Theres a May Day present for smaller business in Russia with new legislation signed into being by President Medvedev limiting official inspections.
Federal Law of the Russian Federation #294-FZ, December 26, 2008 – “On protection of rights of legal entities and individual entrepreneurs under state control (supervision) and municipal control”
(Article 3) The basic principles of protection of rights of legal entities and individual entrepreneurs under state control (supervision) and municipal control are:
2) presumed integrity of legal entities, individual entrepreneurs;
5) impermissibility of several bodies of state control (supervision)and municipal control conducting inspections of one legal entity or one individual entrepreneur to see if they execute the same mandatory requirements or requirements, stipulated by municipal legislation;
8) impermissibility of bodies of state control (supervision)and municipal control charging legal entities, individual entrepreneurs for control procedures;
9) financing from corresponding budgets of inspections, including control procedures, conducted by bodies of state control (supervision)and municipal control.
Chapter 2. State control (supervision) and municipal control
(Article 9) Organizing and conducting regular inspections
2. Regular inspections are conducted no more than once every three years.
5. The annual plan of regular inspections, accepted by the Head of the body of state control (supervision) and municipal control, is made known to everyone concerned through posting it on the web-site of the body of state control (supervision) and municipal control or through any other means available.
7. Russian Prosecutor General’s Office posts the annual combined plan of regular inspections on the official web-site of the Russian Prosecutor General’s Office no later than December 31 of the current calendar year.
8. The basis for inclusion of a regular inspection into the annual plan of regular inspections is the end of the 3-year period since:
1) state registration of the legal entity, individual entrepreneur;
2) last regular inspection of the legal entity, individual entrepreneur;
3) the legal entity, individual entrepreneur starting their business activity, in accordance with the notice of starting certain types of business activity, given to an appropriate federal body of executive power, authorized by the Russian government, if the work or service provided require such notice.
9. Regular inspections can be conducted two and more times every three years for legal entities and individual entrepreneurs that work in the area of health care, education, social sphere. The Russian government stipulates the list of these activities and frequency of their regular inspections.
10. Regular inspections of legal entities, individual entrepreneurs – members of a self-governed organization are conducted in regard to no more than 10% of the whole number of the self-governed organization members, in accordance with the annual plan of regular inspections, unless otherwise provided by the Federal Laws.
11. Regular inspections are conducted in the form of a document inspection and/or a field inspection in the order, stipulated by articles 11 and 12 of this Federal law, accordingly.
12. The body of state control (supervision), body of municipal control notify the legal entity, individual entrepreneur about the upcoming inspection no later than three days prior to the inspection by sending a copy of the order or decree by the principal, deputy principal of the body of state control (supervision), body of municipal control about the regular inspection, through certified secure mail or any other available means.
13. In case of a regular inspection done in relation to members of a self-governed organization, the body of state control (supervision), body of municipal control are required to notify the self-governed organization in order to make sure its representative has a chance to be present at these regular inspections.
(Article 10) Organizing and conducting unscheduled inspections
2. The basis for an unscheduled inspection is:
1) expiration of the previously given to the legal entity, individual entrepreneur order to fix discovered violations of mandatory requirements or requirements, stipulated by municipal legislation;
2) receiving by the body of state control (supervision) appeals and applications from citizens, legal bodies, individual entrepreneurs, information from state bodies, local government bodies, from mass media, on the following:
ð) emergence of life threat in form of infliction of injury, health threat of citizens, threat of harm to animals, plants, environment, state security as well as emergence of threats of creating emergency situations of nature-induced and industrial types;
ñ) inflicting harm to life, health of citizens, harm to animals, plants, environment, state security as well as creating emergency situations of nature-induced and industrial types;
ò) violation of consumer rights (in cases when appeals received from those citizens, whose rights were violated).
8. On the date of signing a regulation or an order by principal, deputy principal of the body of state control (supervision), body of municipal control about conducting an unscheduled field inspection of subjects of small or medium business, in order to coordinate the conduction the body of state control (supervision), body of municipal control should present or send as certified secure mail with return receipt requested or as an electronic document with electronic digital signature, a notification about coordinating of conducting an unscheduled field inspection to Prosecutor’s Office body at the place of operation of the small or medium business. Attached to this notification should be a copy of regulation or order of principal, deputy principal of the body of state control (supervision), body of municipal control about conducting an unscheduled field inspection together with documents, containing information that constituted a ground for conducting this inspection.
12. If a ground for conducting an unscheduled field inspection constitutes inflictions of harm of life and health of citizens, of harm to animals, plants, environment, state security as well as creating emergency situations of nature-induced and industrial types, discovering violations of mandatory requirements and requirements stipulated in municipal legal acts, at the moment of committing such violations, in view of the necessity to take urgent measures, the body of state control (supervision), body of municipal control are entitled to immediately proceed with an unscheduled field inspection upon notifying the Prosecution authorities on conducting an inspection by sending documents specified in parts 6 and 7 of the present article to the Prosecution authorities within 24 hours. In such a case, the Prosecutor or his Deputy will make a decision about coordination of conducting an unscheduled field inspection on the admission date of the relevant documents.
(Article 13) Timing of the inspection
1. Timing of every inspection stipulated in articles 11 and 12 of the present Federal Law may not exceed twenty work days.
