Draft Law № 973264-7 “On amending the Labor Сode of the Russian Federation regarding regulation of remote and distance work” was adopted in the first reading on 21 July 2020.

The draft law proposes to introduce the concept of temporary and combined remote work and simplifies the procedure for transferring employees to such temporary remote work formats.

At the same time, the draft law strengthens the protection of employees working remotely.

Particularly, the employer will have to determine the rules for interaction with the employee and the specific hours of performing the work function. These rules are to be provided in the employment agreement and an internal act of the company. During the rest period, the employee will have the right to stay offline. During this time the employer will only be allowed to interact with the employee solely subject to his/her consent or in emergency cases. Working during such rest periods will have to be paid as overtime.

Additionally, it is proposed to clarify whose equipment will be used by the employee. In case the employee uses his/her personal equipment the related costs can be compensated by the employer. This provision is also to be included in the employment agreement or other acts of the employer.

Moreover, the draft law proposes eliminating the current provision of the Russian Labor Code providing that remote employees can be dismissed on the grounds stipulated in the employment agreement. With such broad interpretation, the reasons for termination often come down to the lack of sufficient workload, production necessity, inexpediency of further cooperation, or simply the decision of the CEO to terminate the contract. The draft law provides that an employee can be dismissed exclusively on the grounds stipulated in the Labor Code.

The transfer to such remote work is proposed to be executed through:

• Ordinary procedure: concluding an employment agreement or an addendum to it; or
• Simplified procedure: temporary remote work can be established by an internal act of the company. This scenario is possible in exceptional circumstances: when life or the living conditions of the individuals are in danger (e.g., during a pandemic).

The amendments before next readings of the draft law are expected to be made until 18 September 2020. Then the draft law will be subject to consideration in the second and third reading in the State Duma, subject to further approval by the Federation Council and the signature by the President.

At the same time, the press service of the Russian Ministry of Labor and Social Affairs provided that the employers can already transfer employees to remote work under the current labor legislation, even if it is not provided for in the employment contract.

In order to prevent the spread of the coronavirus infection, employers can organize the use of flexible working modes for employees who have such technical capabilities.

The Ministry of labor explained that the employer must issue an appropriate order (the ‘prikaz’). It should reflect the working conditions: work start and end times, working hours, and other conditions, if necessary.

Due to the ongoing spread of COVID-19, the employee and the employer can exchange electronic copies of documents, subject to further issuance of such documents in accordance with the established procedure.

The salary for remote employment should remain unchanged if the duties assigned to the employee remain the same.

Federal Laws “On Amending Article 3 of the Federal Law on Procurement of Goods, Works and Services by Certain Types of Legal Entities” and “On Amending the Federal Law on the Contract System for Procurement of Goods, Works and Services for State and Municipal Needs” both dated 31 July 2020 entered into force.

According to the adopted laws, the Russian government will have the right to determine the minimum portion of purchases of Russian products for companies with state shareholding.

At the end of the year, these companies will be required to make a report on the volume of purchases of goods and services of Russian origin.

In addition, the provisions on procurement quotas will also apply to goods produced in the countries of the Eurasian Economic Union.

According to Resolution of the Government of the Russian Federation dated 17 August 2020 No.1254 routine inspections of legal entities and individual entrepreneurs suspended as part of supporting measures during the COVID-19 pandemic until the end of the year, will not be conducted within the framework of the federal control (supervision) in the field of state-regulated prices and tariffs even after the end of 2020.

Nevertheless, such routine inspections will still be carried out at the regional level by the regional executive authorities responsible for state regulation of prices (tariffs). In 2020, these inspections will be allowed if the following conditions are both met:

• the activities of legal entities and individual entrepreneurs and (or) the production facilities used by them have been classified as of extremely high or high risk;
• these legal entities and individual entrepreneurs are not included in the unified register of small and medium-sized enterprises.[1]

[1] As a reminder, small and medium-sized enterprises (SMEs) under the Russian law include the companies in which at least 51% of the charter capital should be held by individuals or other SMEs. The share of other companies, not being SMEs, should not exceed 49% and the share held by the state, region or non-profit organizations shall not exceed 25 per cent. The share of a foreign entity as a rule should not exceed 49%.

Besides,

• Microenterprises cannot employ more than 15 persons, while their revenue cannot exceed 120 million roubles.
• Small enterprises cannot employ more than 100 persons, and their revenue cannot exceed 800 million roubles.
• Medium-sized enterprises cannot employ more than 250 persons, while their revenue cannot exceed 2 billion roubles.

