The Central Bank of Russia (CBR) issued Regulation No 527 which has introduced a process of registration of loans from non-residents which exceed 180 days. This registration should supersede the existing licence requirement in many situations.
The Regulation applies to loans received by Russian residents (other than individuals or authorised banks) from international financial organisations (except the IMF), foreign governmental credit institutions, foreign banks and other non-resident legal entities and individuals but does not cover loans for foreign trade operations (commercial credits).
Although the wording is imprecise, it appears that the Regulation applies to loans granted by banks only if they exceed 180 days whereas if the loan is granted by a non-banking entity, a loan for any period of time must be registered.
The registration "only" procedure can be used if the loan meets all of the following conditions:
the amount of the loan does not exceed 100 million US dollars; andthe interest rate on the loan does not exceed the six-month US dollar LIBOR plus 5%;total expenses relating to the loan (other than interest payments) do not exceed 3% of the loan principal;the loan is not connected with any 'capital transactions'; it is not clear at present what this provision means.
Even if one or more of the above conditions is not met, it appears that the registration "only" procedure will also be applicable to loans granted under guarantee of the Government of RF and to loans initially granted for a period of less than 180 days but prolonged, provided they still meet the condition that the interest rate does not exceed LIBOR plus 5 %.
For all other loans it remains obligatory to receive a licence from the Department of Currency Regulation and Control of the CBR in Moscow.
All transfers under a loan agreement which fall under the scope of the Regulation should be performed through one current hard currency account opened with an authorised bank. The authorised bank is responsible for the classification of the transaction either as requiring registration "only" or requiring a CBR licence.
The Regulation contains a list of documents which need to be submitted to the bank for registration or to the CBR for a licence.
Notwithstanding the above it is not allowed to use foreign currency loans for discharging liabilities to third parties, for the purchase of real estate and for repayment of loans previously obtained from non-residents. This is a new requirement and appears to have significant implications, for example, for companies already funded by overseas loans.
NOTE: This Regulation is effective from the date of publication in the "Vestnik of Bank of Russia". Although, as far as we are aware, it has not yet been published, we expect this to take place shortly. As indicated above the current draft is unclear on a number of matters. We will provide further information once we have obtained further details from the CBR.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.
For further information contact Alla Shaulina on tel: +7 503 232 5511 fax: +7 503 232 5522 or e-mail directly: Alla_Shaulina@ru.coopers.com
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