Increased administrative liability for violations of Russian accounting requirements

On 4 December 2015, a bill (the “Bill”) tightening administrative liability for gross violations of the accounting and financial reporting requirements set out in article 15.11 of the Code on Administrative Offences (the “Code”) was adopted in the first reading by the State Duma. The Bill could pass the further two required readings by the end of the year.

The Bill adds new separate administrative offences for committing acts prohibited by the Russian legislation on accounting, namely for:

• registering facts that did not occur in the economic life of an organisation, making fictitious or sham entries in accounting registers;
• keeping parallel accounts (i.e. accounts that are not provided by the applicable accounting registers);
• preparing accounts that are not based on the data of accounting and other registers; and
• failing to keep the accounting documents that must be stored in accordance with the requirements specified by the Federal Law on accounting (on which we reported earlier).

If the Bill is enacted in its current form, it will:

• increase the administrative penalty that an organisation’s officer may face from RUB 2,000 – 3,000 (approx. EUR 25 – 40) to RUB 5,000 – 10,000 (approx. EUR 65 – 130) per breach; and
• introduce new specific sanctions for repeat offenders who will face fines of RUB 10,000 – 20,000 (approx. EUR 130 – 260) per breach, and possibly disqualification for a period of one to three years.

The Bill also proposes to amend article 4.5 of the Code to raise the limitation period for bringing administrative actions in connection with the above offences from one to two years.

As the forthcoming changes will result in tighter administrative liability, and in particular pose a new risk to CEOs and chief accountants of potential disqualification from holding positions for up to three years, organisations should take particular care to ensure compliance with accounting requirements.