19 March 2020
Planned government support measures of business during the coronavirus pandemic

The rapid of spread of coronavirus will have an adverse effect on a braod range of businesses. Government bodies of the Russian Federation have announced a number of operational measures, aimed at reducing business risks in the context of the global coronavirus pandemic.

Operational work forces

On March 14, 2020, the Government of the Russian Federation created the Coordinating Council to combat the spread of coronavirus, its the main tasks is the preparation of measures to support industries and enterprises that find themselves in the most difficult circumstances.

On March 15, 2020 by order of the President of the Russian Federation a working group was formed by State Council of the Russian Federation on countering the spread of the new coronavirus 2019-nCoV infection (COVID-19).

The Coordinating Council of the Government of the Russian Federation and the working group of the State Council will coordinate actions of federal, regional and municipal authorities, as well as all other structures and organizations to counteract the spread of the virus. This includes determining the necessary state support measures for industries and sectors of the economy and individual companies.

On March 18, 2020, the Prime Minister instructed the federal authorities of the executive branch to create departmental operational headquarters and approve departmental emergency prevention plans to contain the spread of coronavirus infection by 20 March. Creating similar headquarters and plans was recommended to large employers.

Key areas of support

On March 17, 2020, the Government and the Central Bank of the Russian Federation issued a joint message identifying the main directions of state support measures.

In this joint message, the following were identified as priority tasks:

  • Ensuring financial stability.
  • Maintaining financial stability of industries and sectors of the economy.
  • Support for the population and regional budgets.

Development and implementation of a package of economic measures, as well as monitoring the status of key industries and system-forming enterprises will be supervised by the First Deputy Prime Minister of the Russian Federation A.R. Belousov.

The joint statement states that to ensure financial stability, the Central Bank of The Russian Federation will continue to provide markets with the necessary ruble and foreign currency liquidity.

If necessary, the Central Bank will also use regulatory measures.

It is planned to implement the maintenance of financial stability of industries and economic sectors in the following way:

1. In relation to air transport companies and the tourism industry, as the most affected, it is planned to introduce:

  • deferred collection of tax payments;

On March 18, 2020, the Prime Minister gave the federal executive bodies authorities orders to implement this measure, as well as to provide opportunities introducing a moratorium on filing bankruptcy petitions.

  • provision by the Government of the Russian Federation of state guarantees with a view to restructuring and prolongation of loans;
  • providing banks with the opportunity to lend or restructure loans without deterioration in assessments of the financial position of companies (extension of this measure to other industry is planned if necessary);
  • exemption of travel companies from paying contributions to the Association reserve fund “Tourist assistance” and contributions to personal liability funds (until the end of 2020);
2. With regard to systemically important companies, the Government of the Russian Federation plans to approve their updated list and monitor their financial condition. Decisions on additional measures of support of the companies on this list will be accepted by the operational headquarters where necessary.
 
3. In relation to small and medium-sized enterprises, it is planned:
  • expansion of concessional lending (removal of restrictions by type and industry, increased amount of subsidies);
  • expansion of the guarantee support program for lending to small and medium enterprises from the SME Corporation;
  • decision on the introduction of a delay in the payment of rental payments for a period of three months for SMEs - tenants of state or municipal property;
4. With respect to suppliers under government contracts that have been adversely affected by the current situation, it is planned to abandon the application of penalties (including penalties for non-compliance with foreign exchange controls for non-primary export).
 
5. In relation to companies in the trading industry, it is planned:
  • to implement additional support measures to ensure sufficient reserves of socially significant products, including the provision of short-term soft loans as working capital replenishment.
  • zeroing import duties and expanding the use of “green” by customs corridor for certain types of socially significant goods.
6. With regard to the production of medicines and medical equipment, the Central Bank announced easing requirements for banks to provide additional lending opportunities to the industry.
 
7. Additional decisions to support individual companies in affected sectors are planned  as part of the responsibility of a specially created commission whose status has not yet been determined.

Regarding measures to support regional budgets, the Ministry of Finance is ready to constantly monitor their balance and provide financial support as necessary.

A joint statement by the Government and the Central Bank of the Russian Federation indicates that the package of measures implemented will be expanded if necessary. The Russian government declared that it is ready to use the current year’s budget reserve of 300 billion rubles to ensure priority spending needs, as well as increase the limit of state guarantees.

Normative legal consolidation of the declared measures

The support measures indicated in the joint message of the Government and the Central Bank for the time being is not drawn up by regulatory legal acts of the Government or the Central Bank.

Moreover, the implementation of part of the declared measures may require the introduction of separate changes to the current legislation. The development of relevant acts and amendments in the normal procedure may take a significant amount of time (from 2-3 weeks to several months). However, at the meeting of the Coordination Council of the Government of the Russian Federation, it was stated the need to implement 35 priority economic events by March 26, 2020.

In this regard, in the very near future we should expect the appearance of regulatory legal acts and legislative initiatives enshrining economic measures declared by the Government and the Central Bank.

We plan to monitor and analyze these promptly.

Practices

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