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Comments of Evgeny Zverev, senior lawyer of S&K Vertical, in Neighbors-“Flies-by-Night” article

21 December 2011
All of a sudden, any resident of Saint Petersburg may find out that in his/her apartment dozens of companies to establishment of which he/she bears no relation are “registered”. Bona fide owners or lessees of other premises may also find themselves in the same situation. While registering a legal entity, the tax authority does not verify whether the address specified by the founder represents the fact, and sometimes even if it desires to do so, it is unable to limit activities of fly-by-night companies.

Dmitry Medvedev, the President of Russia, repeatedly stated that it is necessary to deal with such companies (also known as “snowdrops”, etc.). The law adopted on the eve of Duma elections made criminal liability for establishment of companies registered for a straw party, and acquisition and even provision of passports and other documents for registration of legal entities to commit an economic crime stricter. However, no actual sanctions are applied to those who “registered” their companies in an apartment of citizens that bear no relations to these companies or on other premises.

Give Liberty to Slack Entrepreneurial Business!

As a result of many years of fights against administrative barriers in the course of registration of legal entities, constituent documents of legal entities are not actually subjected to even elementary checks. The whole procedure takes a little longer than a week and costs 4 thousand rubles (exclusive of services of notaries, if necessary, of lawyers, etc.). The entry made in the public register (Uniform State Register of Legal Entities) includes the entity location (the so-called “legal address”) specified by applicants.

Furthermore, since this autumn the fiscal administration permitted to register companies at the place of residence of the founder. At the same time, no one obliges founders of companies to attach or even present passports (documents can be sent by mail). Technically, place of residence of each founder is specified in a special form attached to the registration application, but it is not notarized and verified in any way. Moreover, even if it is found out that the residence address of the founder does not match the declared location of the company to be established, it will not serve as grounds for refusal to register it.

Lawyers are convinced that “registration” of a dubious company threatens a lawful owner of the premises with great problems. In the opinion of Evgeny Zverev from S&K Vertical legal firm, the property owner may be exposed to an actual “spam” that is received at the address of registered companies and also wastes time and nerves on communication with the police, tax authorities and all those persons that look for these companies. Olga Karpova, senior lawyer of business practice of Rightmark Group, suggests that bailiffs can come to look for property of the company registered at the specified address and may even try to put it under arrest: “In such a situation the owners will have to explain and prove that an “unknown” legal entity is absent, and the property belongs to them.”

To avoid such situations, she recommends that bona fide property owners should send a notarized application for limitation of use of the address as a location of legal entities to the tax inspectorate having attached a copy of the certificate of state registration of title.

If You Do Not Help Yourself...

At the same time, owners of apartments and premises cannot take any actual steps against entities which have been already “registered”. “In theory, registration of a company at someone else’s address may be classified as causing obstacles for the owner upon use of his/her own premises,” Evgeny Zverev reasons. “Indeed, instead of dealing with his/her affairs, the bona fide owner is continuously drawn away. However, prospects of such an action (both for cancellation of registration and for compensation of damages) are ambiguous.”

Olga Karpova agrees with him: “As registration of unknown legal entity is revealed, the owner shall apply to the tax inspectorate. If it is known that the entity has opened settlement accounts, it is practical to send a notice of unfairness of this client and its absence at the claimed address to the bank.”
However, as property owners that actually faced these problems affirm, regulatory authorities ignore such notices: “On the premises belonging to me and used to accommodate a children’s clinic, the tax inspectorate secretly registered 38 companies, to my knowledge, having forged documents,” businessman Pavel Panchenko says. “It does not do any harm to me personally, but having heard call of the President and the Prime Minister for fight against such companies that cause harm to the state budget, I entered into correspondence with the tax inspectorate, the public prosecutor’s office and the Ministry of Internal Affairs. In addition, these companies participate in city tenders.

The tax inspectorate stated straight away that it is my own problem. And if I would like to defend state interests, then I should do it myself. It is easier for officers of the Ministry of Internal Affairs to interrogate me a couple of times and to dismiss the criminal case than to search for, interrogate and bring the management of 38 companies to responsibility. The public prosecutor’s office has already cancelled resolutions of the Ministry of Internal Affairs to dismiss criminal case, etc. several times.”

In the lawyers’ opinion, an attempt to bring founders of such companies to criminal responsibility will fail. Founders are threatened only with an administrative penalty in the form of a fine in the amount of five thousand rubles for provision of untrustworthy information on legal entity. However, even in case violators are brought home to such offences, they are very rarely punished. For instance, citizen Donyushkina submitted constituent documents which contained false facts about the founder, General Director and legal address of the limited liability company for registration. However, Saint Petersburg City Court cancelled the fine that was imposed on her due to expiry of the period of limitation – more than a year have passed since the moment of commitment of offence.

The only real form of fight against illegally “registered” companies is a procedure for their liquidation in a judicial proceeding, but the Civil Code of the Russian Federation delegates the right to file such actions only to tax or other authorized agencies and only upon identification of gross cureless or repeated breaches of the law. Herewith, the tax authorities impose these requirements not only with regard to fly-over-night companies but also with respect to even major legally operating companies. In particular, several years ago an attempt to liquidate PVG company, one of the major operators in the market of outdoor advertising in Saint Petersburg, was made under similar pretence.
Furthermore, in most cases arbitration courts do not regard actual absence of the entity at the address specified in the Uniform State Register of Legal Entities as a gross misconduct sufficient for liquidation, and they also mention its eliminability. For example, an attempt of tax authorities to invalidate re-registration of OOO STS in Saint Petersburg failed. This company specified an address of a private apartment as the location. The owner of this apartment claimed that she has not leased it to anyone. “Location of the legal entity may both match and mismatch actual place of accommodation of property complex, production premises or assets,” the court concluded dismissing the case.


Pavel Netupsky, Fontanka.ru


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