Antimonopoly legislation. Petition to the FAS. FAS notification. Is preliminary approval by the Federal Antimonopoly Service required for transactions between subsidiaries that are indirectly related to each other within the same group of persons?
Freytak Nikolay, Managing Partner of the consulting bureau "Paplinsky, Freytak and Partners"
Kurbatova Irina, independent consultant on corporate structures
The Russian practice of shareholder conflicts, deliberate bankruptcies, hostile takeovers and offshore business structuring has created an extensive and in many ways unique collection of schemes that make it possible to neutralize existing antimonopoly restrictions. But are these schemes really relevant and effective?
Permission or notice
Modern antimonopoly legislation contains a significant number of gaps and “dead” norms. The ambiguity of the procedures and the lack of clear wording in the Federal Law of July 26, 2006 No. 135-FZ “On the Protection of Competition” (hereinafter referred to as Law No. 135-FZ) lead to the fact that businesses often consider applying to antimonopoly service as a voluntary gesture, and not a mandatory implementation of the law. At first glance, it is enough to perform a series of simple actions and the obligation is eliminated.
The legislation provides for a certain procedure for conducting transactions, while the completion of some transactions requires preliminary approval from the FAS of Russia (the licensing procedure is provided for transactions named in Articles 27–29 of Law No. 135-FZ), while for others it is enough to just notify the FAS that the transaction took place (Articles 30, 31 of Law No. 135-FZ).
Vitaly Podolsky,ex-chief X5 Retail Group 1 The X5 Retail Group company quite often applied to the Federal Antimonopoly Service of Russia to obtain consent to conduct mergers and acquisitions. However, some, for example small networks, sometimes consider the approval of a transaction by the FAS of Russia to be an unnecessary formality, fraught not only with delaying the transaction, but also with costs. In the future, this approach may turn out to be negative consequences up to challenging the transaction.
In the practice of X5 Retail Group, the standard condition for closing a transaction was the receipt of all permits, including from the Federal Antimonopoly Service of Russia. If it was a question of purchasing one shopping center or entering a new region, when the fact of infringement of competition was not obvious, then the approval process took little time. If a major transaction was made, then the FAS needed time to study the situation in detail, additional information, including surveys of other market participants. True, we did not experience any problems with disclosing information on large transactions, but still the process could be difficult. For example, during a merger, the FAS can determine what the companies' share in the food market will be. At the same time, we must not forget about the opacity of many participants (gray trading, public markets). Difficulties will also arise with determining the geography of the market: the Moscow Maryino district is one consumer niche, and the Central District is a completely different one. There is still no consensus on how best to solve these issues.
Let us note that the wording of Law No. 135-FZ often misleads the parties to the transaction or allows for an ambiguous interpretation of the situation. A striking example is additional condition on the amount of assets of the target company, introduced by paragraph 1 of Art. 28 of Law No. 135-FZ. In particular, following the text of the law, it can only be attributed to the limitation on the amount of total annual revenue of the participants in the transaction
(more than 6 billion rubles). This is confirmed by the interpretation of this rule of law by some courts (see, for example, Resolution of the Federal Antimonopoly Service of the North Caucasus District dated April 8, 2008 No. F08-1671/2008-616A). In fact, the restriction applies not only to the amount of revenue of the participants in the transaction, but also to the amount of their assets (more than 3 billion rubles). Both cases fall under the permitting procedure for completing a transaction. Fortunately, the Federal Antimonopoly Service of Russia has expressed an official position on this matter regarding the application of the rule on the value of the assets of the target company in all cases of transactions 2.
Personal experience
Andrey Shamshurin,Vice President for Corporate Development of Systematics Group of Companies (Moscow)
In my opinion, Russian antimonopoly legislation defines too broadly the range of transactions for which the consent of the FAS is required. In practice, a situation may arise when partners do not have enough time to carry out all antitrust procedures. However, with proper planning of the transaction and the participation of professional lawyers, this problem can be avoided. Personally, I am not aware of any cases where preliminary approval would lead to the failure of a transaction on the domestic market.
Oksana Sudarskaya,Head of the legal department of the company "Nizhpharm" (Nizhny Novgorod) Last year, the Nizhpharm company acquired the pharmaceutical holding Makiz-Pharma. Approval from the FAS of Russia was a prerequisite for concluding the transaction, and there were no delays either in obtaining approval or in sending our application to the FAS. We received a response from the antimonopoly authority within the time limits established by law.
