Significant amendments to Russian corporate and securities market legislation.
A number of provisions of the Federal Law 514-FZ - amending the laws “On joint stock companies”, “On the securities market” and other securities market regulations – came into effect in December 2018.
The provisions of the law effective from December 2018 introduce the following key changes:
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New type of preferred shares: These shares have a priority in receiving dividends ahead of ordinary shares and the other types of preferred shares. The amount of dividends paid on such preferred shares will be fixed either as a lump amount or as a percentage of the par value of the shares. They do not have liquidation value and their voting rights are limited to different matters related to the liquidation of the joint stock company.
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Introduction of Perpetual Bonds: The issuers with the highest national credit rating operating for at least five years are entitled to issue bonds without a predetermined maturity date. This type of bond may only be distributed among legal entities classified as qualified investors.
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Share buy-backs: Issuers are no longer obliged to buy shares back from shareholders who vote against the decisions made at the AGM/EGM (such as delisting of the public company; change of the public status of the company, etc.) or do not participate in the respective general meeting if such decisions do not come into effect.
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Information disclosure: The Russian Government is empowered to simplify the disclosure requirements for particular entities (issuers, joint stock companies, credit institutions, National Settlement Depository (NSD), clearing organisations etc.) and to limit access to the information on the Russian Unified State Register of Legal Entities.
Other amendments effective from January 2020 include the following provisions:
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Bondholders will place instructions for early redemption or purchase of the bonds via their custodians. NSD will debit/credit the bonds based on the custodians’ instructions and the documents confirming the fulfilment of the cash or securities obligations by the issuers.
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All emissive securities will exist in de-materialised form on the Russian market. Global certificates of bonds kept with the CSD as a documentary verification of the bondholders’ rights will be abolished.
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The new type of custody accounts - “escrow account” – will be introduced in the securities market legislation.
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Simplification of the procedure for issuing shares and debt securities: removal of the issuers’ obligation to submit a notice of the results of an issue of securities, submission of issue documents in electronic form, reduction of the period for the approval of issue documents and the registration of share issuances by the CBR.
Natasha Sidorova
Head of Global Securities Services Russia