2. In regard of one subject of “small business” enterprise, the general timing of a scheduled field inspection may not exceed fifty hours for a small enterprise and fifteen hours for a micro-enterprise, annually.
3. In exceptional cases connected with the necessity to conduct complex and (or) prolonged research, tests, special expertise and investigations based on motivated proposals of officials of the body of state control (supervision), body of municipal control that carry out a scheduled field inspection, timing of inspection may be prolonged by principal of such a body but for no more than twenty work days in regards to small enterprises and for no more than fifteen hours for micro-enterprises.
4. Timing of inspection of every scheduled inspection stipulated in articles 11 and 12 of the present Federal Law on inspections in regard to a legal body that carries out its activity on the territory of several subjects of the Russian Federation is established separately for each affiliate, representative office of the legal entity.
(Article 15) Limitations in exercise of control
In the process of exercising control officials of the body of state control (supervision), body of municipal control may not:
1) check on fulfillment of mandatory requirements and requirements stipulated in legal acts, if such requirements are outside the authority of the body of state control (supervision), body of municipal control on behalf of which those officials act;
2) perform scheduled or unscheduled field inspections in cases when a principal, other official or duly authorized representative of legal entity, individual entrepreneur, his duly authorized representative are absent on the site, except as cases when such inspection is exercised for the cause provided for in subclause "b" of point 2 part 2 of article 10 of the present Federal Law;
3) demand submission of documents, information, product samples, test of surveys of objects of natural environment and working environment, if they do not represent the subject of the inspection or if they are not pertinent to the matter under inspection, as well as withhold originals of such documents;
4) select product samples, test of surveys of objects of natural environment and working environment for conducting research, tests, measurements, without drawing up protocols on taking the specified samples, tests in accordance with the established pro-formas and in the amounts exceeding the norms established by the National standards, sample and tests procedures and research, test, measurement methods, other technical standards and rules and research, test and measurement methods that are good through their effective date;
5) divulge information received as a result of an inspection and constituting state, commercial, official, in any other way protected by law secret, except as cases established by the Legislation of the Russian Federation;
6) exceed the established terms of exercising control;
7) perform issuance of regulations or proposals on conducting control (supervision) measures at the expense of legal entities, individual entrepreneurs to legal entities, individual entrepreneurs.
(Article 18) Liabilities of officials the body of state control (supervision), body of municipal control in the exercise of supervision
5) not to obstruct the presence of the principal, other official or duly authorized representative of the legal entity, individual entrepreneur, his duly authorized representative whilst the supervision is exercised and the explanations on questions pertinent to the matter under examination;
6) present information and documents pertinent to the matter under examination to the principal, other official or duly authorized representative of the legal entity, individual entrepreneur, his duly authorized representative, which are present in the exercise of supervision;
7) instruct a principal, other official or duly authorized representative of the legal entity, individual entrepreneur, his duly authorized representative on the results of the inspection;
9) substantiate its actions in case of complaints lodged against them by legal entities, individual entrepreneurs in accordance with the procedures established by the Russian Federation legislation;
10) keeping timing terms of inspection, established by the present Federal Law;
11) not to demand documents or other information that are not provided for by the Russian Federation legislation from the legal entity, individual entrepreneur;
Chapter 3. The rights of legal bodies, individual entrepreneurs in the exercise of state supervision (surveillance), municipal supervision and protection of their rights.
(Article 21)The rights of legal entities, individual entrepreneurs in the exercise of supervision
A principal, other official or duly authorized representative of the legal entity, individual entrepreneur, his duly authorized representative have the following rights in the exercise of supervision:
1) be personally present while the supervision is exercised, provide explanations on questions pertinent to the matter under examination;
2) receive information pertinent to the matter under examination, the receipt of which is provided for in the present Federal law, from the body of state control (supervision), body of municipal control, their officials;
3) become acquainted with the inspection results and indicate in the survey report the fact of familiarizing oneself with the inspection results, indicate agreement or disagreement with them as well as with single acts of officials of the body of state control (supervision), body of municipal control;
4) lodge a complaint against actions (failure to act) of officials of the body of state control (supervision), body of municipal control, that led to violations of rights of the legal entity, individual entrepreneur in the exercise of supervision, through administrative proceedings and (or) through courts in accordance with the Legislation of the Russian Federation.
Anastasia opened a hairdressing studio half a year ago, together with her husband. They borrowed money from friends, rented the place, and refurbished it. She is cutting hair, he is responsible for accounting. But small business, she says, faces huge problems when inspectors knock on the door
"Some requirements are just ridiculous……The space between chairs should be no less than 2 metres, the instruments should be sterilized in such infusions after which scissors can be thrown away…Some standards haven’t been changed since 1929. They can find violations simply everywhere, and fine you or offer to negotiate."
Police, firemen, sanitary inspections – that’s what businessmen call administrative barriers, according to Vladislav Korochkin, Vice Deputy, at Opora Russia
“For many companies official and unofficial administrative payments can be as high as the tax burden itself. Our data shows that unofficial payments alone amount to 6% of turnover.”
The new law says a regulatory body can visit a firm no more than once every three years. However, there are more than 30 of these authorized regulators. Anastasia welcomes other government initiatives.
“When I hear about new measures I get so glad. But I know people who have worked longer in the business, and they bring me down to earth.”
This year the state is giving $300 million to support small firms – it promises subsidized loans, and discounts for rent and electricity connection.