Changes in legislation

Addressing to the citizens on April 8, 2020, the President of Russia proposed additional measures to support business.

        1. Extend the deferral of payment of insurance premiums to social funds for affected small and medium-sized business for 6 months.

        2. Allow to pay tax arrears monthly in equal installments for at least a year after the end of the deferment.

        3. To instruct the Government of the Russian Federation to prepare, within 5 days, a program of additional business support with the condition of providing priority assistance to companies that have retained the employment.

Earlier, as a part of measures to support the economy and business, the State Duma of the Russian Federation adopted the Federal Law of 03.04.2020 No. 106-FL “On Amending the Federal Law “On the Central Bank of the Russian Federation (Bank of Russia)”and certain legislative acts of the Russian Federation regarding the peculiarities of changing the terms of a loan agreement” or the so-called “Law on credit holidays".

According to the law, citizens and individual entrepreneurs, as well as small and medium-sized enterprises affected by the coronavirus pandemic, are entitled to credit holidays. The benefit will be valid for 6 months, provided that income is reduced by 30% compared with the average income for 2019. Applications for the benefit are to be applied until September 30. Borrowers are entitled to repay a loan ahead of schedule at any time during the grace period.

The following is not allowed during the grace period:

• charging a penalty, fine or interest;
• requests for advanced fulfillment of obligations;
• foreclosure on collateral or mortgages, as well as claims against the guarantor.

Small and medium-sized enterprises of the sectors most affected by the epidemic, can lot upon credit holidays. The list of these industries is entrusted to be submitted to the Government of the Russian Federation.

In addition, the Government of the Russian Federation prepared the Decree No. 439 of April 03, 2020, concerning measures to support tenants and lessors.

This Decree establishes the conditions for obtaining a deferral of rent under real estate lease agreements. The parties are allowed to agree on holidays or reduction in rent, as well as on other changes to the agreements that do not worsen their situation in comparison with the conditions provided by this Decree.

This applies to real estate owned by state, municipal and private property, except for residential premises.

The effect of the Decree applies to legal entities and individual entrepreneurs whose contracts are valid in 2020 and were concluded before the introduction of the high-alert mode or state of emergency in the region, and if they are included in the List of sectors of the Russian economy that were most affected by the worsening situation as a result of the spread of COVID-19.

Installments are valid until 01.10.2020 starting from the date of the introduction of high-alert mode and state of emergency under the following conditions:

• rent arrears must be paid noе earlier than January 1, 2021 and noе later than January 1, 2023 no more than once a month, in equal installments, the amount of which does not exceed a half of the monthly rent under the lease;
• installment is provided for the duration of the high-alert mode or state of emergency in the territory of the subject in the amount of rent for the corresponding period in the amount of 50% of the rent for the corresponding period from the date of termination of the high-alert mode or state of emergency in the territory of the subject of the Russian Federation until October 1, 2020;
• fines, interest for use of another's money or other measures of responsibility in connection with the tenant's failure to comply with the procedure and deadlines for paying the rent (including if such measures are provided for by the lease agreement) in connection with the delay;
• no additional fee for granting deferral from the tenant.

The Decree contains a reference to the need for supporting measures provision to the lessors having granted a deferral. A list of these measures is likely to be further developed by the Government.