RBC: Foreign Businesses in Russia Adopt ‘Abandoned Car’ Strategy
‘Dormant tiger’, ‘abandoned car’, and ‘inaudible presence’—these are the terms experts used to describe the strategies that foreign companies have opted for to remain in Russia. RBC explores their objectives and challenges.
Victoria Arutyunyan, Partner at FBK Legal:
Now, we are witnessing four main strategies among foreign businesses from unfriendly states that formally maintain a presence in Russia. Two of them are ‘dormant tigers’ and ‘abandoned cars’. As a result, even those willing to pay for an orderly exit find themselves in a state of limbo for an indefinite period.
Many foreign entities continue to operate in Russia. They generate substantial profits but largely refrain from distributing these due to counter-sanction restrictions.
However, some of the companies still operating adhere to a principle of ‘complete information blackout’. They make no public statements about their activities in Russia and, even when facing claims from state authorities, they ‘deliberately avoid litigation’. ‘Better to quietly pay extra than to loudly go to court’ — this is the logic encapsulating their approach. This is the strategy of ‘inaudible presence’.
As for the ‘dormant tigers’, these firms have effectively frozen their operations: assets have been sold, contracts terminated, and the workforce reduced to just a CEO and an accountant. All that remains of the former business is a legal address. Such companies have already decided to exit but wish to avoid going through the government commission, facing tax audits (which could uncover arrears), and risking management liability. In my estimation, once the statute of limitations for tax violations expires (typically three years — RBC), the ‘tiger will awaken — only to disappear for good’.
Then there are those ‘failing to submit reports’. I compare such companies to an ‘abandoned car’ — this variation of ‘hibernation’ no longer implies ‘waking up’. In this scenario, the company stops filing reports and ceases to account transactions. The strategy is simple: pretend you don't exist until the tax service itself removes you from the Unified State Register of Legal Entities. Under the law, if there are no bank account movements and no tax reports filed for a year, the Federal Tax Service has the right to strike the legal entity from the register as defunct. It's like a car abandoned in the tax authority's courtyard with the keys in the ignition. Sooner or later, it will be towed away. And sometimes, this strategy actually works.
