Rusal Is Considering Re-registration in the RF. Commented by Alena Bachinskaya for Kommersant

9 july 2018

 According to unofficial information, Rusal is discussing the possibility to re-register the company from overseas in one of the "special administrative regions" (SAR) planned to be established on Russky and Oktyabrsky Islands. Lawyers do not find any material obstacles but note the risks of strengthening the RF authorities control over Rusal. Moreover, if the company fails to get rid of the US sanctions, it will have to transfer its traders in the SAR as well, the analysts add.        

Large Russian holdings "show a direct interest in re-registration" in the SAR, which are assumed to be established on Russky Island (Primorsky Krai) and Oktyabrsky Island (Kaliningrad Region), the Minister of Economic Development Maxim Oreshkin declared on 1 June. According to him, the Ministry is discussing the bills regarding the SAR with market entrants, and it is "working out the details which the government will be able to offer as amendments to the second reading, so that large holdings could re-register from abroad without significant losses." A bit later, referring to a source in the government, the news outlets informed "the negotiations are being conducted with respect to Rusal as well."

UC Rusal Plc is registered in Jersey, and is a tax resident of Cyprus. On 6 April, the main shareholder of Rusal, Oleg Deripaska, was slapped with the US sanctions together with a range of his key assets including Rusal and En+ Group, owning 48.13% in the aluminium company and controlling it as agreed by the shareholders. Viktor Vekselberg who controls with his partners 26.5% of Rusal (more 8.75% are owned by the trader Glencore) also found himself in a black list. Renova owned by Viktor Vekselberg has not been mentioned among potential SAR residents yet. A Kommersant source, familiar with the group's business, assures that the ownership of its assets in the RF has already been "structured through the Russian companies." Viktor Vekselberg refuses controlling interests in external assets, Oleg Deripaska will choose the similar way, he agreed to reduce the participation interest in En+ up to less than 50% (currently - 66%).

Activity relating to "Russian offshore companies" creation became more intense in spring. From the bills of the Ministry of Economic Development and the presentation to them (see Kommersant dated 12 April) it followed that it had been proposed to establish in SAR and move parent structures from other jurisdictions there with maximum possible preservation of all rights and benefits of foreign offshore companies, to provide the right for paying taxes only relating to business in the RF, and not to be considered currency residents. As far back as in April, the lawyers noted vulnerable points of the idea, but on 16 May, the Prime Minister Dmitry Medvedev confirmed that "specific areas with a special legal status and tax regime" were being established on Russky and Oktyabrsky Islands. Maxim Oreshkin specified that it would happen before the end of the year.

The Ministry of Economic Development, the Ministry of Finance, Rusal, En+ and Viktor Vekselberg's companies decline to comment. The Executive Director of Heads Consulting Nikita Kulikov notes that Rusal actually "exists in two offshore zones - it was established in one and operates in the other." "Cyprus does not have restrictions for re-registration, so Rusal is able to leave it, and it will probably keep Jersey domicile," the expert believes. He explains that it is possible to refuse only via dissolution of the company. To the extent technically feasible, it is required to have a resolution of the Shareholders' meeting for moving. Probably, the issue will require an approval of minorities (free float including 3% at Bank for Development and Foreign Economic Affairs constitutes approx. 16%) and bondholders. Kommersant sources say that Rusal delisting is not open for discussion.

Alena Bachinskaya, Project Manager of the S&K Vertikal Law Firm believes that re-registration may be associated with an attempt to avoid new sanctions: the bills regarding SAR allow non-transparency of data on the company owners and managers, so it is possible to hide officially the connection of particular persons with it. However, the lawyer emphasizes that it is exactly one of the disputable moments of the SAR project, because finally all their residents may find themselves in black lists.

Dmitry Kletochkin, partner of the law firm Rustam Kurumaev and Partners notes one more risk: strengthening of the RF authorities control over Rusal. "The government will help Rusal to avoid explosion of public anger, but in exchange it wants to have a controllable asset holding structure, and not a set of offshore companies from all over the world, which is difficult to manager and even more difficult to somehow influence," he says.

Oleg Petropavlovsky from BCS adds that if Rusal remains in the USA black list, the "Russian offshore companies" will have to accept "a thousand of small traders" as well, and restrict customs export disclosure. The analyst provides China as an example of such scheme, which has special island territories, deliveries there are reflected as export, and the islands themselves do not publish customs statistics, which the Chinese exporters use for trade schemes.

Anatoly Dzhumailo, Andrei Raisky


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