The Advisors' Blog

Emily blogged a few weeks ago about restrictions out of Russia that broadly prohibit transactions that transfer equity from companies in an “unfriendly country” (e.g., the US) to Russian residents. This new Orrick memo provides an update:

On March 18, 2022, the Russian Central Bank clarified that the restrictions imposed under Decree No. 81 (see our earlier alert below) do not apply if a Russian resident acquires shares from a company of an “unfriendly” country, as long as:

– the shares are held by a foreign entity outside of Russia;

– the money used to acquire those shares was already in a foreign bank account; and

– such funds and accounts have been previously disclosed to the Russian tax authorities in accordance with Russian law.

However, despite the above clarifications that seem to loosen the prior rules, we still urge caution and would not recommend proceeding with any share transactions, including the issuance of shares upon RSU vesting. See further details below. It is also important to note that Russian residents are still prohibited from remitting funds abroad to acquire shares of a US company.

The memo goes on to explain that the Central Bank’s clarification doesn’t specifically address RSUs, and there’s still a lot of uncertainty around “permitted payments.” The Orrick team recommends that companies continue to formally suspend any outstanding stock awards to Russian residents for the time being. ESPPs are also dicey.

– Liz Dunshee