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Russian Legal Entities in Russia
What is the Difference Between a ZAO and OOO?
Legal Department, Alinga Consulting Group

The most popular forms of a Russian Legal Entity (RLE) are the OOO (Limited Liability Company) and the ZAO (Joint-Stock Company). The OOO or ZAO is a separate legal entity (from the home office). The RLE itself may be the legal owner of any properties purchased or rights acquired and may conduct commercial activities from its own name and be a “party” to a contract.

A Russian legal entity is also able to found other legal entities in Russia by itself or with partners. However, a legal entity founded by only one legal entity may not independently found another legal entity (in this case, partners founded by other shareholders would need to be involved).

The General Director may be appointed by the Board of Directors for both types of entities.

The main differences between a ZAO and OOO are as follows:

Joint-Stock Comany (ZAO)	Limited Liability Company (OOO)
The charter capital is divided up into shares (aktsii). This makes it easier to transfer or assign shares as there is a perception of separation of investor from management of the company.	The charter capital is divided up into percentages of membership interest (dol’). I.e. there is an assumption of the member’s active involvement in the company’s activities.
If a shareholder decides to exit a ZAO then he can do so via the sale of his shares either to the other shareholders or to a third party. The value (selling price) of the shares is determined by the parties and is not linked by law to the net asset value of the company.	If a member decides to exit an OOO he can either sell his membership interest to another member or third party, or he can choose to sell to the company and demand that the company pay him his share of the current net asset value of the company. Such a provision must be set out in the charter of the company.
Share issues must be registered with the Federal Securities Commission (FSC). Additional start-up cost and timeline.	Not need to register with the FSC.
Dividends are paid proportionally to the number of shares owned.	The charter may provide for dividends to be distributed disproportionately from the % of membership ownership.
50% of charter capital must be paid within 3 months of registration and 50% within 1 year. Minimum capital required – 10 000 rub.	50% of charter capital must be paid before registration and 50% within 1 year. Minimum capital required – 10 000 rub.
If the contribution to the charter capital is "in-kind" (property) and not cash, then an independent appraisal is required regardless of the value of such in-kind contributions. Additional cost.	Independent appraisal is not required if the "in-kind" contribution to the charter capital is less than 20,000 rub.

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