In my opinion, difficulties in the process of approving transactions in the FAS of Russia may arise if the impact of the planned transaction on limiting competition in the market is underestimated, to which the FAS pays considerable attention. In addition, problems are inevitable if the lawyers who are involved in the preparation of relevant documents and requests to the antimonopoly service are insufficiently competent. Fortunately, we did not encounter such problems.
Interested persons (Article 32 of Law No. 135-FZ) - the buyer and seller or their authorized representatives - can submit a petition to obtain consent to a transaction or send a notification about it. The question is for the parties to be sure whether it is necessary, and if so, what exactly to contact the FAS. Antitrust law provides an opportunity to puzzle over a variety of situations. For example, there are widespread cases when a target company is acquired in parts (less than 25% of shares or 1/3 shares) by a group of foreign organizations, the affiliation of which is extremely difficult to prove. Or the target company is divided into a number of legal entities in order to reduce the total value of assets and (or) revenue to less than 3 and 6 billion rubles. respectively. Let's take a closer look at some complex transactions.
The object of the transaction is veiled
According to the authors, the most common model of asset ownership in the Russian Federation assumes that the holder of 100% of the shares (shares) of the target company is a subholding registered in a foreign jurisdiction, which, in turn, belongs to the holding. The transaction to acquire a Russian business takes place at the level of the holding company, which is inferior
to the buyer (also a foreign company) a subholding.
At first glance, in this case there is no need to comply with the procedures of the antimonopoly legislation of the Russian Federation, since there is no transaction with shares of a Russian legal entity (which is required in accordance with Article 28 of Law No. 135-FZ). However, let us pay attention to how the law establishes the scope of application of antimonopoly control norms.
The provisions of Law No. 135-FZ apply to agreements reached between foreign persons outside the Russian Federation, if such agreements:
– relate to shares (shares) or rights in relation to Russian companies;
– lead or may lead to restriction of competition in the Russian Federation (clause 2 of article 3 of Law No. 135-FZ).
The law does not directly establish what should be considered an agreement reached in relation to shares or interests in Russian companies. But following paragraphs 16 and 18 of Art. 4 of Law No. 135-FZ, any written or oral
agreement of 3 foreign legal entities
persons or Russian persons with foreign ones, which leads to the acquisition of voting rights granted by shares (stakes), is their acquisition. And thus falls under Art. 28 of Law No. 135-FZ, which requires the prior consent of the FAS for the transaction. Of course, one could argue that the share purchase and sale agreement relates exclusively to a foreign organization (subholding). However, it is obvious that this will not be true. Moreover, this may be refuted by the text of the treaty itself. According to established practice, such agreements are most often subject to English law. According to its traditions, the contract specifies not only the subject of the transaction, but also the purpose - the transfer of ownership Russian company, which will be fixed and guaranteed in several sections of the contract.
Acquisition of a small block of shares
Sometimes the object of the transaction is less than 25% of the shares (1/3 shares) of the holding. However, the parties enter into a shareholder agreement under English law, which regulates the rights of the holding’s shareholders, the procedure for managing it and distributing profits.
Taking advantage of the opportunity provided by English law, the buyer - a minority shareholder - solely manages the holding. The seller voluntarily limits his voting rights, thereby losing the opportunity to influence the activities of the holding. Such agreements between shareholders are based on the fact that English law, unlike Russian law, does not link the degree of participation of a shareholder in the management of a company with its share in the authorized capital. Therefore, company participants can freely redistribute powers among themselves. The shareholders' agreement also establishes the mandatory withdrawal of the majority shareholder (seller) from the holding company within a certain period of time.
At first glance, the transaction in question does not fall under antimonopoly control, because the buyer acquired less than 25% of the holding’s shares. We can say that the FAS will have convincing arguments against it.
Of course, the buyer did not complete a purchase and sale transaction of more than 25% of the shares (shares) of the Russian company. However, he nevertheless received the right to dispose of its activities. And this, in the end, is the decisive factor for the implementation of antimonopoly control. In any case, in its clarifications, the FAS indicates exactly this: “agreements of non-residents that result in the acquisition of rights that allow determining the conditions for the implementation of ... business activities of a Russian business entity (clause 8, part 1, article 28 of the Law) are subject to regulation by the law on protection of competition" 4.
