Smart Due Diligence

Due diligence is a cornerstone of responsible business practice, allowing companies to verify counterparties, assess risks, and establish trustworthy, long-term commercial relationships. By systematically examining legal, financial, operational, and reputational aspects, businesses can make informed decisions, avoid potential pitfalls, and safeguard their strategic interests

Legal and Regulatory Framework

Due diligence in Russia is shaped by civil law principles, sector-specific regulations, and judicial guidance. Companies are expected to act in good faith, maintain transparency, and exercise prudent judgment. Key legal requirements include:

• Anti-Money Laundering and Anti-Corruption: Federal Laws No. 115-FZ and 273-FZ.
• Foreign Investment Restrictions: Federal Law No. 57-FZ governs strategic sectors, including defense, energy, and media.
• Antimonopoly, Data Protection, and Environmental Compliance: Federal Laws No. 135-FZ, 152-FZ, and related regulations.
• Sanctions and Export Controls: Parties must verify counterparties against Russian and international sanctions lists.

Due Diligence Dimensions

Effective due diligence evaluates multiple aspects of a counterparty:

• Legal: Ownership, corporate structure, licenses, contracts, ongoing disputes.
• Financial: Accounting, debt, tax compliance, hidden liabilities.
• Commercial and Operational: Market positioning, client and supplier relationships, workforce, production capacity.
• Environmental: Regulatory compliance, permits, potential liabilities.
• Intellectual Property: Ownership and enforceability of patents, trademarks, and copyrights.
• Labor and Employment: Contracts, workplace safety, compliance with the Labor Code.

Conducting Due Diligence

A structured approach ensures thorough and defensible review:

1. Verification of Legal Status: Confirm registration in the Unified State Register of Legal Entities and validate charters, licenses, and management authority.
2. Financial and Tax Review: Analyze financial statements, debt, and tax filings.
3. Commercial and Operational Assessment: Evaluate supply chains, workforce, and business capacity; conduct site visits as needed.
4. Documentation and Record-Keeping: Maintain contracts, correspondence, and verification reports.
5. Continuous Monitoring: Track changes in ownership, management, litigation, or sanctions using state registers, SPARK, and court databases.

Special Risk Considerations

• Politically Exposed Persons and State-Owned Enterprises: Identify potential political or state-related risks.
• Reputation and ESG Factors: Review labor, environmental, and governance compliance.
• Cross-Border Risks and Sanctions: Ensure compliance with foreign ownership limits, international sanctions, and export control restrictions.

Sources and Tools

• Federal Tax Service (FTS): Registration and tax compliance.
• Unified State Register of Legal Entities: Legal verification.
• SPARK System: Counterparty risk assessment.
• Court Databases: Litigation and dispute history.
• RUSPROFILE, Bankruptcy Registers, Official Gazettes, Media Sources: Supplementary operational and reputational insights.

Conclusion

Due diligence is a strategic business function, combining legal compliance, operational verification, and continuous monitoring. Our team ensures your due diligence is thorough and reliable, helping you make informed decisions, manage risks, and build transparent, trustworthy commercial relationships in the Russian Market.