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Law on improving the effectiveness of anti-raiding measures has been signed

July 1, 2010, Vnukovo Airport, Moscow Region

Dmitry Medvedev announced this during a working meeting with Interior Minister Rashid Nurgaliyev.

The President instructed the minister to give special attention to anti-raiding measures, especially in cases when these crimes are committed with involvement of law enforcement officers.

Mr Medvedev stressed that raiding is a serious and very dangerous crime, which hampers the national economy.

The federal law amends the Criminal and the Criminal Procedure Codes of Russia and aims at improving the effectiveness of measures to combat corporate raiding, which involves illegal seizure of companies’ property, property and non-property rights, and cash assets.

The amendments stipulate criminal liability for corporate raiding and will allow the authorities to instigate criminal proceedings against corporate raiders at an early stage, thereby preventing any serious consequences.

* * *

President of Russia Dmitry Medvedev: Mr Nurgaliyev, I have signed the law introducing amendments to articles of the Criminal and Criminal Procedure Codes which have to do with corporate raiding, or illegal seizure of a company's property or its financial assets. This is a serious and very dangerous crime because in essence it hampers Russian economy. The number of corporate raids has increased significantly in recent years. Unfortunately this crime has different elements, ranging from the company's seizure as such to collusion involving a number of people. To what extent would you say that the Interior Ministry and its criminal investigation department are prepared to apply the new law?

Interior Minister Rashid Nurgaliyev: Mr President, this is a very important and relevant law. I would like to say straight away that its aim is primarily to protect the corporate management of legal entities. Most importantly, it will allow us to stop corporate raids at a very early stage.

We have been fighting this crime since 2004. Since then we have taken over 300 cases to courts. But the key issue here is that in the past a company's assets were often seized and their ownership transferred to other entities before we began our investigation.

The amendments to the law that have been introduced now will allow us to carry out investigations of corporate raiding cases. This is primarily cases that fall under Article 170.1, which covers the most common form of corporate raiding in Russia. False information is entered in the Consolidated State Register of Legal Entities. In the past, before the new amendments were adopted, that made it possible for raiders to claim a company's assets on false grounds. Now any individuals who submit false information to the tax authorities will be brought to justice. The same article stipulates criminal liability for submitting false information to the Securities Register and the Shareholders’ Register, which is also often used in raiding public companies. The article stipulates up to two years in prison.

The four new articles that are being introduced to the Criminal Code for the first time have already been tested in many countries, including in Europe, and they are very effective.

Part 3 of Article 185.2 deals specifically with professional securities market participants. In particular, here we watch out for violations perpetrated by registrars and securities depositories, who assist raiders by registering false information. Here the new law also stipules up to two years imprisonment.

The third area that will allow us to take more decisive action is Article 285.3. It concerns violations committed by officials, primarily tax and registration officials. Again, the punishment stipulated is up to two years in prison.

Article 185.5 contains an innovation that will be very widely applied. It deals with various forms of counterfeiting. The article's first part stipulates up to two years in prison, and the second part stipulates up to five years if violence is used in committing the crime.

We believe that these amendments will significantly move forward our work in detecting, preventing and stopping these crimes. Considering that all four articles relate to the responsibilities of the Investigative Committee at the Prosecutor General's Office, we will work on the details of the law's practical application together and resolve related issues. I am confident that it will allow us to substantially change the situation in this sphere of criminal activity.

Dmitry Medvedev: This is the first time that we will be able to bring to justice those perpetrators who in the past did not have any criminal or civil liability. Now these actions are defined as criminal, or as lawyers say, they have been criminalised. This will have a real effect on the work of law enforcement agencies. Moreover, every individual who is involved in corporate business must realise that if certain actions take place they can be viewed as raiding, which is punishable by law.

I am referring to such run-of-the-mill activities as an annual stockholders meeting, maintenance of a register, implementation of instructions and registration of amendments in respect of shares or other securities. All of those activities will now be regulated not just by civil law but also by criminal law. This is certain to make a mark on corporate culture. That is the first point.

Secondly, it is obvious, and you have just said so, corporate raiding is a crime that is usually committed by a group of people. There are no cases when the raid involves a single person, when one individual planned and organised the crime, and nobody else knows anything about it; those criminals always get help. They have accomplices either among the company's employees or government officials in charge of the registers.

Unfortunately, they very often also get support from employees of law enforcement agencies, including the police. Therefore, I would like to draw your attention to the fact that apart from fighting corporate raiding itself you need to make sure that the people whose job it is to protect companies from raiders do not join their gangs instead. That is your responsibility as Minister, and you need to deal with this because as a rule these crimes are committed with the support of law enforcement officials.

That does not mean only the Interior Ministry; as you have said it may involve tax officials and other law enforcement agencies, which supply information or cover up the crime and often simply send their own units to carry out a raid for a fee.

Therefore it is very important that you will deal with this and that the amendments to the Criminal and Criminal Procedure Codes bring positive results.

So, get down to work.

Rashid Nurgaliyev: Yes, sir.

July 1, 2010, Vnukovo Airport, Moscow Region