The Russian Government has developed draft amendments to Decree No.1729 of the Russian Government dated 30.09.2022 "On approving regulations on state accreditation of Russian organizations operating in the field of information technologies" (hereinafter "Decree 1729"), which expands and specifies the list of criteria required for IT companies to obtain and maintain state accreditation.

In particular, as one of the criteria, the draft amendments provide that ownership, management or control directly and/or indirectly of over 50% of shares in the charter capital of a company must be maintained by Russian legal entities and/or Russian citizens, except for public joint stock companies. Note that the ban on majority ownership (more than 50%) applies to all foreign controlling entities (foreign organizations and foreign citizens), regardless of their affiliation with so-called "unfriendly" states. The rules proposed by the draft amendments to Decree 1729 are anticipated to take effect starting September 1, 2025.

As follows from the explanatory note to the draft, the purpose of the amendments is to help maintain the pace at which the Russian IT industry is currently developing in conditions of external sanctions pressure, as well as to provide access to state support measures for the IT industry granted to domestic organizations engaged in research and production in quantum communications (among other things, the proposed draft expands the list of activity type codes (OKVED) which entitle organizations to obtain accreditation).

The current version of the draft amendments to Decree 1729 contains the following accreditation criteria:

    (i)        The main activity of the organization is in the field of information technologies and information services (the list of activities is specified in Appendix 1 to Decree 1729).

   (ii)        The average monthly amount of payments and other remuneration accrued in favor of individuals being employees of the organization, determined on the basis of calculation data for insurance contributions in the most recent 3 months of the last reporting/calculation period the deadline for submission of which expired as of the date the accreditation application is submitted, is no less than the average monthly accrued wage in the Russian Federation or the average monthly accrued wage in the region of the Russian Federation in which the organization is registered, for the quarter preceding the date the accreditation application is submitted.

  (iii)        As of the end of the year preceding the date the accreditation application is submitted, the share of income from IT activities exceeds 30% of the organization's overall income.

  (iv)        Information on the official web site of the organization on the Internet about the IT activities carried out by the organization is provided in the Russian language.

   (v)        The organization provides an opportunity to disclose to the authorized body information on the average monthly amount of payments and other remuneration of employees for the previous and current years (if the organization applies for accreditation during the year in which it is registered) and for a period of at least 2 calendar years after the submission of the application for accreditation, having submitted the relevant consent to the tax authorities.

  (vi)        Ownership, management or control, directly and/or indirectly, of more than 50% of shares in the charter capital of the company by Russian legal entities and/or citizens of the Russian Federation (the criterion discussed above).

It should be noted that violations in the disclosure of tax secrets by IT companies (criterion v), as well as absence of information on core activities on an IT company's web site (criterion iv) are currently among the common causes for accreditation being revoked.^[1]

If the updated rules proposed by the draft amendments to Decree 1729 take effect, the negative impact may extend to companies that have already received accreditation and confirmed it before June 1 of this year in accordance with the established procedure.

Pursuant to Decree 1729, the Ministry of Digital Development, Communications and Mass Media of the Russian Federation (Mintsifry) is entitled no more than once a year, on its own initiative, to conduct unscheduled inspections of accredited companies for compliance with the relevant requirements.

The explanatory note to the draft amendments to Decree 1729 also states that one of the purposes for conducting an unscheduled inspection after the new rules take effect will be to check for the absence of foreign shareholding. If non-compliance with the established requirements is discovered, the accreditation could be revoked. According to the draft amendments, a repeat application for state registration may be submitted no earlier than 3 (three) months from the date accreditation is revoked.

Consequently, once the draft amendments to Decree 1729 take effect, we cannot rule out the possibility that the authorities will conduct mass unscheduled inspections to check compliance with the updated criteria.

We note, however, that the draft amendments are being prepared for public consultations, and further changes may be made to their provisions, in particular, possible adjustments relating to the transition period to allow companies to restructure their assets to comply with the new requirements. The current version of the draft amendments, however, does not contain transitional provisions.

Based on the above, the initiated amendments to Decree 1729 reflect the course of prioritizing national ownership and control in strategically important industries for the economy, such as IT. Companies with foreign shareholding operating in segments receiving state support should prepare in advance for the new requirements to avoid losing their status as an accredited organization.

If necessary, we would be happy to share our professional expertise in corporate asset restructuring and to suggest the most fitting ownership structure for IT companies wishing to retain accreditation.

This overview was prepared by Irina Kocherova and Anastasia Gorbunova, associates of the CLS Corporate practice.

Additional information

Should any questions arise in connection with the above or if you need any additional materials, please contact the CLS office in St. Petersburg or Moscow.

This information letter keeps clients of CLS and other interested parties abreast of information that may, to some extent, affect their activity or cater to their interests. The opinions and commentaries expressed in this information letter shall not be deemed legal advice and do not cancel the need to obtain legal advice or legal opinion on separate issues.

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