Completing a transaction without the prior consent or notification of the FAS of Russia may lead to its recognition as invalid
Of course, antimonopoly requirements apply to such transactions only if they lead or may lead to a restriction of competition in Russia (Part 2 of Article 3 of Law No. 135-FZ). In this case, the following are considered signs of restriction of competition (clause 17, article 4 of Law No. 135-FZ):
– reduction in the number of companies that are not part of the same group of persons;
– an increase or decrease in the price of a product that is not associated with changes in other market conditions;
– refusal of companies that are not part of the same group of persons to act independently;
– an agreement between companies to determine the general conditions for the circulation of goods;
– coordination by companies that are not members of the same group of persons of their actions on the product market;
– other circumstances that make it possible to unilaterally influence the general conditions of circulation of goods on the market.
Transaction within a group
So, recognizing the need to obtain the preliminary consent of the FAS to carry out M&A transactions complicated by a foreign element, participants in transactions will certainly be faced with the need to disclose information, including in relation to a group of persons of the buyer and the issuing company. Meanwhile, the concept of “group of persons” is defined in Art. 9 of Law No. 135-FZ and, strictly speaking, applies only to business companies and partnerships. They are recognized as commercial organizations with divided
on the shares (contributions) of the founders (participants) in the authorized (share) capital (clause 1 of Article 66). They are subjects of exclusively Russian law. The question arises: can a foreign organization and a Russian joint-stock company having the same ultimate beneficiaries be recognized as a group of persons? And what to do in a situation when we are talking about two or more foreign organizations that are controlled by a third foreign party? The answer to these questions is sometimes critical from the point of view of both maintaining confidential information of the parties involved in the transaction and the need to comply with antitrust requirements.
Let's consider a transaction to acquire 100% of the shares (shares) of a company within a group of persons, when only the owner of the asset legally changes, but the overall ownership structure remains the same (Figure). A transaction concluded between holdings 1 and 2 for the sale of shares of a sub-holding is formally subject to antimonopoly control. However, when structuring it, it seems appropriate to apply the provision that if up-to-date information about the composition of the group was provided to the antimonopoly authority no later than one month before the transaction, then the transaction does not require prior permission from the FAS (Part 1, Article 31 of Law No. 135 -FZ). In this case, the notification procedure is applied. Thus, by providing FAS Russia with information about the group of persons within which the transaction will be carried out, the parties will receive a number of advantages. Firstly, it becomes possible to carry out an unlimited number of transactions within a group of persons. Secondly, the time for implementing the transaction is significantly reduced: 10 days are allotted for the response from the FAS about receiving the list of persons and posting it on the official website (which actually confirms consent to the transaction) without the possibility of extending the specified period. Thirdly, the risk of the FAS refusing to complete the transaction is eliminated, and the threat of legal challenge to it is significantly reduced.
The situation will change dramatically if, in fact, a third-party investor (buyer) decides to acquire 100% of the shares of Holding 2. If a petition is not submitted to the FAS, then it cannot be ruled out that the antimonopoly authority will appeal to the court to declare the transaction invalid.
The imperfection of legislation is only one, far from the main argument in a dispute with the antimonopoly authority
Personal experience
Mikhail Myshlyaev,Head of the Legal Protection Department of Promsvyazcapital Group of Companies (Moscow) It should be recognized that in most cases today companies are better off following the rules
antimonopoly legislation. However, some of its provisions are difficult to implement. So, based on sub. 14 clause 1. art. 9 of Law No. 135-FZ, it can be assumed that under certain circumstances a group of people can “grow” to a universal scale. This is certainly absurd.
Currently, there is high M&A activity in Russia. Therefore, I consider it necessary to further improve antimonopoly legislation.
Consequences of breaking the rules
Completing a transaction without the prior consent of the FAS, as well as violating the notification procedure for carrying out transactions, can lead to their recognition as invalid in a lawsuit by the antimonopoly authority (Article 34 of Law No. 135-FZ).
In such a situation, each of the parties will have to return everything received under the transaction: the seller is obliged to return the received cash, and the buyer - shares (shares) (clause 4 of article 167 of the Civil Code of the Russian Federation). This is extremely disadvantageous for participants. A transaction can be challenged and the decision enforced after a significant period has passed after its conclusion. During this time, the value of shares (shares) of the target company may change significantly (increase, decrease).
To submit any statement of claim it is necessary to establish the fact of a transaction in violation of the antimonopoly legislation of the Russian Federation, as well as indicate the name of the defendant and his location. Otherwise, the application will not be accepted for processing (Articles 125, 127 of the Arbitration Procedure Code of the Russian Federation).
