The Directive of the Central Bank of Russia as of 22.09.2014 №3386-D regulates the rules for calculation of the foreign participation amount (quota) in share capitals of insurance companies and the list of compulsory documents for obtaining permits of the Bank of Russia for disposal of stocks or shares in the share capital of insurance companies in favor of foreign investors and/or their subsidiaries.
Annually the Central Bank of Russia makes calculations of amount (quota) of foreign participation in share capitals of insurance companies as of January, 1st. It is done before March 1st of the year following the accounting one on the basis of data on share capital of insurance companies disclosed in the Report for shareholders (participants) or other affiliated parties (Report).
The amount of the foreign capital in the share capital of insurance companies is calculated as a ratio of total capital, owned by the foreign investors and their subsidiaries in the share capital of insurance companies, to total share capital of insurance companies.
In its turn, total share capital of insurance companies is a sum of share capitals of companies having insurance licenses.
Total capital of the foreign investors and their subsidiaries in the total share capital of insurance companies is calculated on the basis of the data from the above-mentioned Report by stock or share denomination in the share capital of the foreign investors and their subsidiaries.
The procedure regulating the obtaining permits on increase of the share capital at the expense of foreign investments or on disposal including by selling own stocks or shares in the share capital to the foreign investors is established by the same Directive of the Central Bank of Russia №3386-D as amended by the Directive of the Central Bank of Russia as of 29.07.2016 №4091-D.
In order to obtain the permit it is necessary to submit to the Central Bank of Russia the statement attaching documents according to the list particularized in the Directives of the Central Bank of Russia. Among the documents from the list are: copies of charter documents and confirmation of the legal registration of the foreign investors or private persons stating their addresses; written consent of the foreign supervisory body to investor participation in the share capital of the insurance company in the territory of the Russian Federation or report of absence of necessity for such consent; accounting (financial) statements of the foreign investor attaching audit report, if available; copies of licenses and special permissions of the foreign investor, confirming its insurance activity and accounting (financial) statements over the last five years; original consent of anti-monopoly authority to transaction or document of absence of necessity for such consent; data on shareholders or participants of the insurance company on each legal entity stating ultimate beneficiaries - private persons.
In the Directives there is a detailed list of documents for permit of share capital increase at the expense of foreign investors’ subsidiaries.
The same set of documents should be submitted by the Russian shareholders or participants to get the right for disposal of stocks and shares owned by them in the share capital of the insurance company at the expense of foreign investors or their subsidiaries.
The similar procedure of obtaining permits is related to disposal of insurance companies stocks at the expense of unlimited range of persons in tenders with potential participation of foreign investors or their subsidiaries.
The above-mentioned statements and documents might be submitted to the Central Bank of Russia in electronic form through “My account” on the official web-site of the bank or in paper format following the rules set for such documents.
It is necessary to legalize the documents submitted by the foreign state authorities or other public organizations in the procedure outlined in the domestic legal system, unless contrary to international treaties with the participation of the Russian Federation and states at the place of registration of shareholders and participants – non-residents. The copies of the documents made up in a foreign language are to be followed up by certified translation.
According to the data of the Central Bank of Russia from the Unified State Register of Insurance Entities as of October 1st, 2016, there were 390 organizations having valid insurance licenses countrywide. According to Information and Analytical System Globas-i, among these organizations 50 companies (13% of the total amount) have the foreign equity in the capital structure including: 18 companies have 100% of foreign participation, 17 companies – from 80% to 99,99%, 3 companies - from 50% to 80%, 8 companies - from 25% to 50% and 4 companies - to 25%.
Domestic economy becomes attractive not only for investors from Russia, but also for foreign businessmen
After a long-time break caused by sanctions, rouble devaluation and oil prices fall, foreign investment is back to Russia. What are the reasons for foreign capital inflow? Why does foreign investment play such an important role for the economic development?
Foreign capital enters the domestic market through various ways, depending on strategic goals of investors. The importance of foreign direct investment (FDI) is explained by its key role in provision of developing markets with advanced technologies and management systems. FDI is connected with long-term investor’s control over business activity of the recipient company in another country, which means it is aimed at long-run cooperation instead of instantaneous profit, thus giving quality to the economic growth.
In the June 2016 Newsletter, Information agency Credinform reported about reduction of investment volume to the country’s economy as of year-end 2015 to the lowest level since 2002. In the second quarter of 2016, after the long-time break, FDI begins to demonstrate indicators comparable with pre-sanction.
As the diagram shows (see picture 1), the volume of FDI in the IIQ 2016 amounted to $ 7,1 bln, which exceeds data for the whole 2015 ($ 6,4 bln) and is comparable to pre-sanction figures. Some experts suppose the return of the Russian capital from offshores to the national jurisdiction is at the back of FDI inflow growth, as a result of the economy deoffshorization measures and tighten the anti-offshore legislation in the world. Undoubtedly, a revival of the foreign business interest takes place. Various investigations record growth of optimism concerning business in Russia among European entrepreneurs. Businessmen observe high potential and large volume of the Russian market, as well as its positive development despite of unsatisfactory economic situation.
One of the results of foreign investment is establishment of the Russian companies with foreign capital participation. According to the Information and analytical system Globas-i® of Credinform agency, currently 41 071 legal entities with foreign participation are registered in Russia. 32 832 of them are majority owned by foreign investors. Most of companies with foreign participation – over 70% - are registered in Moscow, Moscow region, Saint-Petersburg and Leningrad region.
Speaking about activity types, the most investment-attractive companies are engaged in wholesale, construction, renting and own or rented immovable property management. The table 1 contains Top-10 of activities of the Russian legal entities with foreign participation.
|Activity type||Number of companies||Share, %|
|1||Construction of residential and non-residential buildings||1 787||4,35|
|2||Non-specialised wholesale trade||1 233||3,00|
|3||Renting and operating of own or leased real estate||1 182||2,88|
|4||Business and management consultancy activities||1 018||2,48|
|5||Buying and selling of own real estate||981||2,39|
|6||Renting and operating of own or leased real estate||956||2,33|
|7||Other transportation support activities||646||1,57|
|8||Management of real estate on a fee or contract basis||591||1,44|
|9||Computer programming activities||550||1,34|
|10||Other financial service activities, except insurance and pension funding n.e.c.||512||1,25|
By the projections of experts, the year of 2017 can be bright for Russia in terms of increase in foreign investment inflow. The country’s economy becomes more attractive and convincing than markets of other countries. At the same time, net capital outflow, which is formed mostly by repayments of the private sector’s external debts, reduced to $10,5 bln in the first half-year, i.e. almost in 5 times compared to the same period of 2015. It also counts in favor of easing of the situation. Relief or lifting of sanctions can be a significant impetus for foreign investment, but even in the current conditions the Russian economy offers enough sectors free from limitations and having substantial growth potential at reducing level of risk and instability.