How far do you need to go to get accurate ownership information during your due diligence process when selling into Russia?
This question was asked as part of our webinar on Russia which can be found at:
Is this due diligence to take on a new customer or due diligence for an acquisition? If it is a new customer, a credit rating agency’s opinion is usually good enough. Russian import/export payment rules mean that you will usually be paid on time.
If your concern is an acquisition, the first step is the Russian company database compiled from tax return data. Volga Trader has a subscription. This will identify the owners, particularly if foreigners. However, Russian citizens can merely register as "A Russian Citizen" and regularly do so.
To go deeper, you should ask to see the various registration certificates by sight, including, perhaps especially, the land ownership certificate if any. (And by the way, check the leases if they don’t own the land-look for 11 month leases).
One of our clients doing due diligence for an acquisition decided to skip on this point. We are unravelling the consequences for them now. As of this year, the company ownership certificates are no longer bearer bonds (which led to a lot of abuse), the final authority is the state registry and the final proof of ownership is an extract from the state registry, which must be paid for. It is best to organize this on your side.
Contact us for more information about due diligence.