However, identifying the defendant may become real problem, if the parties to the transaction are foreign entities that do not have representative offices, branches or assets in Russia, information about the owner of which is provided to the authorities of the Russian Federation.
It will be difficult to obtain information about the name and location of such persons. Considering the target company itself as an interested party is also questionable, because it may not know about the parties to the transaction.
There may be questions about the subject of the claim (the disputed transaction), as well as the object of the transaction (shares or interests in a foreign company that directly or indirectly owns assets in Russia). Obviously, if the sources of this information are the media or private individuals, then it cannot be used as evidence. Therefore, the FAS will have to submit requests to the authorities of foreign states, banks, international organizations, or, in the worst case scenario, with a request for assistance from the internal affairs bodies or the FSB (for conducting operational investigative activities or initiating a criminal case, which is provided for in subsection 11 p. 1, subparagraph 8, article 23 of Law No. 135-FZ, article 143, 144 of the Code of Criminal Procedure of the Russian Federation). The task of the FAS is somewhat simplified if the subject of the transaction is an asset visible on the market, for example shares (shares) of large companies. This is precisely what explains the constant appeal to the antimonopoly service by large market players: they have practically no opportunity to conceal information about a transaction from the attention of third parties.
Personal experience
Larisa Nelyubina,Director of the Directorate for Corporate Development and Integration of OJSC VimpelCom (Moscow)
VimpelCom is a large company, and almost any of its acquisitions is subject to the requirements of antimonopoly legislation to obtain the prior consent of the Federal Antimonopoly Service of Russia. In this regard, we regularly contact the antimonopoly service, all procedures are well developed
As for possible difficulties, the FAS may agree to a deal with some regulations aimed at ensuring competition (for example, compliance with a certain level of tariffs). Also, the antimonopoly authority may request additional documents and extend the approval process. True, in my practice there were no such cases.
In addition to civil consequences, violation of the antimonopoly legislation of the Russian Federation provides for administrative liability in the form of a fine (currently its maximum amount is 500 thousand rubles). Let us note that there is no criminal liability for transactions involving the acquisition of shares (stakes) in violation of antimonopoly legislation.
To date, all the issues considered only indicate the imperfection of the norms of antimonopoly legislation, which creates problems for both business entities and antimonopoly authorities. This is once again confirmed by the lack of established judicial practice.
However, the imperfection of the law can only be an additional argument in the event of a dispute with the FAS. This should not be seen as a reason not to apply to the antimonopoly authorities for permission to conduct a transaction. In our opinion, the fulfillment of controversial duties at the stage of investment is the lesser of evils, since it frees the invested capital from risks in the near future.
1 Today – managing director of Renaissance Partners. – Note ed.
2 Explanations of the FAS of Russia, posted on the service website http://www.fas.gov.ru/answers/10906.shtml.
3 Agreement of purchase and sale, trust management of property, assignments, joint activities, etc.
4 Explanations of the FAS Russia to Art. 3 of Law No. 135-FZ.
This list of legal acts adopted by the relevant authorized bodies is far from exhaustive, but it confirms that the current antimonopoly legislation is a complex multi-stage system, which includes many documents, ranging from articles of the Constitution of the Russian Federation to resolutions of individual bodies. However, it should be emphasized that all by-laws of lower authorities can only clarify or duplicate the essence of higher ones. Sometimes this leads to difficulties in the enforcement of antimonopoly legislation, so it currently requires significant improvement. Today, several concepts are being considered that include the most problematic issues and involve changes to the relevant legal norms.
Responsibility for violation of antimonopoly legislation
All entities guilty of violating the principles and rules of free competition bear legal responsibility. Depending on the category of antimonopoly rules affected and the severity of the violation, three types of liability are provided:
Civil law. This form of liability is implemented through the collection of losses that were caused by illegal actions or inaction of both individual business entities and authorities executive power locally or local government and officials accountable to them. All profits received from such a violation of antimonopoly legislation must be transferred to the federal budget of Russia.
Administrative. Antimonopoly administrative measures are established by the Code of Administrative Offenses of the Russian Federation. In particular:
- Article 14.33 regulates administrative liability for unfair competition, if such actions do not constitute a criminal offense. Such activity is punishable by a fine for officials in the amount of 20 thousand rubles or disqualification for up to three years. For legal entities - a fine of up to 15% of revenue for goods sold in violation.
