Use of the words “Russia”, “Russian Federation” and similar words and phrases in the names of legal entities in our country has always been an object of special attention of the Government. It is considered that business partners and consumers can be misled by proclamation of organization itself as a “Russian” or “Federal” organization.
Experience of Lidings attorneys suggests that legal regulation of this issue is quite unclear for the business community and especially among the foreign business operating in Russia. It’s well-known international companies often include words Russia or Rossia (for instance, closed joint-stock company “XYZ Rossia”) in the names of their Russian subsidiaries in order to specify their location.
Presently there is special order of receiving permissions for inclusion of such words in the names of newly created companies, provided by joint Order of 10.03.2006 № 39/112/73/29/39n/42/39. Permissions are distributed by Interdepartmental Commission for the use of denominations “Russia”, “Russian Federation” and derived words and phrases in the organizations’ names. The existing procedure is quite effective – during the period of Commission’s activity four of our clients have successfully applied to the Commission and received the permissions.
However, the situation will change dramatically from January 1, 2008, after the 4th Part of Civil Code comes into effect. According to section 4, article 1473 of the Civil Code the name of a legal entity can not include full or short official denominations of Russian Federation, foreign states, and also derived words. Exception is provided only for state-owned companies (public unitary enterprises and some joint-stock companies).For instance, inclusion the word "Russia" in the name of a joint-stock company will be allowed by permission of the Government, if more than 75% of stock of joint-stock company belongs to the Government. Such permission will be issued without determining their period of validity and can be recalled if the circumstances, due to which it was granted will change given. In case of recall of a such permission the company is obliged to make appropriate alternations in the statute in 3 consequent months.
Regarding the legal entities that have received the corresponding permissions before entrance into force of the 4th Part of Civil Code the Introductory Law to (article 14) provides that they should bring their names in accordance with the new requirements together with the first change of constitutive documents after the January 1, 2008. Thus, organizations, using the word “Russia” in their name, will be able to use it on legally until their first application for registration with the Unified State Register of Legal Entities (for example, increase in authorized capital, admission of new participants in LLC, changing legal address). Changes, unconnected with new edition of constitutive documents (for example, new General Director’s appointment) aren’t taken into account.
In order to control the compliance with the new rules the registration authorities (tax inspectorates) have been granted a right to demand a change of the company's name through court proceedings in the case of non-compliance (section .5, article 1473 of the Civil Code).
Thus, businesses, who plan to use the words “Russia”, “Russian Federation” etc. for the name of their Russian subsidiaries should consider whether it will make sense to receive the permit according with the existing regulations, or it is better to create another name without using these words. It is not clear, however, will the use of Russian transliterations of foreign words be admissible (for example, “XYZ Rasha” LLC). From our point of view this could be qualified as a misleading practice and therefore as contradictory with the new regulations.
In any case it is clear that all organizations, without any exceptions, whose firm-name is not compliant with the new rules of the Civil Code will face a necessity to amend their names and to register the corresponding changes with the State Register.
