New order of proceedings for administrative cases is determined

Amendments to the Code of Administrative Offences of the RF (CAO RF) were made by the Federal Law from August 3, 2018 №298-FL.

In particular, arrest of property of legal entities that act as defendants in administrative cases on illegal gratification on behalf of legal entity that is provided by the Article 19.28 of the CAO RF.

Under arrest of property is implied embargo on property disposal or limitations on possession or disposal of property. In cases when legal entities do not have other property, monetary funds on deposits and banking accounts can be arrested. Besides, value of the arrested property cannot exceed maximum amount of administrative fine provided by the Article 19.28 of the CAO RF.

Arrest of property is implied by judicial procedure based on the decision on initiation of administrative proceeding and, provided with reasoned application of prosecutor.

Specific facts that were cause for making such a decision and limitations on property disposal should be determined in court decision on arrest of property.

Court decision on arrest of property is enforced in accordance to the legislation concerning enforcement proceedings.

Arrest of property can be annulled by the judge who took this decision, on presentation of prosecutor, bailiff and executor of justice or after considering of reasoned statement of defense (legal representatives) of legal entities.

Besides, according to the Addition to the Federal Law, made to the Article 19.28 of the CAO RF, legal entities can be released from administrative responsibility, with contribution made to detection of violation, administrative investigation, crime related to such violations, and in cases when these legal entities were subjected to blackmail. However, the Addition to the Article 19.28 of the CAO RF does not concern administrative violations regarding foreign authorities, including public international organizations while carrying out commercial transactions.

You can get more detailed information about decisions of arbitration courts and documents on enforcement proceedings of all companies of Russia, if subscribing for access to the Information and Analytical system Globas.

Capitalization of the largest domestic and foreign companies

Capitalization is an indicator of company’s demand for market investors. Market value is calculated by multiplying the number of shares outstanding by the current market price of a firm's shares.

The capitalization figure is dynamic because share price is dependent on internal and external factors as well. Economic conditions, demand, state policy, brand popularity are classified as external factors, while management decisions, qualification and revenues are internal one.

These factors could be a lever of management and influence on the size of capitalization by artificially over- or underestimation of the company's actual value.

Using Orbis by Bureau van Dijk, Belgian electronic publisher of business information, the Credinform experts made TOP-10 of companies all over the world by the level of capitalization (Table 1).

Number one is Apple. At the beginning of August 2018, its NASDAQ value amounted to 1 tln USD and made the company the most expensive business.

According to the ranking, 7 out of 10 top companies are representatives of American business giants, mostly engaged in IT sector. However, there is an exception – Exxon Mobil, which carries out extraction and processing of key product for all companies in the ranking. The largest American oil corporation is estimated at 344 bln USD. This figure is significantly lower than capitalization of companies engaged in providing services or manufacturing of customer-related product.

Many economists note that capitalization of all listed companies is overestimated and further increase stimulating could lead to dotcom crash as it has happened with NASDAQ in the early 2000s.

Table 1. TOP-10 foreign companies by capitalization
Company Capitalization, bln  USD Assets, bln  USD (for 2017)
1 Apple (USA) 1000 375
2 (USA) 908 131
3 Microsoft (USA) 835 250
4 Facebook (USA) 443 84
5 Tencent (China) 443 85
6 Exxon Mobile (USA) 344 348
7 Samsung Electronics (South Korea) 269 281
8 Walmart (USA) 264 204
9 Nestle (Switzerland) 253 133
10 Intel (USA) 229 123

Source: Orbis database by Bureau van Dijk

There is a completely different situation among Russian listed companies. The state participates in capital of 9 out of 10 enterprises, and their activity is related to industrial production: oil and gas extraction, production of metals. All companies in the ranking are engaged in manufacturing of essential products, are world-famous and lead in the international market. However, their total capitalization is roughly equal to the capitalization of Exxon Mobile alone.

The most expensive domestic corporation is JSC Rosneft (Table 2): its value is estimated at 72 bln USD. The second is JSC Lukoil, the most efficient oil company by "earnings-net profit" figures in Russia. By the way, Tesla Motors, one of the most ineffective international American businesses for the last 15 years, has 63 bln USD capitalization. Its revenue is less than that of Magnit retail chain (JSC Tander), which operates only in the Russian Federation. In addition, throughout its history, Tesla did not bring in profit to its investors, and the loss in 2017 amounted to the maximum anti-record - almost 2 mln USD.

JSC Gazprom, having 12%-share in the world's gas production and one of the most important strategic partners for Europe and the rest of the world, has a capitalization of 53 bln USD, with a total asset value of 317 bln USD.

Table 2. TOP-10 Russian companies by capitalization
Компания Капитализация, млрд. USD Активы, млрд USD(за 2017 год)
1 JSC Rosneft 72 212
2 JSC Lukoil 61 90
3 JSC Gazprom 53 317
4 JSC Novatek 45 18
5 JSC MMC Norilsk Nickel 27 16
6 JSC Tatneft 25 17
7 JSC Gazprom neft 24 50
8 JSC Surgutneftegaz 16 73
9 JSC NLMK 15 11
10 JSC Severstal 13 7

Source: Information and Analytical system Globas by Credinform

Obviously, the market value of domestic enterprises is underestimated and does not reflect the real situation.

The formula for calculating market capitalization does not take into account the non-financial aspect – publicity of brand, which can be estimated not by financial indicators, but through innovation, advertising and marketing. Listed enterprises engaged in extraction of minerals or industrial production are classified as strategically important objects. Being monopolists in their business, they cannot conduct aggressive advertising or marketing policies.

Overestimated capitalization of servicing and IT companies is a worldwide trend. Through local innovations, aggressive advertising and strong marketing, corporations create a buzz around their brand, thereby stimulating a speculative process that over- or underestimates the company's actual value.