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Pepeliaev Group Istanbul October 2012 Page PEPELIAEV GROUP www. pgplaw. ru 1 www. pgplaw. Pepeliaev Group Istanbul October 2012 Page PEPELIAEV GROUP www. pgplaw. ru 1 www. pgplaw. ru

About the Firm ► Leading law firm in Russia ► More than 160 lawyers About the Firm ► Leading law firm in Russia ► More than 160 lawyers ► Three offices: in Moscow, St. Petersburg and Krasnoyarsk ► A full range of services to provide integrated legal support for business ► No. 1 in legal consulting in Russia according to the leading Russian rating agencies ► More than 100 recommendations from leading foreign experts in all areas of law ► More than 1500 clients in different industries ► More than 80% of the clients are multinational companies and corporations, including a number of firms which have made long-term investments in Russia PEPELIAEV GROUP Page 2 www. pgplaw. ru

Practice Areas TAX ADVICE AND TAX LITIGATION LABOUR AND MIGRATION LAW CRIMINAL DEFENCE FOR Practice Areas TAX ADVICE AND TAX LITIGATION LABOUR AND MIGRATION LAW CRIMINAL DEFENCE FOR BUSINESS DISPUTE RESOLUTION AND MEDIATION BANKING CUSTOMS AND FOREIGN TRADE REGULATION INTELLECTUAL PROPERTY AND TRADE MARKS Corporate Division REAL ESTATE AND CONSTRUCTION PEPELIAEV GROUP CORPORATE COMMERCIAL/M&A Page 3 www. pgplaw. ru

Industry Groups PHARMACEUTICALS& HEALTHCARE TELECOMMUNICATIONS SUBSOIL USE ADVISORY METALLURGY SHELF PROJECTS AND THE PSA Industry Groups PHARMACEUTICALS& HEALTHCARE TELECOMMUNICATIONS SUBSOIL USE ADVISORY METALLURGY SHELF PROJECTS AND THE PSA FINANCE TRANSPORT OIL&GAS AND MINING FMCG SOCIAL SERVICES SECTOR PEPELIAEV GROUP Page 4 www. pgplaw. ru

Clients Selected list of clients Banking & Finance AIG Russia ► Citibank ► MICEX Clients Selected list of clients Banking & Finance AIG Russia ► Citibank ► MICEX ► Dresdner Bank ► West. LB Vostok ► Renaissance Capital ► Industrial production Kronospan ► Caterpillar Tosno ► Access Industries ► Honeywell ► Skamol ► Baltreagent Gazprom ► Schlumberger ► Mosenergo ► Sakhalin Energy ► Rosneft’ ► Shell PEPELIAEV GROUP British American Tobacco ► Henkel ► Oriflame ► Reckitt Benckiser ► Nike ► Procter & Gamble ► Fuel & Energy sector ► FMCG ► Pharmaceuticals & Healthcare Metallurgy & Mining Novo Nordisk ► Johnson & Johnson ► 3 М ► Glaxo. Smith. Kline ► Novartis ► Merck Sharp & Dohme Alcoa ► Rusal ► Basic Element ► CTSD ► Halliburton ► Hydro Aluminium ► ► Page 5 www. pgplaw. ru

Clients Selected list of clients Retail Castorama ► Metro Cash & Carry ► Zara Clients Selected list of clients Retail Castorama ► Metro Cash & Carry ► Zara ► Billa ► IKEA ► Mass Media Independent Media ► CTC Media ► Prof Media ► Thomson Reuters ► The Business World Publishing Group Duesseldorf Gmb. H ►Moscow State University ►Russian Medical Academy of Postgraduate Education ►Liden & Denz PEPELIAEV GROUP Ford ► Volkswagen ► Scania ► Aeroflot ► Nissan ► Social services ►Messe Transport ► Telecommunication & IT Food industry Vimpelcom ► MTS ► ER-Telecom ► MGTS ► Telia. Sonera ► Nokia Siemens Networks Coca-Cola ► Harry’s ► Danone ► Frito Lay ► Hortex ► Ritter Sport ► ► Page 6 www. pgplaw. ru

INVESTING IN RUSSIA: ISSUES TO CONSIDER PEPELIAEV GROUP Page 7 www. pgplaw. ru INVESTING IN RUSSIA: ISSUES TO CONSIDER PEPELIAEV GROUP Page 7 www. pgplaw. ru

