Russia Devises Plan to Seize Firms Abandoned in Foreigner Exodus
In the first explicit response to the exodus of foreign businesses from Ikea to McDonald's Corp., the Russian Economy Ministry has outlined new policies to take temporary control of departing companies where foreign ownership exceeds 25%.
March 10, 2022 at 01:42 PM
4 minute read
Russia's government moved closer to seizing and even nationalizing foreign-owned companies that are leaving the market over the invasion of Ukraine while planning measures to coax others into staying.
In the first explicit response to the exodus of foreign businesses from Ikea to McDonald's Corp., the Economy Ministry has outlined new policies to take temporary control of departing companies where foreign ownership exceeds 25%.
Under the proposals, a Moscow court would consider requests from board members and others to bring in external managers. The court could then freeze shares of foreign-owned companies as part of an effort to preserve property and employees.
External management could include state development bank VEB.RF, according to a ministry statement. Owners would have five days to resume activity or resort to other options such as selling their stake.
"The Russian government is already working on measures that include bankruptcy and nationalization of the property" of foreign companies forced into exiting, former Russian President Dmitry Medvedev said in a statement posted Thursday on the VKontakte social media site.
The list of global brands pulling out of Russia is growing by the day as some of the world's biggest corporations, from energy to consumer goods and electronics, suspend operations in the country. While sanctions and capital controls are making it harder to conduct business, companies are also concerned about potential backlash over being seen as supporting President Vladimir Putin's invasion of Ukraine.
The Economy Ministry suggested that its measures would be aimed more at auctioning off assets rather than nationalization. "The project is aimed at encouraging organizations under foreign control not to abandon their activities on the territory of the Russian Federation," it said.
Some major foreign firms have yet to signal their intentions. Renault SA, the French company that has majority control of AvtoVaz, has remained quiet. Danone SA has suspended investment in Russia but said it will maintain its production and distribution there.
Meanwhile, Citigroup Inc., which has about $9.8 billion of loans, assets and other exposure tied to Russia, has seen efforts to sell its local consumer-banking unit stall. The bank's commodities-trading desk has also been one of the few to continue to finance existing deals involving natural gas coming from Russia.
Russia has promised to retaliate for sanctions imposed by the U.S. and other countries, but its response so far has been limited. As part of steps taken to quell capital flight, authorities have imposed a temporary ban on certain foreign-exchange transactions and payments to non-residents from states that joined the international penalties.
Putin also issued an order earlier this week saying Russia would restrict trade in some goods and raw materials in response to sanctions, and that details would follow as to which products would be affected.
Any move to take over foreign-owned firms risks an even bigger standoff. White House Press Secretary Jen Psaki said Wednesday "there would be steps we would take" if Russia seized private assets in companies planning to pull back and exit the country.
Tit-for-tat measures that may include the possible arrest of Russian assets abroad would have "mutually negative consequences," Kremlin spokesman Dmitry Peskov told reporters in Moscow.
Russia should remain an attractive destination for investors from countries that aren't waging an "economic war" against it, Peskov said. "The market abhors a vacuum," he said.
China is already in talks with its state-owned firms on any opportunities for potential investments in Russian companies or assets, Bloomberg News reported this week.
For Russia, the exodus of foreign firms threatens further disruptions in supplies of imported goods in an economy already suffering from one of its biggest inflation shocks in decades. Also at risk of losing employment are nearly 3 million Russians who work either for companies based abroad or domestic companies in joint ventures with counterparts overseas.
The Economy Ministry said its proposed measures would apply to businesses whose management, including shareholders, effectively terminated control of activity in violation of Russian laws. Companies whose management left Russia or shifted assets starting Feb. 24 may also be subject to the new rules.
Businesses undergoing external takeovers could be repackaged and then sold at auction after three months, the ministry said. New owners would have to preserve two-thirds of jobs and keep the companies going in Russia for a year. The measures have not yet been approved.
NOT FOR REPRINT
© 2024 ALM Global, LLC, All Rights Reserved. Request academic re-use from www.copyright.com. All other uses, submit a request to [email protected]. For more information visit Asset & Logo Licensing.