- Article 19.8 establishes administrative liability for failure to submit petitions, information, statements and other similar information to the antimonopoly authority or to the body regulating natural monopolies. The fine varies depending on the severity of the violation.
- Article 19.5 establishes liability for failure to comply with the instructions of the above-mentioned authorities within the prescribed period.
Article 14.9 of the Code establishes the responsibility of officials whose actions violate the current antimonopoly legislation and may lead to the restriction or elimination of competition, and also create obstacles to the free movement of goods and services. The punishment for such an offense may be the imposition of an administrative fine of up to 30 thousand rubles. In case of repeated violation - up to 50 thousand rubles or disqualification for up to three years.
Article 14.31 prevents the commission of abuses by business entities that occupy a dominant position in the product market. For officials, such a violation of antimonopoly legislation threatens with a fine of up to 50 thousand rubles or disqualification for up to three years. Legal entities - a fine of up to 15% of the revenue for goods sold in violation.
Article 14.32 regulates liability for the implementation of concerted actions that limit competition in the market. Thus, for signing an agreement that is contrary to the current antimonopoly legislation, a fine of up to 50 thousand rubles or disqualification for up to three years is established for officials. For legal entities - a fine of up to 15% of revenue for goods sold in violation. A similar penalty applies for coordinating the economic activities of business entities, which is unacceptable from the point of view of the current antimonopoly legislation. The same fine for officials is imposed if a federal or local government body enters into an unacceptable agreement or carries out other prohibited concerted actions that undermine the principles of competition.
Criminal. Measures of criminal antimonopoly liability are regulated by Article 178 of the Criminal Code of the Russian Federation:
- Restricting, preventing or eliminating competition through agreements or other actions, as well as repeated abuse of one's dominant market position, causing serious harm to citizens or the state, are punishable by a large fine (the amount varies depending on the severity of the crime) or imprisonment for up to three years.
- The same actions committed with the use of official position and other aggravating circumstances are punishable by imprisonment for up to 6 years with a fine of one million rubles.
- The same actions committed with the use of violence or the threat thereof are punishable by imprisonment for up to seven years with deprivation of the opportunity to hold certain positions for up to three years.
Federal Antimonopoly Service (FAS)
FAS is the main federal body exercising control and supervision over compliance with the principles of free competition in the domestic market. FAS was created by Presidential Decree No. 314 on 03/09/04, and the principles of its activities are laid down in the Decree of the Government of Russia dated 06/29/04. Its main tasks include:
- Promoting the establishment and formation of market relations based on free competition.
- Prevention and suppression of any activity of a monopolistic nature, as well as cases of unfair competition on the part of business entities.
- Exercising state control over strict compliance with the current antimonopoly legislation in the activities of natural monopoly entities, in the field of advertising, as well as when placing orders for the provision of goods, services and performance of work for federal needs.
- Control when attracting foreign investment in those economic sectors that are of strategic importance for Russia to ensure the security of the state.
Legal services related to antimonopoly legislation
As we can see, it is very problematic to understand all the intricacies of the current legal norms on your own. The Prime Legal company invites you to take advantage of the service of legal support for projects that fall within the sphere of influence of antimonopoly legislation Russian Federation, as well as other legal assistance. Our services:
- Legal assessment of the presence of a dominant position in the market. Our lawyers study the legality of the application of antimonopoly legislation by the relevant authorities. They determine the validity of their establishment of a dominant position of an economic entity in a specific market sector. Our company also offers lawyer consulting regarding the consequences of such use. The company’s specialists are studying the procedure for including business entities with a share of a certain product over 35% in the relevant state Register. Offer recommendations on possible actions for exclusion from this Register.
- Application of antitrust laws to combat anti-competitive actions. Our company offers legal services to analyze the actions of your competitors. If violations are detected, we prepare a package of relevant documents and file a complaint with the antimonopoly authority regarding the legality of the actions of a competing business entity. At the same time, we provide legal support for the filed complaint. If necessary, we carry out a legal assessment and appropriate response to the actions of the antimonopoly authority.
- Support of a commercial transaction. We offer consultations regarding the need for approval of the upcoming transaction with the antimonopoly authority or notification of it. We analyze the transaction for its compliance with current legal standards. Our lawyers will prepare the necessary documents for the antimonopoly authority to obtain permission to carry out a specific transaction or action. We provide consultations on the procedure for submitting notifications of transactions subject to state control. We provide information on the consequences of violating antitrust laws.