However, if the foreign entity’s share in the company exceeds 49%, but the shareholder meets the criteria set for medium-sized enterprises as provided above and is not incorporated in an offshore, such company can be qualified as an SME subject to a certain procedure

Federal Laws “On Amending Federal Law on Limited Liability Companies” No. 251-FZ and “On Amending part 94 of the Civil Code” No. 252-FZ both dated 31 July 2020 became effective on 11 August 2020.

According to these amendments it became easier to leave an LLC established under the Russian law.

It is now possible to grant the right to withdraw from the company to participants listed in the charter or to those who, for example, have a share of a certain size in the charter capital. In addition, it is now possible to make the right to exit conditional upon:

• the occurrence or absence of certain circumstances;
• the established term;
• the decision of the general meeting of the shareholders adopted unanimously. The decision must contain information about the withdrawing participant, as well as the term for the exercise of this right.

Previously, including such conditions in the charter was not restricted, however, not all companies were aware of this possibility.

The notary who certifies the LLC participant’s application for withdrawal must within two days following the certification, apply to the tax service to make changes to the Unified State Register of Legal Entities (EGRUL). Previously, the company itself had to apply for registration of the participant’s withdrawal.

Moreover, according to the new amendments the moment of the transfer of the share to the company has been modified. Currently the transfer occurs from the date when the changes have been introduced to EGRUL. Previously the transfer occurred from the date when the company received a letter of withdrawal from a participant. The old rule remains effective for credit organizations.

Federal Law “On Digital Financial Assets and Digital Currency” dated 31 July 2020 No. 259-FZ was signed by the President.

The law introduces rules for the issuance of digital financial assets and the turnover of digital currency (cryptocurrency). Most of the provisions of this document will take effect from 1 January 2021.

Digital financial assets (“DFA”) are determined by the law as digital rights that include, inter alia:

• monetary claims;
• ability to exercise rights on equity securities;
• rights to participate in the capital of a private joint stock company.

DFA can only be issued, registered and accessed by making (changing) entries in the information system based on the distributed register (the ‘raspredelenniy reestr’) which is a set of databases with identic information, provided by special algorithms, as well as in other information systems.

The rights certified by the DFA will arise for their first owner from the moment of making a record of crediting the DFA to them in the system. These entries can be made by individual entrepreneurs and legal entities.

The law does not contain an exhaustive list of transactions that can be made with the DFA. Anyway, such transactions will need to be concluded through the DFA exchange operator. Credit organizations, trade organizers and other legal entities that are included in the Bank of Russia’s register of such operators can act as such exchange operators.

In respect of cryptocurrency, the new law uses the term “digital currency” (the ‘tsifrovaya valyuta’) instead of cryptocurrency. A digital currency is a set of electronic data (a digital code or designation) in a system. It can be accepted as an investment or as a means of payment that is not a monetary unit.

The law defines digital currency as a means of payment but for the purposes of the Russian insolvency legislation it can also be defined as property.

• Practice of the Board of economic disputes of the Supreme court of the Russian Federation
  –  The condition of a works contract stating that the customer (the ‘zakazchik’) is not held liable for intentional violation of its obligations is considered void.
  –  The works contract cannot contain a condition for the full release of the customer from liability for intentional breach of its obligations. This provision cannot be justified by the principle of freedom of contract. Such an advantage for one of the parties grossly violates the balance of interests: the contractor does not receive timely remuneration for services rendered, and the customer is not responsible for the delay in any way.
• Court dismissed a penalty due to the moratorium on insolvency – Decision of the Arbitration Court of Sverdlovsk region of 24.08.2020, case No. A60-28212/2020

The landlord intended to collect from the counterparty a penalty for late payment of rent for the period from 7 May to 5 June 2020. The tenant referred to force majeure due to the COVID-19 pandemic requesting to reduce the penalty.

The court noted that the tenant was subject to supporting measures in the form of a moratorium on insolvency. During the moratorium period, no penalties are imposed on the debtors subject to moratorium on insolvency.[2] These persons are not subject to other financial sanctions for non-performance or improper performance of monetary obligations. The moratorium is valid for six months starting from 6 April 2020.

Thus, the court decided not to collect penalty from the tenant.

[2]  As a reminder, the Russian Government adopted Regulation No.428 dated 3 April 2020 on the introduction of such a moratorium for a 6 months’ term for the most affected economic sectors, as well as for the organizations included into the lists of systemically important organizations, strategic enterprises, as well as strategic joint-stock companies and organizations.

The list of most affected economic sectors as of today includes the following industries: passenger transportation, tourism, hospitality, culture, art and leisure businesses, sports and recreation activities, including health resort organizations, catering services, additional education for children and adults, daycare services for children, organization of conferences and exhibitions, retail of non-food products, mass media and production of printed products.