investors, but the bill is seen as one of the tools to reduce these risks.

Under the draft, within 365 days from the date of its entry into force, foreign investors holding shares (stakes) in the amount of "more than 25% but not more than 50%" are required to file a petition for approval of establishing control in accordance with Law No. 57-FZ, or to reduce its share in the authorized capital of such entities to less than 25%.

Failure to submit such a request to the Federal Anti-Monopoly Service will provide grounds for depriving the investor or a group of persons to which he is a member, in a court procedure, of the right to vote at a future meeting of shareholders.

The draft also tightens certain provisions of Law No. 166-FZ regarding the extension of prohibitions and restrictions on the fishing of aquatic biological resources for organizations under the control of not only foreign investors, but also a group of persons that includes a foreign investor.

According to the bill maker, the draft takes care of the rights and interests of business entities, as it provides for a transition period for bringing a foreign investor's activities in line with the imposed restrictions, as well as the possibility of choosing behavior options (alienation of shares or applying for approval of the establishment of control by a Government Commission).

It is noted that the Ministry of Economic Development of Russia gave a positive conclusion on the assessment of its regulatory impact.

The adoption of the bill is also supported by VARPE. On the other hand, the Association believes that foreign investment can be a good way to enter new markets or access new technologies. However, the entry of foreign investors into the fishery sector should not take place underground, as it was some time ago. Instead, it should occur in accordance with the approved procedure and within the permitted limits," said VARPE President German Zverev.

For copyright please write to vera@megafishnet.com.