The Russian Central Bank published new explanations on application of the Presidential Decrees dealing with anti-sanctions measures.

The most notable ones seem to be the Central Bank’s comments about the procedure for applying the limit of RUB 10 million on obligations to foreign creditors pursuant to Clause 2 of Presidential Decree No.95 dated 05.03.2022.

In particular, the Russian Central Bank noted the following aspects:

• The aggregate amount of the debtor’s monthly obligations to non-friendly entities[1] is to be calculated for applying the limit;
• If the amount of the debtor’s obligations to its creditors exceeds RUB 10 million, further obligations to creditors should be fulfilled in the manner prescribed by Decree No.95 (payment in rubles through a C-type account).

However, the Central Bank does not explain how banks are to verify the compliance with such procedure in case of obligations to several foreign creditors (interest and dividend payments) and accounts in several banks. In practice, banks are asking companies to provide representations and warranties that the amount of monthly payment to non-friendly creditors does not exceed RUB 10 million.

Nevertheless, this explanation of the Central Bank raises questions as to whether it is reasonable to impose such limitations and require opening a special C-type account for all non-friendly creditors in cases where the limit is also reached by summing up small amounts of aggregate obligations.

For instance, if a resident transfers RUB 9,966,000 from its account in a bank under a loan agreement with a non-friendly creditor, and then RUB 5,000 from another account in another bank under an agreement with another creditor, then under the said procedure the obligation to pay RUB 5,000 should be fulfilled in compliance with the requirements providing that such a foreign creditor from a non-friendly state must have a special C-type account.

It seems that in such a case it is reasonable to leave such payment until the next month to avoid these measures; however, the number of such “small” obligations could be significant, which raises concern over the application of these limitations in practice, as well as obliges banks to check and request additional information from clients.

Moreover, new explanations cover only Presidential Decrees No.No.79, 81, 95 and 126, and do not clarify whether dividends from limited liability companies subject to the special procedure provided by Presidential Decree No.95 in accordance with Clause 1 of Presidential Decree No.254 dated 04.05.2022 when paid to non-friendly entities, should be taken into account for calculating the limit on loans and financial instruments.

Therefore, the Russian Central Bank does not clarify whether the general limit of RUB 10 million applies to dividends and financial instrument payments or if they can be paid in parallel within different limits.

Given the current situation, we recommend conducting careful analysis of the effective regulations when fulfilling obligations to foreign creditors, especially non-friendly ones, and taking them into account, when planning your company’s activities.