You Might Like
View All'Disease-Causing Bacteria': Colgate and Tom’s of Maine Face Toothpaste Class Action
3 minute readFlorida-Based Law Firms Start to Lag, As New York Takes a Bigger Piece of Deals
3 minute readFowler White Burnett Opens Jacksonville Office Focused on Transportation Practice
3 minute readDisbarred Attorney Alleges ADA Violations in Lawsuit Against Miami-Dade Judges
3 minute readTrending Stories
- 1Gibson Dunn Sued By Crypto Client After Lateral Hire Causes Conflict of Interest
- 2Trump's Solicitor General Expected to 'Flip' Prelogar's Positions at Supreme Court
- 3Pharmacy Lawyers See Promise in NY Regulator's Curbs on PBM Industry
- 4Outgoing USPTO Director Kathi Vidal: ‘We All Want the Country to Be in a Better Place’
- 5Supreme Court Will Review Constitutionality Of FCC's Universal Service Fund
Who Got The Work
Michael G. Bongiorno, Andrew Scott Dulberg and Elizabeth E. Driscoll from Wilmer Cutler Pickering Hale and Dorr have stepped in to represent Symbotic Inc., an A.I.-enabled technology platform that focuses on increasing supply chain efficiency, and other defendants in a pending shareholder derivative lawsuit. The case, filed Oct. 2 in Massachusetts District Court by the Brown Law Firm on behalf of Stephen Austen, accuses certain officers and directors of misleading investors in regard to Symbotic's potential for margin growth by failing to disclose that the company was not equipped to timely deploy its systems or manage expenses through project delays. The case, assigned to U.S. District Judge Nathaniel M. Gorton, is 1:24-cv-12522, Austen v. Cohen et al.
Who Got The Work
Edmund Polubinski and Marie Killmond of Davis Polk & Wardwell have entered appearances for data platform software development company MongoDB and other defendants in a pending shareholder derivative lawsuit. The action, filed Oct. 7 in New York Southern District Court by the Brown Law Firm, accuses the company's directors and/or officers of falsely expressing confidence in the company’s restructuring of its sales incentive plan and downplaying the severity of decreases in its upfront commitments. The case is 1:24-cv-07594, Roy v. Ittycheria et al.
Who Got The Work
Amy O. Bruchs and Kurt F. Ellison of Michael Best & Friedrich have entered appearances for Epic Systems Corp. in a pending employment discrimination lawsuit. The suit was filed Sept. 7 in Wisconsin Western District Court by Levine Eisberner LLC and Siri & Glimstad on behalf of a project manager who claims that he was wrongfully terminated after applying for a religious exemption to the defendant's COVID-19 vaccine mandate. The case, assigned to U.S. Magistrate Judge Anita Marie Boor, is 3:24-cv-00630, Secker, Nathan v. Epic Systems Corporation.
Who Got The Work
David X. Sullivan, Thomas J. Finn and Gregory A. Hall from McCarter & English have entered appearances for Sunrun Installation Services in a pending civil rights lawsuit. The complaint was filed Sept. 4 in Connecticut District Court by attorney Robert M. Berke on behalf of former employee George Edward Steins, who was arrested and charged with employing an unregistered home improvement salesperson. The complaint alleges that had Sunrun informed the Connecticut Department of Consumer Protection that the plaintiff's employment had ended in 2017 and that he no longer held Sunrun's home improvement contractor license, he would not have been hit with charges, which were dismissed in May 2024. The case, assigned to U.S. District Judge Jeffrey A. Meyer, is 3:24-cv-01423, Steins v. Sunrun, Inc. et al.
Who Got The Work
Greenberg Traurig shareholder Joshua L. Raskin has entered an appearance for boohoo.com UK Ltd. in a pending patent infringement lawsuit. The suit, filed Sept. 3 in Texas Eastern District Court by Rozier Hardt McDonough on behalf of Alto Dynamics, asserts five patents related to an online shopping platform. The case, assigned to U.S. District Judge Rodney Gilstrap, is 2:24-cv-00719, Alto Dynamics, LLC v. boohoo.com UK Limited.
Featured Firms
Law Offices of Gary Martin Hays & Associates, P.C.
(470) 294-1674
Law Offices of Mark E. Salomone
(857) 444-6468
Smith & Hassler
(713) 739-1250