One of the unfair business practices, which unfortunately occur in Russia, is transacting business with foreign companies via a non-existent firm or a non-registered company. Commercial relations with such “business partners” can result in significant losses and even present grounds for a criminal charge. Moreover, such “cooperation” can result in tax losses for the conscientious counterparty.
A no less widely spread criminal scheme of leading business with foreign companies is the criminal use of “one-day companies” set up for the purpose of tax evasion. Such firms are set up on the basis of forged or lost personal documents in the names of fictitious founders, and are led by fictitious managers. Commercial cooperation with such companies may result in serious non-reimbursable losses for non-residents of the Russian Federation.
In Russian business practices, it is often the case when one of the counterparties insists that the person having signed a contract did not have proper authorities to do it. This technique is actively used as an attempt to diminish or altogether cancel judicial sanctions for breach of a valid contract.
Besides, certain kinds of entrepreneurial activities, according to the Russian law, must be licensed on a mandatory basis. The absence of an appropriate license means that your counterparty lacks the civil legal capacity, which may result in the invalidity/unenforceability of the contract signed with such counterparty.
What threatens cooperation with an unscrupulous counterparty?
There are many risks that may be caused by cooperation with unscrupulous parties to the contract:
- Legislative risks. These include the accrual of additional tax payments, administrative or criminal liability.
- Financial risk. They are expressed in non-compliance by one party to the transaction with the terms of the contract. Non-delivery of products or violation of the terms of their transportation, non-compliance with the conditions of transportation, etc. — all this can lead to serious financial losses.
- Claim Risks. For cooperation with unscrupulous partners, fines may be levied not only from the enterprise itself (its authorized capital), but also directly from its participants.
- Damage to reputation. Reviews of the company’s work can be pretty bad.