Regulation of Foreign Investment in Russia Federal Law “On Foreign Investments in the Russian Regulation of Foreign Investment in Russia Federal Law “On Foreign Investments in the Russian Federation” No. 160 -FZ dated July 9, 1999: “The legal regulation of the activities of foreign investors and their right to dispose of the revenues from such investments may not be less favorable than that established for Russian investors, unless otherwise provided by the federal laws”. PEPELIAEV GROUP Page 8 www. pgplaw. ru

Restrictions for Foreign Investors I. Strategically Important Businesses Investments in strategically important businesses, such Restrictions for Foreign Investors I. Strategically Important Businesses Investments in strategically important businesses, such as: ► nuclear industry ► military technology ► space activity ► aviation security ► mass media ► extraction of some minerals (uranium, diamonds, lithium etc. ). require the prior consent of the authorized governmental bodies. PEPELIAEV GROUP Page 9 www. pgplaw. ru

Restrictions for Foreign Investors II. Real Estate Acquisition of land plots Foreign investors may Restrictions for Foreign Investors II. Real Estate Acquisition of land plots Foreign investors may not own: ► Agricultural land ► Land in areas adjoining the state borders ► Land within the boundaries of sea ports PEPELIAEV GROUP Page 10 www. pgplaw. ru

Restrictions for Foreign Investors III. Insurance Sector Investments in the insurance sector Limitations on Restrictions for Foreign Investors III. Insurance Sector Investments in the insurance sector Limitations on the maximum amount of foreign shareholding in the insurance sector in Russia (25%) ► Prior permission required for an increase of charter capital using foreign funds, and to transfer a holding in a Russian insurance company to a foreign investor ► Foreign investors are not allowed to provide life insurance, and some other types of insurance ► PEPELIAEV GROUP Page 11 www. pgplaw. ru

Restrictions for Foreign Investors IV. State Regulation of Prices and Tariffs State regulation of Restrictions for Foreign Investors IV. State Regulation of Prices and Tariffs State regulation of prices and tariffs in certain areas of economy Healthcare industry: obligation to register maximum prices for medicines, included in the List of Essential Medicines, adopted by the Government ► ► State regulation of tariffs on electricity, gas, communications, and transport ► Administrative fine for the violation of regulations of tariffs and prices PEPELIAEV GROUP Page 12 www. pgplaw. ru

Restrictions for Foreign Investors V. Employment Law Issues Complicated Procedures Employee’s right to quit Restrictions for Foreign Investors V. Employment Law Issues Complicated Procedures Employee’s right to quit at any time with two weeks notice; contractual lengthening of notice period – unenforceable ► ► Exhaustive number of grounds for termination by employer ► Multi-step and very formalized procedure for termination ► Burdensome procedures for hiring the majority of foreign employees PEPELIAEV GROUP Page 13 www. pgplaw. ru

Restrictions for Foreign Investors VI. Competition & Antimonopoly Law Issues Obtaining of transaction clearance Restrictions for Foreign Investors VI. Competition & Antimonopoly Law Issues Obtaining of transaction clearance 1 If the total value of assets of the parties of the planned transaction are exceeding the following limits, than the Buyer needs to file an application in order to get an approval for transaction: amount of assets of the buyer and its group shall be 7 billion RUB (175 MEUR) or total earnings of more than 10 billion RUB (250 MEUR) plus to that total amount of assets of the target shall be more than 250 million RUB (6, 25 MEUR); 2 Extensive definition of Group makes usage of SPV’s for deal structuring ineffective 3 Penalty for non filing of an application is – 12 300 EUR 4 Penalty for non filing of a notification is – 6 150 EUR 5 Transactions performed without due approval of Federal antimonopoly service may be considered as void by the court in certain situations (e. g. . limitation of competition); PEPELIAEV GROUP Page 14 www. pgplaw. ru

INVESTING IN RUSSIA: THE OPPORTUNITIES PEPELIAEV GROUP Page 15 www. pgplaw. ru INVESTING IN RUSSIA: THE OPPORTUNITIES PEPELIAEV GROUP Page 15 www. pgplaw. ru

