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Olga Kolmykova, Head of International Trade, RABU: Due diligence of Russian companies & suppliers


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Due Diligence of Russian companies and suppliers: Russian due diligence, dynamics of the number of companies in Russia, index of incorporated and struck off companies in Russia, dynamics of overdue debts of legal entities in Russia, INN, Registration address, Tax debt and reporting, contracts with government companies, directors and beneficiaries

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Olga Kolmykova, Head of International Trade, RABU: Due diligence of Russian companies & suppliers

  1. 1. Due diligence of Russian companies & suppliers Russian Asian Business Union
  2. 2. Kolmykova Olga ● Russian Asian Business Union – p.t. ● Professional experience - 7 years in procurement (multinational companies: Philip Morris, JTI, Chipita) ● Leader, organizer and co-chair of the Procurement Committee in American Chamber of Commerce National University of Singapore (Master of Science in Supply Chain Management) in 2019Y Saint-Petersburg State University Master in International Business
  3. 3. Russian Due Diligence - “Trust but Verify“- “Doveryay no proveryay” I. Lack of transparency (ownership, financial statements, often involve sureties, guarantees, barter relationships and other kinds of trades, managers often keep two sets of books); II. Lack of publicly-available information (very difficult to perform quick research on asset filings or to determine whether a company’s stock has been properly issued); III. Bribery (Yukos (in past the Russian oil giant) case, in which bribery is alleged at the highest levels, is an extreme — but cautionary — tale. An investor or lender should find out if bribery is rampant and at what level. Money laundering is prevalent as well, and should be investigated.) The point of the due diligence is not to find problems that mean you cannot go forward. It is to find problems and resolve them before committing a lot of time, resources and money to the project only to find out about these problems later.
  4. 4. Main poins: I. Investor or lender must verify that the Russian company has been properly established and its shares were validly issued; II. The company’s charter complies with Russian law. It may contain restrictions on foreign ownership III. Registration is extremely important. You cannot obtain shares in a Russian “closed” or “open” joint stock company unless those shares have been registered. IV. Ownership of assets should be verified V. real estate and land issues (A lease is not valid if it is not registered) VI. Tax issues always loom large in Russia VII. Other Pitfalls (Environmental liabilities , Licenses, employment system-terminated employees)
  5. 5. Dynamics of the number of companies in Russia 2010-2016 FEDERAL TAX SERVICE OF RUSSIA HTTPS://WWW.NALOG.RU/ENG/ 0 1 2 3 4 5 6 2010 2011 2012 2013 2014 2015 2016 4,49 4,54 4,54 4,61 4,66 4,82 4,55 1,96 2,53 3,13 3,6 4,11 4,46 5,22 millioncompanies the number of registered companies the number of struck off companies
  6. 6. Index of incorporated and struck off companies in Russia FEDERAL STATE STATISTICS SERVICE RF HTTP://WWW.GKS.RU/ 93,60% 94,70% 95,80% 94,40% 92,10% 102,70% 96,20% 46,30% 81,30% 89% 87,30% 84,70% 67,40% 149,20% 0,00% 20,00% 40,00% 60,00% 80,00% 100,00% 120,00% 140,00% 160,00% 2010 2011 2012 2013 2014 2015 2016 % Index of incorporated companies Index of struck off companies2 Index of struck off companies = (Number of struck off companies / number of active companies )* 1000 ! According to United Nations Conference on Trade and Development, in 2017 foreign direct investment in Russia increased by 62% to $ 19 billion, while on average it fells by 13% worldwide.
  7. 7. Dynamics of overdue debts of legal entities in Russia CENTRAL BANK OF RUSSIAN HTTPS://WWW.CBR.RU/ 639486 733564 819856 861362 1128325 1676510 1749321 0 200000 400000 600000 800000 1000000 1200000 1400000 1600000 1800000 2000000 1.1.2011 1.1.2012 1.1.2013 1.1.2014 1.1.2015 1.1.2016 1.1.2017 mlnrubels Amount of overdue debt Linear (Amount of overdue debt)
  8. 8. Statistic gives us a not very pleasant fact: A deal with each 20 organization usually ends in losses only because the counterparty company did not verify it for reliability. Let's try to figure it out and learn simple ways to verify counterparty
  9. 9. To Check the INN - Individual Tax Number and Extract from Unified State Register of Legal Entities (EGRUL) Where: Result of search:
  10. 10. Check the registration address for "mass character" Where:
  11. 11. Verification of tax debt and reporting Where:
  12. 12. Contracts with government companies Where: - to check the company for participation in public procurement Contracts with government companies are a great way to check all the data about the prospective partner. Companies executing such transactions are selected very strictly. For example, the executor can not be a company has debts. If a company sometimes concludes state contracts, it is an indicator of its reliability and a stable position in the market.
  13. 13. Information about directors and beneficial Where:
  14. 14. Thank you for attention ! Ocean Financial Centre, Level 40, 10 Collyer Quay, Singapore 049315 Сингапур: +65 8123 5527 Вьетнам: +84 9747 38037 Малайзия: +6011 283 51220 Таиланд: +65 81235527 Москва: +7 495 374 86 57