Experts Discuss the Competitiveness of the Russian Jurisdiction for Private Equity and Venture Capital Investments


On October 14, a strategic session of the Bank of Russia was held to discuss the Consultative Report “Development of Alternative Investment Mechanisms: Direct Investments and Crowdfunding,” during which the issues of competitiveness of the Russian jurisdiction for direct and venture investments were discussed. The event was held with Irina Monina, Director for Legal Support of Investment Activities and Legislative Initiatives of RVC.

The discussion was also attended by the senior partner of Baring Vostok — Elena Ivashentseva, the managing partner of Da Vinci Capital — Oleg Konev, the deputy chairman of the board of RUSNANO MC LLC — Yuri Udaltsov, the general director of Skolkovo Ventures — Vladimir Sakovich, the partner of Baker McKenzie — Sergey Krokhalev, the managing partner of the law firm Line of Law — Andrey Novakovsky. The moderator was the First Deputy Chairperson of the Bank of Russia — Sergey Shvetsov.

According to Irina Monina, the focus of Russian business on Western jurisdictions is traditionally significant. For an entrepreneur, the choice of jurisdiction means particular concepts: predictability, consistency, and security.

“The attractiveness of the Russian jurisdiction should be assessed not only by the volume of foreign investments and companies that come to the Russian Federation but also by the number of Russian businesses that decided not to leave for foreign jurisdictions,” said Irina Monina.

There are some areas that, according to Irina Monina, should increase the attractiveness of the Russian Federation jurisdiction for the venture and direct investments. First of all, this is a continuation of the judicial reform, including developing arbitral proceedings (arbitration). It is equally important that Russia has a full range of necessary, understandable, and easy-to-use legal instruments that meet the business's needs and objectives

“Concerning direct and venture capital investments, an important step is the draft law prepared by the Ministry of Economic Development of Russia and market participants (including RVC), designed to eliminate some of the shortcomings of the institution of investment partnership. Also, amendments have been proposed to the Tax Code of the Russian Federation to improve the taxation of income from IT activities (deferred taxation on income tax) and eliminate the discriminatory nature of IT taxation,” said Irina Monina.

The discussed bill will allow individuals with a qualified investor's status to participate in investment partnerships as investors (which is essential for business angels); at present, individuals cannot be parties to an IT contract. The document also provides legal relations under the IT agreement to create a fund of funds and restrictions on the investment of comrades' common funds in foreign securities.

“It is fundamentally important that the bill envisages the removal of restrictions on participation in an investment partnership of Russian entities that do not have the status of a legal entity, which makes it possible to expand the circle of potential investors for funds,” said Irina Monina.

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