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Russia passes law restricting foreign investment in Russian companies

Russia passed a new law on Friday allowing courts to strip foreign owners from hostile countries of stakes in key Russian entities, in a purported attempt to protect strategic companies from foreign influence.

According to the text, the purpose of the new law is to protect the rights of Russian citizens and entities, ensure national defense and security in the face of hostile actions by the US and its allies. The law establishes restrictions for foreign holding companies that own economically significant Russian firms, while determining conditions for indirect investors in those holdings to take direct stakes.

The law defines economically significant organizations as Russian businesses critical to Russia’s economic sovereignty and security. They include firms meeting criteria such as annual revenue over $1billion, more than 4,000 employees, total assets above $2 billion or taxes paid of at least $130 million last year. Foreign holding companies owning at least 50% of such economically significant firms can now have their corporate rights suspended if they refuse to exercise rights, block management or engage in actions that threaten to terminate the Russian subsidiary. Once a court rules to suspend a foreign holding company’s rights, it transfers the shares to Russian citizens and residents who indirectly own stakes through the foreign entity.

The law is part of Russia’s response to foreign freezing of Russian assets abroad, which President Vladimir Putin has called a violation of international law. Analysts say it will give Moscow more oversight of foreign investors, especially in strategic industries like banking and energy.

The new restrictions come amid already high tensions between Russia and Western nations over Moscow’s invasion of Ukraine.

Article: Russia passes law restricting foreign investment in Russian companies

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