The aAdaptation of foreign contractors
to domestic building law requirements of construction legislation in Belarus
Law Firm Glimstedt
Adaptation of Foreign Contractors to
Domestic Requirements of Construction Legislation
Pobediteley ave. 59-103, Minsk, Belarus. www.glimstedt.by . Tel.: +375 17 203 19 60 E-mail: firstname.lastname@example.org
MINSK VILNIUS RIGA TALLINN STOCKHOLM
Law firm Glimstedt
Nowadays not only foreign investors and clients who are willing to finance different projects
but also foreign contractors involved in construction of turnkey are interested in Belarusian
There are several strategies to enter the construction business which may be implemented in the
framework of cooperation or integration.
Cooperation assumes a rather close collaboration of foreign contractor with local contractors
during the realization of certain construction project and is provided by general contractor's
agreement and subcontract agreement. Under this scheme the construction is actually made by
local contractor who has contractor?s license while a foreign construction company which has
won a tender for construction in Belarus as a general contractor only controls the process.
The advantage of this strategy is that foreign general contractor doesn?t need significant invest-
ment and full adaptation to the local market, while allowing him to achieve some brand recogni-
tion and profit.
At the same time the foreign general contractor runs certain risks as he is responsible before the
client for non-fulfillment or improper fulfillment of obligations by contractor and before the
subcontractor ? for non-fulfillment or improper fulfillment obligations by the client according to
the contractor's agreement. It is possible to minimize such risks in the contracts through inter-
connected procedure of settlements between parties (receipt of payment from the client to the
general contractor and from him to subcontractors), advance accounts system, intermediate
terms of handing-over of the works and so on.
Integration means direct transaction of construction business by foreign company in Belarus
while its affiliated person (representative office, branch and subsidiary) becomes the resident of
the country. Integration is possible in the form of joint business with his Belarusian partner, ei-
ther in the form of a sole proprietorship construction of business, when the foreign contractor
control created entity completely.
These schemes can be realized through (i) purchase of shares or stocks in the authorized capital
of the existing Belarusian company (having a construction license as a rule) or (ii) establishment
of a new joint company with Belarusian partner with further acquisition of a license; (iii) by way
of the opening of representative office of foreign company in Belarus with further acquisition of
license or (iv) through the purchase of finished construction business.
It should be mentioned that the purchase of finished business or shares (stocks) in operating con-
struction company always is more risky strategy than the establishment of a company from
scratch. Thus, often after a change of ownership of the company it becomes clear that it has off-
balance-sheet obligations that didn?t exist in the time of acquisition. The construction business
itself is very specific and risky which is stipulated first of all continuing contractor?s warranty
that exist even putting into operation (removal of latent faults, etc.). Therefore a construction
company, actively working on the market, could potentially assert claims for quality from nu-
merous customers.. Nevertheless, the risks of the presence of latent faults may be minimized
before the purchasing of the company by conducting thorough due diligence of all its obliga-
tions and financial condition.
In any form of integration it is necessary to adapt foreign contractor to the Belarusian legis-
lation, primarily in the licensing of construction activity, and labour migration.
The first step of adaptation is fulfillment of corporative formalities which are connected with the
change of the participants as well as administrative procedures for change of legal address, official
registration of the amendments to the constituent documents of the acquired company and of altera-
tion in the construction license.
The first stage of adaptation is compliance with corporate formalities associated with the change of
the participants, as well as administrative procedures for change of legal address, state registration of
amendments to the constituent documents of the acquired company, and changes in the building li-
The second and the most important step is reinforcement of building company by necessary qualified
specialists in accordance with the building law requirements. At the same time employing a staff of
foreign labor is a licensed activity, for the implementation of which requires a special permit issued
by the Ministry of Internal Affairs of the Republic of Belarus to Belarusian employer, planning to
employ foreign workers.. Then for employment of each foreign worker it is necessary to obtain spe-
cial permit to carry out labour activity in the Republic of Belarus. However, the essential condition
of compliance with licensing requirements is a confirmation of qualification of foreign specialists, in
particular, their retraining in Belarus in accordance with local requirements.
The next step for attracting foreign workers is the receipt of the residence permit in the Republic of
Belarus which is issued on the base of special permit to carry out labour activity.
The following step of adaptation is connected with such licensing requirements in contraction activ-
ity as certain material resources (construction equipment, instruments) on the balance of a construc-
tion company. In the case of import of productive assets from abroad is important to observe cus-