Procedure of Notarization of Transfer of Shares of LLC Simplified


Federal Law No. 205-FZ of 19.07.2009 “On amendments to individual legislative acts of the Russian Federation”

After July 1, when the amendments to the Law “On limited liability companies” were enacted, transfer of shares of limited liability company (OOO) need to be notarized. But no instructions were issued to the notaries regarding the procedure governing formalization of the transactions of the kind and no specific stamp duty rate applicable to the notarial act concerned was defined. Therefore the majority of notaries either sabotaged the notarization of such transactions or required the share value to be assessed by a third party appraiser. When a share is transferred at its par value of, say, RUB10,000, the state duty payable is RUB300 while the appraiser’s fees can be as high as RUB50,000.

Enactment of the law being considered cured the problem radically. Now the stamp duty rate (0.5% of the transaction value, but min RUB300 and max RUB20,000) is applied to the share’s contractual value (which shall not be lower than the face value) instead of the appraised one. Thus, parties to the transaction need not incur the costs of the share value appraisal while notaries need not undertake the liability for the possibly incorrect appraisal of the transaction. Every party to the procedure has gained, exclusive of the appraisers.

The law takes effect on August 23, therefore it is advisable to postpone finalization of share transfers till the said date.

Upper Limit of Deductible Interest Increased up to Twofold CBR Rate on August 1

Federal Law No. 202-FZ of 19.07.2009 “On amendments to Chapters 23 and 25 of the RF Tax Code and on the repeal of individual provisions of the Federal Law “On amendments to Part One and Part Two of the RF Tax Code and individual legislative acts of the RF””

The legislators have temporarily increased for the ruble borrowers the upper limit of tax-deductible interest on credits and loans. In August 1 – December 31, 2009 the revised limit will be the twofold official rate of the RF Central Bank (the former limit in effect from January 1 to July 31 was 1.5-fold official rate). The revised limit shall apply to the interest accrued after August 1 irrespective of the effective date of the agreement. Same as before, for the purpose of interest calculation for loans providing for the interest rate adjustment one should apply the official rate as of the end of reporting period, otherwise the official rate as of the loan extension date applies.

Besides, the legislators have clarified the issue whether one can opt between the methods of interest rate setting, i.e. on the basis of either the official rate or rates under comparable credits and loans. Formerly this issue used to give rise to numerous disputes since it had ambiguous statutory wording. Now the respective provision has been refined for the avoidance of doubt: which method to apply is up to the taxpayer.

Upper Limit of Income Eligible for Transition to Simplified Taxation System Raised but Its Indexing Cancelled

Federal Law No. 204-FZ of 19.07.2009 “On amendments to Part Two of the RF Tax Code”

In 2010 the revised upper limit of income eligible for transition to the simplified taxation system of RUB60mn will start to apply. To be eligible for the transition in 2010 the income for the 9 months of 2009 shall not exceed RUB45mn. Instead of having been repealed, the Tax Code provisions establishing the former limits have been suspended for three years. Annual inflation–based indexation of the indicators has also been suspended.

The law being considered, which was initiated by the President as a measure intended to support small businesses, rather makes the tax regime less predictable for them. When resolving on the transition to the simplified system and especially back to the standard system one should consider many factors, primarily those related to the VAT and the risk of VAT recovery for a protracted period which can adversely affect the business.

As for the announced extension of the range of the simplified taxation system users due to the higher income limit, we remind again that actually the limit has not been raised. If all the deflators defined by the Government are consistently applied, the upper limit for the simplified system users in 2009 is as high as RUB58mn while the qualifying limit for the transition to the simplified system is RUB43.4mn. This approach was already applied by the Supreme Court of Arbitration (Ruling by the Presidium of the Supreme Court of Arbitration No. 12010/08 of 12.05.09) and is backed by the Federal Tax Service (letter No. ShS-22-3/539@ of 03.07.09).

Thus, having achieved its political target the law has deprived small and medium businesses of the opportunity to plan operations and tax burden for any period longer than 2 years.

Significant Amendments Made to the Corporate Law

Federal Law No. 205-FZ of 19.07.2009 “On amendments to individual legislative acts of the Russian Federation”

An extensive law has been enacted focused on eliminating the gaps revealed by the judicial practice in the laws on legal entities. Numerous amendments have been introduced into the law on joint stock companies ranging from the joint and several liability of the company and registrar for loss incurred by a shareholder to the conditions governing recognition as invalid of a resolution by the company’s collective management body. Law on limited liability companies has been amended promptly in order to deal with a potential gap which has not been assessed judicially yet. Now that the notarization requirement for share transfers has been enacted, the problem has emerged: what if a party to a shareholders agreement under which it has undertaken to transfer its share subject to the availability of certain circumstances illegitimately avoids the notarization? The law being considered stipulates that should this be the case, the acquirer is entitled to claim the share in dispute in court. In this case the state registration is to be performed against judgment by the court of arbitration instead of the notarial deed.

Besides the laws on individual types of legal entities, the Arbitration Procedure Code of the RF has been amended as well. It has been supplemented with Chapter 28.1 governing hearing of corporate disputes.