- Protection from prosecution. The Prime Legal company will provide qualified legal support in the event of prosecution in the area of application of antimonopoly legislation. Our lawyers will carefully analyze the circumstances that led to the initiation of the case. They will check to what extent the actions of the antimonopoly authority complied with current legislation. They will develop the necessary strategy to protect the interests of the applicant. If the actions of the antimonopoly authority violated the rights of our client, in accordance with the law, we will file the necessary complaints and petitions. We will provide legal representation of the client’s interests when considering his case in court. If necessary, we will challenge the court’s verdict in a case of violation of antimonopoly legislation or refer it to higher authorities.
- Non-competitive bidding. The company's lawyers will analyze the bidding procedure and find out whether it violates current antimonopoly legislation. They will determine the fact of creating non-competitive conditions for clients or limiting their access to trading. We will immediately respond to such violations of antitrust laws. Our lawyers will conduct a legal assessment of tenders during bankruptcy proceedings, enforcement proceedings, and so on.
Antimonopoly legislation is one of the key areas of activity of the Prime Legal company. We have been successfully working with similar cases in Moscow for more than 11 years.
If you have any additional questions regarding current legislation, you can get up-to-date information from our lawyer by calling the specified phone number or directly on the website. To do this, use the appropriate form.
Specialists from Prime Legal LLC provide support services for projects that fall within the scope of the antimonopoly legislation of the Russian Federation. Based on a thorough analysis of the terms of the transaction you are planning, our specialists will determine whether your organization needs to contact the Federal Antimonopoly Service (FAS) to obtain preliminary consent from the FAS or subsequent notification to the FAS.
Petition to the FAS. FAS notification
Relations related to the protection of competition, including the prevention and suppression of monopolistic activities and unfair competition, are covered by the Law of July 26, 2006 No. 135-FZ “On the Protection of Competition,” as well as certain by-laws. This Law is aimed at improving antimonopoly legislation and replaces the previously in force Law of the RSFSR dated March 22, 1991 N 948-I “On competition and restriction of monopolistic activities in commodity markets” and Federal Law dated June 23, 1999 N 117-FZ “On the protection competition in the market financial services". Chapter 7 of the Law “On Competition” contains a list of actions that can be performed with the prior consent of the FAS or with subsequent notification of the FAS.
With the prior consent of the FAS, the following actions are carried out:
- Creation and reorganization of commercial organizations (in cases provided for in Article 27 of the Law “On Competition”)
- Transactions with shares (shares), property of commercial organizations, rights in relation to commercial organizations (in cases provided for in Article 28 of the Law “On Competition”)
- Transactions with shares (shares), assets of financial organizations and rights in relation to financial organizations (in cases provided for in Article 29 of the Law “On Competition”)
Subsequent notification to the FAS is carried out:
- When concluding transactions or other actions, the implementation of which must be notified to the antimonopoly authority (in cases provided for in Article 30 of the Law “On Competition”)
- In the cases provided for in Art. 31 of the Law “On Competition”
Work completion time: 4 weeks
State duty in the amount 10,000 rub., for consideration of an application for obtaining prior consent, is not included in the cost of services and extra charge.
Relatively recently, I had to deal with preparing and submitting applications for preliminary approval of transactions to the Federal Antimonopoly Service of the Russian Federation.
In general, this is a simple matter, but some technical and practical knowledge is still useful.
Here I would like to present a checklist of points that are worth paying attention to.
I hope they will be useful to the readers.
According to Part 1 of Art. 28 of the Federal Law of July 26, 2006 No. 135-FZ “On the Protection of Competition” (hereinafter referred to as the Law on the Protection of Competition), a number of transactions listed in this article are subject to preliminary approval by the FAS RF.
In my case, transactions for the acquisition of 100% shares of a limited liability company (object of economic concentration) were subject to preliminary approval on the basis of clause 2, part 1 of the Law on Protection of Competition.
The process of approving the transaction at the FAS began with a thorough study of the regulatory framework, which, one way or another, covers the issues of preparing an application, namely: Law on the Protection of Competition, Order of the FAS of the Russian Federation dated November 20, 2006 No. 293, Order of the FAS of the Russian Federation dated December 28, 2007 No. 457 , order of the FAS RF dated 04/17/2008 No. 129, order of the FAS RF dated 09/20/2007 No. 294.
First, you need to determine the structural unit of the FAS to which the application is being submitted. For this purpose, it is necessary to refer to the Administrative Regulations approved by Order of the FAS RF dated September 20, 2007 No. 294 (clauses 3.5-3.12 of the Regulations).
