Please find below information about support measures for system-forming organizations as of 28 May 2020.
1. What are system-forming organizations?
Companies are included in the list of system-forming organizations by means of a decision taken by the Russian Government Commission.
The criteria for system-forming organizations depend on their industry (e.g. for the aviation industry, turnover of more than RUB 10 billion and a headcount of more than 1000; for the oil and gas engineering industry, turnover of more than RUB 2 billion and a headcount of more than 250). The complete list of criteria can be found in the annex to the minutes of the meeting of the Government Commission of 10 April 2020 no. 7kv). The calculation is based on the group indicators. There are no restrictions on foreign participation for the companies to be recognized as system-forming organizations.
If an organization does not meet the established criteria, it may still be included in the list of system-forming organizations according to other criteria established by the Government Commission (for example, ensuring information security; ensuring transport accessibility of remote territories; dominant position in a particular market).
As of 2 June 2020, the Government Commission approved a list of 1139 system-forming organizations.
2. What support measures are available for system-forming organizations?
2.1. Regulation of the Russian Government of 24 April 2020 no. 582 - Subsidized loans for system-forming organizations
According to Regulations of the Russian Government of 24 April 2020 no. 582 and 20 May 2020 no. 712, system-forming organizations and their subsidiaries may obtain state-subsidized loans. The loan amount for the group of companies should not exceed RUB 3 billion, and the maximum interest rate is 5%. The loan is granted for a period of up to 36 months, and this preferential interest rate is applicable for the first 12 months.
In order to obtain a subsidized loan, a system-forming organization or its subsidiary should meet the following criteria:
- it should belong to one of the industries designated in Regulation of the Russian Government of 20 May 2020 no. 712 (e.g. the automobile industry, oil and gas engineering, metallurgy, wholesale and retail trade of non-food goods, the pharmaceutical industry);
- it has not entered into any other concessional loan agreement;
- the funds are used only for specific purposes (e.g. salaries, rent, transport charges, current repair, communications services, security services);
- it is not in the process of reorganization, liquidation or bankruptcy;
- it retains at least 90% of its workforce as of 1 May 2020;
- its income decreased by at least 30% for the period of 1 April-30 June 2020 compared with the same period in 2019;
- it is not a foreign legal entity/the total share of participation of foreign legal entities in its share capital does not exceed 50%.
Borrowers cannot use received funds to refinance loans they have previously received. While the preferential interest rate is in effect, they are not permitted to pay dividends without Government approval.
Regulations of the Russian Government of 24 April 2020 no. 582 and 20 May 2020 no. 712 do not address the application procedure for subsidized loans. To obtain a subsidized loan, organizations should contact a bank that participates in the state program (e.g. Sberbank, VTB, Gazprombank).
2.2. Regulation of the Russian Government of 10 May 2020 no. 651 - Other support measures
According to Regulation of the Russian Government of 10 May 2020 no. 651, system-forming organizations are eligible for:
- subsidies to cover production and sales costs;
- tax deferral or instalment plans subject to criteria listed in Regulation of the Russian Government of 2 April 2020 no. 409;
- state guarantees for loans.
Requirements for system-forming organizations to receive state support under Regulation of the Russian Government of 10 May 2020 no. 651
In order to obtain state support, a system-forming organization should meet the following criteria:
- it is not a foreign legal entity/the total share of participation of foreign legal entities in its share capital does not exceed 50% (this criterion may be waived by a decision of the Government Commission).
- a stress test has been passed and an analysis of financial and economic activities has been carried out;
- the organization has no tax arrears exceeding RUB 10,000 or arrears on the return of federal subsidies as of the application date.
Decrees of the Ministry of Economic Development of Russia of May 13, 2020 Nos. 276, 277, 278, 279 provided the procedure for a stress test, analysis of the financial and economic activities of system-forming organizations, the procedure for considering applications from such organizations, as well as the procedure for maintaining a register of system-forming organizations applying for state support in 2020.
Overview of the procedure for obtaining state support under Regulation of the Russian Government of 10 May 2020 no. 651
- A system-forming organization submits an application to the specialized federal body and the Ministry of Economic Development of Russia in which it discloses its beneficial owners and agrees to share its commercial secrets.
- The Government Commission reviews the application and decides on the approval of the provision of state support.
- Information on the decision adopted by the Government Commission is sent to the system-forming organization.
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.