New bill on use of ‘Russia’ in company names

The Russian Parliament has proposed a new bill which would allow certain companies to use the word 'Russia' in their name.

Earlier this year, the legislature introduced an amendment under which Russian firms could not include the word 'Russia' in their name unless 75% of the company belonged to the state. Such prohibition concerned all companies and a large number of firms that had the word 'Russia' in their name were caught by surprise.

In order to conform to the amendment, such companies would have to amend their constituent documents, thereby incurring significant costs. For example, the Savings Bank of Russia, Russia's largest bank, has approximately 20,000 branches across the country. In order to comply with the new law, the bank would have to change not only its constituent documents, but also all its signboards, letterheads and other marketing material. This would involve an outlay of money comparable to the budget of a ministry. It is estimated that, should the bill be passed, the Savings Bank of Russia would save at least $20 million.

It is unknown whether any company had already taken steps to amend its constituent documents. However, the widespread opinion was that the legislature had been too hasty in introducing this rule.

The new bill, which was first heard by Parliament on October 3 2008, would lower the 75% state ownership threshold. It is believed that the final bill will require only that the government has a controlling interest in the company. Under the bill, the government will be able to allow certain companies to use the word 'Russia' in their name on a case-by-case basis. However, the authors of the bill emphasized that the government wishes to protect the word 'Russia' and will allow companies to use it only in specific circumstances.

Vladimir Biriulin, Gorodissky & Partners, Moscow