Advantages for Foreign Investors Basic Facts/Legal Entities 1. 2. 3. 4. 5. 6. 7. Advantages for Foreign Investors Basic Facts/Legal Entities 1. 2. 3. 4. 5. 6. 7. 8. 9. LLC and JSC are legal entities established by one or more founders with the charter capital divided into shares in JSC and into participation interest in LLC. Both types of the entities can be established by non-Russian individuals or legal entities. The founders of the LLC become its participants and the founders of JSC become its shareholders. LLC and JSC cannot be established by another legal entity, which has a sole shareholder itself. JSC can be established as an opened JSC or a closed JSC. The main difference between an opened JSC and a closed one is that an opened JSC is entitled to make the public offering of the issued shares and conduct their free sale, and the amount of the shareholders is not limited as in a CJSC with maximum 50 shareholders. Minimum amount of the charter capital of the LLC is RUB 10 000 (approximately EUR 250). Minimum amount of the charter capital of a CJSC is also RUB 10 000 (approximately EUR 250) and RUB 100 000 (approximately EUR 2 500) for OJSC. In general the participants/shareholders of the LLC/JSC shall not be liable for its obligations. The participants/shareholders bear risks of losses, in connection with the LLC/JSC’s activity, only in amount of their participation interest (cost of the shares). Participants/shareholders can bear joint responsibility in the event of company insolvency (bankruptcy), which occurred due to their fault. The only statutory document of both legal entities is a charter. PEPELIAEV GROUP Page 16 www. pgplaw. ru

Advantages for Foreign Investors Basic Facts/Governing Bodies of Legal Entities The supreme governing body Advantages for Foreign Investors Basic Facts/Governing Bodies of Legal Entities The supreme governing body is the general meeting of the participants/shareholders. 1. There are 2 types of the General Meetings: (i) Ordinary General Meeting and; (ii) Extraordinary General Meeting. 2. The Ordinary General Meeting in LLC shall be held at least once a year between 1 st of March and 30 th of April. The Ordinary General Meeting in CJSC shall be held at least once a year between 1 st of March and 30 th of June. 3. Extraordinary General Meetings can be convoked at any time stipulated by the charter or legislation. 4. Competence of the General Meeting: • Appointment or early termination of powers of the executive body and board of directors; • Limit powers of the executive body; distribute dividends; • Approve annual reports and financial statements; • Approve transactions executed by the company (major transactions, interested party transactions); • Approve internal documents of the company; etc. PEPELIAEV GROUP Page 17 www. pgplaw. ru

Advantages for Foreign Investors Basic Facts/Governing Bodies of Legal Entities Board of Directors 1. Advantages for Foreign Investors Basic Facts/Governing Bodies of Legal Entities Board of Directors 1. Board of Directors is another governing body of the LLC and JSC. 2. Board of Directors is elected by the General Meeting. 3. For the LLCs the Board of Directors is optional body as well as for the CJSC. The OJSC is obliged to establish the Board of Directors if the number of its shareholders exceeds 50. 4. Competence of the General Meeting: • Convocation of the general meeting and approval of its agenda; • Appointment or early termination of powers of the executive body of the LLC or JSC (if it is allowed by the charter); • Approval of transactions; • Approval of establishment of branches and/or representative offices; • Supervision of the executive body; etc. PEPELIAEV GROUP Page 18 www. pgplaw. ru

Advantages for Foreign Investors Basic Facts/Governing Bodies of Legal Entities Executive body (Director, General Advantages for Foreign Investors Basic Facts/Governing Bodies of Legal Entities Executive body (Director, General Director) of the LLC and JSC 1. Day to day activity of the LLC and JSC is carried out by its executive body. 2. The executive body is appointed by the general meeting, unless such competence is not transferred to the Board Directors. The executive body is appointed on the terms set by the charter of the LLC or JSC. 3. The executive body acts on behalf of the LLC or JSC without a power of attorney; represents the LLC, CJSC at courts; issues powers of attorneys; executes agreements, including labour agreements etc. 4. Please note that according to the Russian legislation a foreign citizen can be appointed as the sole executive body of the LLC or JSC. However, it would be necessary for him and the LLC or JSC to obtain a so-called work permit. The work permit can be obtained only after the state registration of the LLC or CJSC. Failure to comply with the Russian migration requirements may result in imposition of penalties in amount approximately EUR 20 000. Therefore, for the first few months (before the LLC or JSC and a foreign citizen obtain the work permit) a Russian citizen must be appointed as the LLC’s or JSC’s Director. 5. There is no right of the second signature in the LLC and JSC. PEPELIAEV GROUP Page 19 www. pgplaw. ru

Separate Subdivisions of Legal Entities 1. 2. 3. 4. 5. 6. 7. The Russian Separate Subdivisions of Legal Entities 1. 2. 3. 4. 5. 6. 7. The Russian Law allows performing business activities in Russia through a so-called Representative office (the RO) and Branch. RO is not considered as a separate legal entity, but rather a subdivision of a foreign company (hereinafter the Company), which represents and protects the Company’s interests outside its main seat. Liability of the RO is a liability of the Company itself. Branch is also a subdivision of the Company. However, unlike the RO the Branch exercises all or part of the functions of the Company, including commercial activity. Any liability of the Branch is a liability of the Company itself. The RO or the Branch may only be established in Russia by undergoing of an accreditation procedure. The Company appoints a person who is to be in charge of the RO or the Branch as its head, and such person acts pursuant to a power of attorney issued by the Company. PEPELIAEV GROUP Page 20 www. pgplaw. ru

