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New bill that would allow Russia’s government to take control over local businesses of departing companies

The Russian government is advancing a new law that would allow it to seize businesses of western companies that quitted the Russian market or suspended operations in the country. This measure was taken in response to the exodus of foreign businesses due to the open armed conflict that broke out between Russia and Ukraine on February 24, 2022.

After the first market behemoths, such as McDonald’s, Coca-Cola and Pepsi, started exiting Russia, new economic policies were outlined to take temporary control of the above companies where foreign ownership is at least 25%.

Under the proposals, a court would have the right to bring in external administration on companies that have paused operations without clear economic reasons. After that, the court could freeze shares of companies in order to “preserve property and employees”.

Thus, under the bill, the government will be allowed to take control over the local businesses of the departing companies and sell them to a friendlier firm. It would make it harder for overseas entities to pull back quickly unless they get prepared to take a significant financial hit.

The bill was proposed on April 12, already passed the State Duma (lower house of Russia’s Parliament) on May 24, and faces two more readings and an Upper House review to be signed by the president.

While sweeping sanctions and control over capital make it more difficult for overseas firms to run business in the country, most of them remain, still hoping that the political environment will improve soon.

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