It is no secret that the Act no.171/2012 on Capital Markets (which entered into force in 2013), together with numerous changes to Act no.1134/1997, and in addition the recent abolition of Act no.199/1998 on Securities Markets, cumulatively have significantly changed the rules of direct transactions with securities in Moldovan joint-stock companies ("JSC"). As a consequence, fears arose that such possibility would no longer exist. This uncertainty could easily have caused numerous reorganisations of existing JSCs into other forms of incorporation, simply to secure this right.
To calm things down, the National Commission for the Financial Market of the Republic of Moldova ("CNPF") passed Decision no.14/5 on approval of the Regulation on Circulation of Securities ("Decision 14/5") on 31 March 2016. This decision entered into force on 15 April 2016 and aims to regulate transactions (including direct) with JSC's securities.
Direct Transactions with Securities are Still Possible
Decision 14/5 provides for an exhaustive list of instances when direct transactions (including sale and other title passing operations) are possible. Some of these instances are:
- in any 12-month consecutive period - transaction(s) with packages of securities not exceeding (in one class) 1 % of the overall number of placed securities in that class and issued by public interest companies (eg insurance companies, etc); purchased by one purchaser or several purchasers acting in concert;
- placement of securities as contribution to the share capital of a limited-liability company or a joint-stock company;
- sales of securities of JSC incorporated as closed-type before 1 January 2008 and which kept such a possibility in their constitutive document(s);
- donations between individuals;
- buyouts and/or acquisitions of its own securities by JSC;
- purchases from minorities as result of mandatory buyouts by shareholders holding (individually or acting in concert) over 90 % share capital;
- disposal of treasury shares of JSC;
- by virtue of court judgment;
- passing of securities by virtue of reorganisation or liquidation of JSC;
- sale-purchase, exchange, consolidation of share packages, alienation of securities on a free-of-charge basis, payment with shares of the Moldovan state's debts to the privatisation participants in line with the Moldovan legislation on denationalisation of public property;
- transfers resulting in partition of property between formerly married individuals;
- foreclosure of pledge rights over securities not admitted to a regulated market and MTF;
- sale of securities that could not have been transacted on the regulated market or MTF, after the expiry of a 30 day period as of the offering, etc.
Registration of Direct Transactions
According to Decision 15/4, direct transactions with securities (ie, outside regulated market(s) or MTF) are effected on the basis of transfer deeds and documents (eg constitutive) that identify the parties to the deal. Also, due powers to sign all transaction documents are presentable.
Before getting to the transfer deed, transacting parties must make sure there is a written document in place regulating the transfer. The form depends on the grounds for transfer. For example, share purchase agreement, protocol / agreement on incorporation of JSC, protocol / decision of corporate body to transact treasury shares, donation agreement, definitive court judgment, and so on.
Finally, the parties to the respective transaction are to fill-in the declaration on compliance with the Moldovan competition legislation, whereas the transferee is to provide the information identifying the effective beneficiary in accordance with the legislation on prevention and combating of money laundry and terrorism financing. On the other side, the shareholders register entity is under the obligation to ensure implementation of the regime of security and confidentiality of the personal data collected, stored, processed and used as a result of the registered transaction.
Minimum Price for Securities
Before registering the direct transfer of securities, shareholder register entities are under obligation to verify whether the transacting parties have fulfilled and are in compliance with the minimum thresholds set for the price of the securities. Such minimums vary for each case, for example:
(A) For sale transactions, enforcement of judgments, foreclosure of pledges, the price for the securities is to equal at least:
- the average transaction price registered on a regulated market or MTF during the last 12 months before the registration of the direct transaction;
- the net asset value of JSC corresponding to the securities;
- the independently evaluated value of the securities; or
- the value set by transacting parties, if the net asset value of JSC is negative or its activity is suspended or JSC has not presented its financials as required by law for the last three years.
(B) For sale transactions in respect of securities of JSCs incorporated before 1 January 2008 and the constitutive document(s) which provide for such possibility, the price set by contracting parties shall be mandatory.
It is certain that Decision 14/5 brings further clarity to the market. This is a welcome introduction. Still, as was the case in the past, direct transactions with a larger volume of securities in JSC that were incorporated after 1 January 2008 or before, but not having such a possibility in their constitutive document(s), remain rather limited.