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. Last Updated: 07/27/2016

Lawyer Claims Win in Registration Case

ST. PETERSBURG -- A St. Petersburg attorney is claiming a recent lawsuit he won eliminates the need for companies with foreign capital to register in Moscow. His Western counterparts, however, are not so sure.


Vasily Malkov, director of the firm Soyuzregister, brought his case to the St. Petersburg and Leningrad region arbitration court to test the registration law.


Under the law, firms with more than 100 million rubles ($17,241) in foreign investment must file their registration documents with the Federal Registration Chamber in Moscow. But the same law also states that if foreign capital is increased, the change should be noted with the registration chamber where the company was originally registered.


Malkov took a shell corporation, Maltrus, capitalized it with 100 million rubles borrowed from a Lithuanian friend, and registered it with the St. Petersburg Registration Chamber. Then he added one more ruble of foreign capital and attempted to register the change in St. Petersburg. The St. Petersburg Registration Chamber informed him he needed to go to Moscow, because the company had exceeded the 100 million ruble limit.


The arbitration court decision of July 10 found the St. Petersburg Registration Chamber must register the increase in capital. It was given one month to implement the decision.


Malkov said he brought the case to court in part because the law had become patently absurd. The regulation requiring registration in Moscow had been passed in 1991, when the value of 100 million rubles was significantly more than it is now, he said.


"Now [100 million rubles] is about $17,000. You couldn't open a bakery for this amount of money," he said.


In the summer of 1991, the official exchange rate was 0.6 of a ruble to the dollar, even if the effective internal exchange rate was 27.5 rubles to the dollar. The current exchange rate is now about 5,809 rubles to the dollar.


Malkov said that using the precedent his case had set, companies could now avoid going to Moscow to register their companies, saving time and money. The registration process could require as many as four separate trips to Moscow, he said, adding that the whole process takes up to two months.


In St. Petersburg, even with the two-step process of going to the capitalization limit and then exceeding it, registration only takes about a month, he said.While the St. Petersburg Registration Chamber was technically Malkov's opponent in the courtroom, the arbitration court decision did not cause any sorrow there.


"I'm sure it will be easier for companies now," said Svetlana Isotova, vice director of the registration chamber. "I think it might make a big difference."


Isotova said the registration process was "simpler here."


Marian Hagler, an attorney with Coudert Brothers, said she was not ready to recommend that businesses with more than 100 million rubles in foreign capital register only in St. Petersburg, but said the court's decision did have significance.


"It is helpful, yes. It's part of the move to localize the registration of companies," she said.


The problem, Hagler said, was that court precedents do not have the legal force in Russia that they do in the United States or England. So a business attempting to avoid registration in Moscow might have to go to court to prove its point, despite the recent arbitration court decision, she said.


But Malkov said he had talked with customs officials, who told him they would respect the recent arbitration court decision.


Hagler said she would continue to recommend for the time being that companies register both in Moscow and St. Petersburg.


One example of the problems such wrangles can cause is the recent case of a Danish businessman who was forced to pay a $8,600 fine before he could take his Volvo out of the country.


Local customs officials told Finn Andersen that while the paperwork on his four-year-old Volvo was fine, the paperwork of his firm's local office, with which it was registered was out of order because the Danish-German joint venture had been registered in St. Petersburg, instead of in Moscow.