State Duma toughens control over strategic investment in 2nd read

MOSCOW, Jul 21 (PRIME) -- The State Duma, the Russian parliament’s lower chamber, on Tuesday approved a bill in the second out of three required readings that strengthens control over foreign investment in local companies from the strategically-important industries.

The list of strategic industries comprises more than 40 types of activities, including the nuclear sphere, development, production, sales, servicing, and utilization of military equipment, space and aviation, and production of mineral resources.

The bill outlines conditions for preliminary agreement of deals of foreign investors buying shares of Russian companies from the strategic industries. The government will now take into account all shares of a company that the investor bought previously, even if the investor has no right to vote with them. Thus, the bill eliminates the possibility for a foreign investor to buy more shares in the company after a temporary transfer of a stake he already owns to a third party.

For instance, if an investor owns 30% of voting shares in a company and pledges 20% as collateral under a contract, he will be able to vote with only 10%, and the current edition of the law allows them to buy 40% more in the company without approval of the government’s commission for foreign investment control. So the investor will own 70% in the company after the pledge agreement expires.

A spokesperson for the Federal Antimonopoly Service told PRIME previously that the possibility of the scenario happening was very low, but it still should be eliminated.

The State Duma scheduled the third reading of the bill for July 22.

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