The procedure for dividend distribution in case of potential restrictive measures is determined
On 16 September Presidential Decree No 285 "On Special Accounts" (hereinafter referred to as Decree No 285) will come into force. The Decree defines the peculiarities of receipt by foreign participants and property owners of profits and dividends from legal entities of the Republic of Belarus.
Decree No. 285 was adopted in development of the provisions of the Law of the Republic of Belarus of 12.07.2023 No. 280-Z "On the Application of Special Restrictive Measures" (hereinafter - the Law) in order to clarify the procedure for application of a special restrictive measure in the form of "imposing restrictions on financial transactions" (hereinafter - the special restrictive measure).
It should be reminded that decisions on the application or cancellation of special restrictive measures are taken by the Council of Ministers of the Republic of Belarus in the form of resolutions (Clause 1, Article 8 of the Law).
Decree No. 285 approved the Regulation on the Procedure of Functioning of Current (Settlement) Bank Accounts with Special Functioning Mode (hereinafter - the Regulation).
Thus, the rules for receiving profits (dividends) established by the Regulation apply if a separate resolution of the Council of Ministers of the Republic of Belarus on the application of the said special restrictive measure is adopted.
Who is covered by Decree No. 285?
- Legal entities of the Republic of Belarus with foreign participation (except banks) (hereinafter - residents).
- Foreign participants and property owners (hereinafter - foreign participants).
"Foreign participants" means participants, owners of property of legal entities of the Republic of Belarus (except for banks) which are persons from foreign states committing unfriendly actions in accordance with Article 3(1)(3)(3) of the Law.
Rules for payment/receipt of profit (dividends) stipulated by Decree No. 285
Opening of a special account by Belarusian legal entities (residents)
To pay distributed profits (dividends) in favour of foreign participants, a resident must open a special account in Belarusian rubles with a bank of the Republic of Belarus (hereinafter referred to as a resident's special account).
Funds credited to the special account of a resident have a special purpose and are transferred to special accounts of foreign participants, unless otherwise provided for by the Regulations.
Opening of a special account by a foreign participant
In order to receive distributed profit (dividends) from a resident's special account, a foreign participant must open its own special account (hereinafter referred to as a foreign participant's special account).
Peculiarities of opening special accounts for a resident and a foreign participant:
- you can open a special account in any bank in Belarus;
- currency of the special account - Belarusian ruble;
- a resident may open only 1 special resident account in respect of each foreign participant;
- a foreign participant may open only 1 special account of a foreign participant to receive profit (dividends);
- special accounts shall be opened independently of:
- availability of decisions on suspension of operations on accounts of residents or foreign participants in banks;
- resolutions (rulings) on seizure of funds in the accounts of residents or foreign participants.
Transfer of profit (dividends) to a special account of a foreign participant
A resident must transfer funds to a foreign participant no later than 10 business days from the date of the foreign participant's application, indicating the details of the special account opened by the foreign participant.
Restrictions on the use of funds held in special accounts of foreign participants
Funds credited to the special accounts of foreign participants have a designated purpose. The Regulation defines the purposes for which foreign participants may use these funds, in particular:
- financing the implementation of investment projects in the territory of the Republic of Belarus;
- repayment of debt on credits granted by JSC "Development Bank of the Republic of Belarus" and banks in accordance with decisions of the President of the Republic of Belarus;
- acquisition of government securities of the Republic of Belarus issued for the purposes of implementing the resolution of the Council of Ministers of the Republic of Belarus on the application of a special restrictive measure;
- placement in irrevocable bank deposits for a period of not less than 1 year in the bank where the special account of the foreign participant is opened.
Monetary funds may be used for other purposes if they are agreed between the Council of Ministers of the Republic of Belarus and the President of the Republic of Belarus.
Prohibitions related to distribution of profits (dividends) to foreign participants
NOT allowed:
- transfer of distributed profit (dividends) to accounts other than the special account of a foreign participant (except for the case provided for in clause 9 of the Regulations);
- transfer of funds from special accounts for purposes that are not stipulated in paragraphs 4, 5 and 7 of the Regulation;
- transfer of other funds to special accounts.
If funds are transferred to special accounts (both resident and foreign participants) as a result of a technical error, this does not constitute misuse.
Foreclosure of funds held in non-special accounts of Belarusian companies
The following actions are NOT permitted with respect to funds held in special accounts of residents:
- foreclosure under enforcement and other documents that are the basis for writing off monetary funds from accounts on an indisputable basis;
- seizure;
- suspension of operations on special accounts.
These restrictions do not apply to cases provided for by the legislation on prevention of money laundering, financing of terrorist activities and financing of proliferation of weapons of mass destruction, other activities harmful to national security.
Obligations of residents and foreign participants upon expiry of a special restrictive measure
No later than 10 days before the expiry of a special restrictive measure, residents and foreign participants who have opened special accounts must send to the bank:
- application for closing of special accounts, specifying current (settlement) bank accounts and
- payment instructions for transferring the balance of funds to these accounts.
In the absence of such application and expiry of the term of validity of the special restrictive measure, such special accounts shall be closed under the terms and conditions stipulated by the agreement with the servicing bank.
Special accounts shall not be closed if measures have been taken in respect of a Belarusian legal entity and a foreign participant to suspend financial transactions, freeze funds and (or) block financial transactions in accordance with the legislation on prevention of legalisation of proceeds of crime, financing of terrorist activities and financing of proliferation of weapons of mass destruction, other activities harmful to national security.
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