On repayment period for funds raised by microfinance organisations

On 29 March 2016, Federal Law No. 407-FZ, dated 29 December 2015, ‘On Amending Certain Laws of the Russian Federation and Invalidating Certain Provisions of Laws of the Russian Federation’ (hereinafter, Law No. 407-FZ) became effective. Specifically, the Law amended Federal Law No. 151-FZ, dated 2 July 2010, ’On Microfinance Activities and Microfinance Organisations’ (hereinafter, Law No. 151-FZ).

Legislative division of microfinance organisations (hereinafter, MFOs) into two types — microfinance companies (hereinafter, MFCs) and microcredit companies (hereinafter, MCCs) occurred from the time Law No. 407-FZ had become effective.

The MFOs with information on them included in the state register of microfinance organisations prior to 29 March 2016 are automatically recognised as MCCs, but they are obliged to bring their names in line with the requirements of Law No. 151-FZ (Part 3, Article 5, Law No. 407-FZ).

In the period from 29 March 2016 to 29 March 2017 the MFOs, which have not brought their names in line with the requirements of Law No. 151-FZ, are entitled to raise funds of individuals, including individual entrepreneurs, who are not their founders (participants, shareholders), based on the loan agreement. They are also entitled to amend previously executed loan agreements to raise funds of individuals, including individual entrepreneurs, regarding the extension of effective periods of the agreements provided that the commitments of such microfinance organisations under the said agreements, including, but not limited to, the amendments, are to be performed before 29 March 2017 (Part 5, Article 5, Law No. 407-FZ).

In the event that in the period from 29 March 2016 to 29 March 2017 an MFO obtained the MFC status, the said company may extend the repayment period of raised funds as agreed by an individual lender, including an individual entrepreneur, by amending a relevant loan agreement accordingly.

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29.03.2016 00.00.00