How foreign investors can alienate a share in a Belarusian entity?

The last update of the restrictions on the alienation of shares (stocks) in share capitals of Belarusian legal entities was in October 2023 (you can read about it in our post). Today, January 17, 2024 the procedure for the alienation of shares (stocks) has been clarified with the Resolution of Council of Ministers of the Republic of Belarus N27 dated 12.01.2024 (Resolution 27).

Recall that currently there is a prohibition on:

• alienation of shares in Belarusian legal entities owned by residents of "unfriendly" states;
• reorganization of such legal entities;
• withdrawal of shareholders from "unfriendly" states from such legal entities;
• alienation of immovable property by residents of "unfriendly" states or legal entities, more than 25% of the share capital of which belongs to residents of "unfriendly" states.

The above transactions and the state registration of such transactions are possible only with the permission of the Government, issued under the separately established procedure.

Today the procedure was officially established by Resolution 27.

What is the procedure for obtaining a permit?

1. Assessment

A legal entity shall conduct an assessment of the market value of alienated shares (stocks) or immovable property. The assessment shall be performed by a state organization carrying out assessment activities.

2. Application

The next step is submission of an application to regional, Minsk City Executive Committees at the place of registration of a legal entity (Executive Committees). The form of the application is not established so it shall be submitted in a free form. However, we recommend to include the economic reasoning for the transaction in the application.

Application shall be filed with the following attachments:

• information on the activities of the legal entity;
• balance sheet of the legal entity with appendices to it;
• a copy of the assessment report;
• a legalized extract from the commercial register of the country of establishment of the resident of the "unfriendly" state;
• copy of an identity document (for individuals);
• statement of the depo account (in case of alienation of stocks);
• information on the acquirer (the composition and form of such information is NOT provided);
• other documents at the discretion of the Executive Committees.

In practice, we expect "other information" to include, in particular, business plan, information on sources of financing of the deal, and copies of decisions of governing bodies on making the deal or reorganization.

3. Consideration by the Executive Committee

Within 5 working days the executive committees decide on acceptance or refusal to accept the application.

Executive committees decide on the possibility of transaction within 30 working days from the date of submission of all necessary documents (please note, NOT from the date of receipt of the application).

4. Overview by the State Property Committee (SPC)

Executive committees pass the information to the SPC, which drafts the Resolution of the Government. The draft is agreed with the Ministry of Justice and the Ministry of Finance.

5. Adoption of Resolution

When adopted, the Resolution on issuance the permit is sent to the SPC, the Ministry of Finance, the Ministry of Justice, the Ministry of Economy, and the Executive Committees.Executive committees send copies of the Resolution to the applicant within 5 working days.The resolution is valid for 1 year, the transaction must be closed within that time frame.

6. Exit tax

The applicant shall pay the exit tax in the amount, manner and within the terms stipulated in the Resolution.

The amount of the exit tax to be paid is NOT less than 25% of the market value of shares (stocks), immovable property. Please, not that it can be more then 25%.

7. State registration

After obtaining the permit the documents for the state registration of changes for the legal entity can be submitted to the registration authorities. The documents shall additionally contain a copy of the Resolution and a payment instruction for exit tax payment.

Who shall apply?

The list of possible Applicants is quite short. It can be:

• the owner of the property (in case of alienation of the immovable property);
• the shareholder (stockholder) from "unfriendly" state;
• the legal entity itself.

What happens with the exit tax if the deal is not closed (within the 1 year term or in general)?

Paid exit tax may be refunded in case of failure to close a transaction involving the alienation of immovable property upon submission of an application by the payer with a justification for the refund and confirmation of the legitimacy of such refund.

Such an option is not provided for transactions on alienation of shares (stocks).

In case the resolution on issuance of permit for a transaction expired earlier than closing, it is necessary to apply for the permit again.

What happens if there is a change in the essential terms of the transaction?

In case of any essential changes a new permit shall be obtained under a common procedure.

Full Resolution 27 may be found in Russian at the link.

CONCLUSION

We expect new trends in the development of the M&A market in Belarus with the adoption of Resolution 27. However, lots of issues remain unresolved. We recommend getting a clarification from SPC before the deal.

To consult with our Corporate law and M&A team, ask for assistance in obtaining a permit or organaise a pre-advice call send your request to [email protected] or +375 29 373 55 00 (available at WhatsApp).