Advantages for Foreign Investors LLC as a potential target of M&A transaction 1. 2. Advantages for Foreign Investors LLC as a potential target of M&A transaction 1. 2. 3. 4. 5. Mandatory notarization of all transactions with participatory interest Participatory interest is deemed transferred simultaneously with notarization SPA without notarization is void Registration with the Trade Register is required Pledge of participatory interest shall also be notarized and officially registered Some pluses: • Easy financing (in form of in kind contribution); • LLC’s are more effective for sole shareholding due to more technical protection; • Conversion of debt into participation interest; • No obligatory disclosure requirements. PEPELIAEV GROUP Page 21 www. pgplaw. ru

Advantages for Foreign Investors JSC as a potential target of M&A transaction 1. 2. Advantages for Foreign Investors JSC as a potential target of M&A transaction 1. 2. 3. 4. 5. 6. 7. 8. Clear and simple share transfer procedure (share transfer act) Possibility of using classic M&A instrumen ts /conditions, pre-conditions, pledge, retention and etc. Conversion of debt into shares Shareholders agreements High level requirements for disclosure and strict control of the Federal Service for Financial Markets Administrative and criminal liability for breach of corporate procedures and disclosure requirements Obligatory duty to make an offer to by shares to other shareholders in case of purchase of 30, 50 and 75 percent of shares in open joint stock companies Squeeze-out right in case of purchase of 95 percent of shares PEPELIAEV GROUP Page 22 www. pgplaw. ru

Advantages for Foreign Investors Shareholders agreements in LLCs Participants of LLC have the right Advantages for Foreign Investors Shareholders agreements in LLCs Participants of LLC have the right to set up an agreement regarding usage of rights rendered by the participatory interest regarding the following matters: • voting, coordination of voting; • to buy or to sell shares at the prior agreed price at the prior specified moment, action or event; • coordination of other actions connected with management of the company and its reorganization; No need to disclose information about SHA Shareholders agreements in JSCs Shareholders of JSC have the right to set up an agreement regarding usage of rights rendered by the shares regarding the following matters: • voting, coordination of voting; • to buy or to sell shares at the prior agreed price at the prior specified moment, action or event; • coordination of other actions connected with management of the company and its reorganization; Mandatory obligation to disclose information about the SHA Main Problems Clause 333 of the Civil Code of Russian Federation says that court has the right to decrease the amount of forfeit if it is disproportional to the damage; Clause 9 of the Civil Code of Russian Federation says that rejection of rights by the person does not entail termination of the said rights; No court practice PEPELIAEV GROUP Page 23 www. pgplaw. ru

Advantages for Foreign Investors Information 1. 2. Setting up a limited liability company – Advantages for Foreign Investors Information 1. 2. Setting up a limited liability company – 3 weeks Setting up a closed joint stock company – 3 weeks plus 1 month for registration of share issuance 3. Each legal entity must have a real office / virtual offices are struggled 4. Obtaining of work permit for General manager expat – 1 month 5. Obtaining work permit for regular expats – 3 months 6. Minimum Charter capital – 250 EUR 7. Setting up a representative office – 1 month 8. Obtaining of the approval for transaction from FAS – 1 month 9. State registration of participatory interest transfer – 1 week 10. Registration of share transfer – 3 days within the system of registrar / no state registration PEPELIAEV GROUP Page 24 www. pgplaw. ru

Thank You. Questions ? PEPELIAEV GROUP Page 25 www. pgplaw. ru Thank You. Questions ? PEPELIAEV GROUP Page 25 www. pgplaw. ru

Contact Details Russia, 123610, Moscow, WTC-II, Krasnopresnenskaya nab. , 12, Entrance 7, 15 floor Contact Details Russia, 123610, Moscow, WTC-II, Krasnopresnenskaya nab. , 12, Entrance 7, 15 floor Tel. : +7 (495) 967 -00 -07 Fax: +7 (495) 967 -00 -08 E- mail: info@pgplaw. ru PEPELIAEV GROUP Russia, 191015, Saint Petersburg, Shpalernaya, 54, Golden Shpalernaya Business Centre Tel. : +7 (812) 640 -60 -10 Fax: +7 (812) 640 -60 -20 E-mail: spb@pgplaw. ru Page 26 www. pgplaw. ru