Dear Client,
The Law significantly simplifies the proxy voting process and introduces:
New voting procedure at General Meetings (GM)
- Custodians are authorized to participate and vote at GMs based on their clients' instructions without the Power of Attorney, which was requested by the issuers previously. The shareholders are also allowed to participate in GMs personally.
- The procedure for instructing custodians by their clients should be stipulated in the custody agreement between them. Custodians are not obliged to confirm the receipt of the clients' voting instructions or to provide the depository agreement as evidence of their authority to vote on behalf of their clients.
- Electronic document flow is used throughout the whole chain of corporate action processing participants. Information on GMs is cascaded by the issuers, through Russia's National Settlement Depository (NSD), to the custodians acting as nominee holders to their clients, including foreign nominee holders. Nominee holders, in return, pass the lists of their clients and their voting instructions through NSD back to the issuers/registrars.
New disclosure requirements
Entitled shareholders participating in GMs through a Foreign Nominee Holder shall be included in the list of entitled shareholders based on the information provided by the Foreign Nominee Holder to its local custodian not later than 5 working days prior to the GM. In this case the Foreign Nominee Holder should disclose the following information:
- Information on the entitled shareholders, quantity of the securities that belong to them and their way of voting
- Information on individuals and legal entities to be included in the list of entitled shareholders, which however do not provide voting instructions
- Information on the foreign entities which carry out record-keeping and transfer the rights to securities in accordance with their local laws and which have not disclosed the data specified in the two points above, as well as the quantity of securities for which the information on their owners and other persons or entities exercising rights for the securities was not provided.
Recognition of ownership in accordance with the local laws and recognition of organizations not registered as legal entities as owners of securities
- Individuals or legal entities holding ownership or exercising rights for Russian securities kept on a Foreign Nominee Account (entitled investors) are determined in accordance with the local laws of such individuals or legal entities.
- Owner of the securities can be a foreign organization not having a status of legal entity in its country of residence. Local custodians could open a beneficial owner account in the name of a foreign organization that is non a legal entity.
Local issuers and regulatory authorities have the right to request information on the ultimate beneficiaries in certain cases, even for collective investment schemes
- A Foreign Nominee Holder upon request from the Russian issuers, courts, the Cenral Bank of Russia or bodies of preliminary investigation must undertake all possible measures to disclose the information on the owners of the securities, persons or entities exercising rights for such securities and on those in whose interest they exercise the rights for the Russian securities, except for the case where in accordance with their local laws such foreign entities are considered as collective investment schemes, having the status of a legal entity or not having such a status, in case the numbers of the participants in such collective investment schemes exceeds 50.
Impact on investors: Investors, including those using Foreign Nominee accounts, will benefit from simplified proxy voting procedure. Additionally, new rules on the recognition of beneficial ownership apply.
Related Newsflashes: Simplification of Nominee Holder Proxy Voting Procedures