On 5 February 2014, Russian lawmakers proposed amendments concerning the registration of limited liability companies (“LLC”). The amendments will eliminate the requirement to pay at least half of the registered capital upon registration and shorten the deadline for full payment of registered capital from one year to two months from registration.

The changes strive to reduce the start-up time for new businesses. Currently LLC founders are required to apply for provisional bank accounts and deposit half of the required registered capital before they can apply to the registration authority. Once the state has registered the LLCs, the founders have to open current bank account for the new company that replaces the provisional one. Elimination of the initial deposit requirement will accelerate the LLC registration process by omitting the need for provisional accounts.

By shortening the payment due date from the time of registration until the registered capital must be paid in full from one year to two months, lawmakers hope to curtail abusive business practices that could arise from lack of initial required funds.

All legal consequences related to the failure to pay the amount of registered capital within the terms set forth by the law shall remain in force. Such consequences include:

1) turning over the unpaid shares to the company if the LLC founders have not paid the registered capital within the required time limit (assuming the registered capital amount was greater than the required minimum) for a decision of the general meeting to determine if the company will sell the shares (must occur within one year), pay the unpaid amount in full or lower the registered capital by the amount of the nominal value of the unpaid share (part of share);

2) liquidating the company by a decision of the court if the company has failed to pay the required minimum of registered capital within the legal time period.

Lawmakers expect the business community to welcome the amendments which should ease and accelerate the registration process of LLCs and positively influence the Russian Federation’s position in the World Bank’s annual “Business performance” rankings.

Entrepreneurs working in Russia are well aware of the often times lengthy and tedious process of opening provisional bank accounts. The recently announced changes are bound to improve the registration process.