According to clause 3.7 of these regulations, my applications were subject to consideration by the FAS of Russia. Documents were submitted by a representative by proxy to the office of this body (Moscow, Sadovaya-Kudrinskaya St.).
Now a little about the documents themselves.
List of submitted documents
This was where my entire pile of documents began, neatly placed in a hard ring binder.
An inventory is made by simply listing the documents submitted to the FAS, starting with the petition. For convenience, I pasted stickers on the sheet/first sheet of each document indicating the application number according to the inventory.
Petition
There is no form established or recommended by the FAS. Therefore in in this case I used my experience in preparing all kinds of official requests in government bodies. In the petition we briefly disclose the essence of our request with reference to the Federal Law on the Protection of Competition, indicating the persons under whose control the Applicant and the Object of Economic Concentration are located. A sample application can be found attached.
I would like to immediately draw your attention to the fact that the information transmitted to the FAS in connection with the approval of the transaction is posted on the official website of the antimonopoly authority.
If you are faced with the task of making public as little information as possible, on the petition, annex to the petition (in the form approved by the Order of the Federal Antimonopoly Service of the Russian Federation dated April 17, 2008), as well as on lists of persons compiled in free form (paragraphs 12-15 Part 5 of Article 32 of the Federal Law on the Protection of Competition), it is recommended to mark “Confidential”.
By virtue of clause 3.16 of the Regulations, approved by FAS Order No. 294 of September 20, 2007, the applicant must indicate an exhaustive list of documents and information constituting a trade secret (with the exception of documents and information that cannot be a trade secret in accordance with the legislation of the Russian Federation), official or other secret protected by law.
Please note that according to clause 16 of FAS Order No. 293 dated November 20, 2006, the mark “Confidential” is not placed on the list of persons included in one group, and on a schematic representation of a group of persons. On my own behalf, I would like to add that this rule applies to the list and diagram, both in paper and electronic form (which are submitted to the FAS on a laser disk).
At the same time, in documents submitted to the FAS on disk, the personal data of individuals must be anonymized.
Thus, after the FAS makes a decision, a minimum of information about the transaction will be posted on the official website. So, at my request, sufficient general information: name, main activity and address of the applicant, name and main activity of the object of economic concentration, indication of the nature of the transaction.
Document confirming payment of the state fee for consideration of the application
I put it in second place after the petition itself, because... specialists of the FAS office are very sensitive to the availability of this document and first of all they demand it.
The duty is 35,000 rubles. Payment details can be found on the official FAS website at the following link: http://www.fas.gov.ru/contact-fas/details-for-payments-of-fees/details-for-payments-of-fees_31712.html
Power of attorney for a representative
The most common power of attorney with the right to sign all necessary documents, the right to submit documents, negotiate and other general phrases. It is better to make at least two copies. One is submitted along with the petition, the second was taken from me when the FAS decisions were taken away. Well, I still have the third one, just in case J
Attachments to the petition
Part 5 of Art. 32 of the Law on Protection of Competition establishes a list of documents that must be attached to the application.
Requirements for the design and form of applications can be found in the specified FAS orders. When preparing documents, you should take into account that they will have to be stitched; accordingly, it is advisable to make the size of the left margin at least 20 mm.
With a ruler, of course, FAS does not check each sheet. But the fewer reasons to find fault with your documents on technical issues, the better.
The sheets of attachments to the petition must be numbered. This is done with a simple pencil in the upper right corner of each sheet.
If the document you are submitting, for example the same petition, consists of more than two sheets, it must be bound, sealed and signed by an authorized person.
The document forms approved by the FAS, which are submitted along with the application, personally did not cause me any difficulties in filling out.
I will just note a few points.
Order of the Federal Antimonopoly Service of the Russian Federation dated November 20, 2006 N 293 approved the form for presenting the list of persons included in one group of persons. This form requires the indication of passport data, as well as TIN of individuals. If you do not have the ability/desire to disclose this data, you can indicate the following: “consent to the processing of personal data has not been obtained.” This does not apply to persons indicated as those under whose control the applicant and the target of economic concentration are located.
I asked for appendices 1-5 to the form approved by the FAS Order dated 04/17/2006 to prepare accountants. If the activity is not carried out by one or another person of the group (in particular, this applies to appendices 4 and 5), in the corresponding appendix we write “the activity is not carried out”. The annexes contain information for the two years preceding the date of submission of the application. I submitted my petition in February of this year. To avoid any suspension due to the request for additional documents, I had applications for 2013, 2014 and January 2015.
According to sub. 7 hours 5 tbsp. 31 of the Law on Protection of Competition, simultaneously with the application, the balance sheet of the applicant as of the last reporting date preceding the date of submission of the application is submitted. It is not specified whether we are talking about annual or interim financial statements.
In addition, by virtue of sub. 8-9 hours 5 tbsp. 31 of the Law on Protection of Competition, the FAS must be provided with information on the total book value of the assets of the applicant and its group, as well as the object of economic concentration and its group. This information is also confirmed by balance sheets.
In accordance with Art. 15 of Federal Law No. 402-FZ of December 6, 2011 “On Accounting”, the reporting period for annual financial statements is the calendar year - from January 1 to December 31 inclusive. The reporting period for interim accounting (financial) statements is the period from January 1 to the reporting date of the period for which the interim accounting (financial) statements are prepared, inclusive.
On the day the applications were submitted, the annual balance sheets for 2014 were not yet ready. Again, to avoid any claims, I submitted balance sheets for 2013 and 9 months of 2014.
I also attached to the petition an application for the issuance of the FAS decision in hand. Otherwise, the decision will be sent by Russian Post and you may have to wait a long time for it.
Well, that's probably all. If you have any questions, I’m ready to answer.
The request concerned the possibility of purchasing and selling within the group a stake in a legal entity owning more than 50% authorized capital object of economic concentration.
I will not describe the situation in more detail for reasons of confidentiality.
I did not find any direct indication in the Law or the regulator’s clarifications that there is no need to obtain prior consent from the FAS. From the literal interpretation it turned out that the preliminary consent of the FAS was required.
By virtue of clause 1, part 1, art. 9 of the Law of July 26, 2006 No. 135-FZ, a group of persons is recognized as a set of individuals and (or) legal entities that meet the following criteria: a business company and individual or a legal entity, if such an individual or such a legal entity has, by virtue of its participation in this business entity or in accordance with the powers received, including on the basis of a written agreement, from other persons, more than fifty percent of the total votes attributable to voting shares in the authorized capital of this business company.
By general rule acquisition by a person (group of persons) as a result of one or several transactions of rights allowing to determine the conditions for an economic entity registered on the territory of the Russian Federation to carry out business activities or to perform the functions of it executive body carried out with the prior consent of the antimonopoly authority(clause 8, part 1, article 28
The requirement to obtain the prior consent of the antimonopoly authority to carry out transactions does not apply, among other things, if specified in Part 1 Art. 28 of the Law of July 26, 2006 No. 135-FZ, transactions are carried out by persons included in the same group of persons on the grounds provided for clause 1 part 1 art. 9 Law of July 26, 2006 No. 135-FZ (Part 2 of Article 28 of Law of July 26, 2006 No. 135-FZ).
There are also clarifications from the FAS dated 03/05/2014 on this topic. According to these clarifications, the execution of transactions in respect of which the exceptions provided for in Part 2 of Art. 27-29 of the Law of July 26, 2006 No. 135-FZ (completion of transactions (actions) between persons related directly or indirectly on the basis of clause 1, part 1, Article 9 of the Law of July 26, 2006 No. 135-FZ), no submission required to the antimonopoly authority with a petition or subsequent notification.
Meanwhile, in paragraph 1 of part 1 of Art. 9 of Law No. 135-FZ of July 26, 2006, we are talking about the “mother-daughter” format.
In our situation, the “sister-sister” format (seller companies) takes place. Moreover, each of them individually owns less than 50% of the authorized capital of a company that owns more than 50% of the object of economic concentration (and only in the aggregate do the selling companies own more than 50%).
The fact that each of the sellers owned less than 50% of the company's authorized capital was generally confusing. With a literal interpretation, it turned out that yes - prior consent is required.
In response to the request, the regulator confirmed that there is no need to obtain prior consent from the FAS to carry out such transactions. According to the FAS, based on the circumstances specified in the appeal, transactions and other actions carried out between persons, more than 50% of the shares (shares) of which a controlling person (group member) has the right to directly or indirectly dispose of, do not require the prior consent of the antimonopoly authority.
The motivation for this position is that the composition of persons controlling the object of economic concentration remains the same as a result of the transaction. The format of relations between the group companies in this case has no legal significance. The completion of such transactions does not affect the state of competition on the territory of the Russian Federation.
