The National Commission for Securities and the Stock Market of Ukraine (“NCSSM”) adopted a number of important regulatory acts aimed at the implementation of the Law of Ukraine “On depositary system in Ukraine” No. 5178-VI (the “Law”) that comes into force from October 12, 2013. According to our information delivered earlier, this Law introduces some novelties, including those being burdensome to the issuer and shareholders of the Ukrainian joint stock companies.

Procedure for transfer of securities for depositary services

On March 26, 2013 the NCSSM adopted Resolution No. 430 “On approval of the Procedure for Transfer of Securities for Depositary Services to Central Securities Depositary” (the “Procedure”).  The Procedure sets forth the mechanism applied to transfer the securities for depositary services from ACSD (All-Ukrainian Central Securities Depositary) to NDU (National Depositary of Ukraine) used as a basis for the establishment of the Central Depositary of Ukraine as stipulated in the Law coming into force from 12 October 2013. Although, under the transitional provisions of Law, by the above date it is necessary to ensure the transfer of all global certificates from other depositary institutions to NDU for storage.

The Procedure provides for a concurrent transfer of global certificates, provisional global certificates, certificates for immobilization of registered securities, bearer securities certificates, certificates being such depositary assets.  Such transfer will be made gradually under a schedule.

The Procedure imposes an obligation on the securities’ issuers serviced by PJSC “All-Ukrainian Central Securities Depositary” (“ACSD”) to enter into (within 30  calendar days after receiving from PJSC “National Depositary of Ukraine” (“NDU”) a notice that it has received the securities for storage and servicing issued by such issuers) an agreement for service to securities issue with NDU and deliver the documents listed in its internal regulations in order to open a securities account for the issuer, and request NDU to assign numbers (codes) to the securities, unless an international securities identification number (ISIN) has been assigned to the securities of such issue under law.

The Procedure came into force from the date of its official publication (May 7, 2013).

Approved Requirements to Agreement for Services to Securities Account

According to the notice published by Press Service of NCSSM as at April 15, 2013, a draft Resolution “On approval of requirements to Agreement for services to securities account” was adopted. On April 18, 2013 the draft Resolution was published on the official NCSSM web-site for discussion and furnishing proposals. The Draft Resolution provides that the agreement is executed between the depositor and the depositary institution, whereby the depositary institution opens a securities account under the procedure prescribed by NCSSM for the depositor, and accounts on such account the securities held by the owner, co-owners, and –  if the securities are deposited on a deposit with a notary – by the lender, and record of the rights of the above persons to the securities accounted on the certain securities account, and the limitations on such rights. The agreement must be executed as a single document signed by its parties with the affixed seals of the depository institution and the depositor (if the latter is a legal entity) or in the form of an electronic document under the Laws of Ukraine “On electronic documents and electronic document circulation”, “On electronic digital signature.” The draft Resolution also stipulates that the execution of the agreement for services to securities account for the depository shall not entail the transfer of rights to the securities and rights under the securities to the depository institution.

Under the draft Resolution, the Agreement must have the following: the date and place of execution; details of the parties to the Agreement; subject matter of the Agreement; organization and technical conditions for the delivery of services; rights and obligations of the parties; rates for the services and payment procedure; liability of the parties; the procedure for resolution of disputes that may arise between the parties during the agreement implementation, amendment or termination; effective term, amendment and termination and other terms not contravening to law.

Under the draft Resolution it is prohibited to enter into the Agreement any provisions stipulating the collection of a separate fee from the depositor for the work and services not being independent and aimed to ensure due quality of services, elimination of  technical damage or accidents occurred not through the fault of the depositor, receipt and/or payment by the depositor for services not prescribed by law and/or not ordered by the depositor, making the procedure for lodging claims and complaints by the depositor complicated, and the terms making the parties to Agreement non-equal, limiting or impairing the right of one of the parties as compared to the requirements set forth by law.

The Resolution is subject to final approval with the decision of NCSSM after a public discussion (taking into account the proposals delivered), and further registration with the Ministry of Justice of Ukraine and official publication.

Approved Requirements to Agreement for Services to Securities Issues

According to the notice published by Press Service of NCSSM, as at April 16, 2013, the Resolution “On approval of Requirements to Agreement for Services to Securities Issues” was adopted. According to the notice the key notation of the document is a comprehensive procedure for execution of an agreement between the issuer and Central Depositary. On 22 April 2013 the official language of the document was published on the official web-site of NCSSM in Internet for discussion and furnishing proposals. The Draft Resolution provides that the Agreement for Services to Securities Issues between the issuer and Central Depositary is to be executed as a single document signed by its parties with the affixed seals or in the form of an electronic document under the Laws of Ukraine “On electronic documents and electronic document circulation”, “On electronic digital signature.” The terms and conditions of Agreement for Services to Securities Issues must stipulate the delivery of services under terms equal for all issuers. It is contemplated that the Central Depositary is not entitled to refuse an issuer to enter into an Agreement for Services to Securities Issues if such issuer approaches the Central Depositary and delivers the documents prescribed by law in order to execute such agreement and render the services.

Under the draft Resolution the agreement must contain:  the date and place of execution; details of the parties to the Agreement; subject matter of the Agreement; organization and technical conditions for the delivery of services; rights and obligations of the parties; rates for the services and payment procedure; liability of the parties; the procedure for resolution of disputes that may arise between the parties during the agreement implementation, amendment or termination, effective term, amendment and termination and other terms not contravening to Ukrainian laws, and other terms set forth in draft regulations.

Under the draft Resolution it is prohibited to enter into the Agreement any provisions stipulating collection of a separate fee from the issuer for the work and services not being independent and aimed to ensure due quality of services, elimination of  technical damage or accidents occurred not through the fault of the issuer, receipt and/or payment by the issuer for services not prescribed by law and/or not ordered by the issuer, delivery information by the issuer not prescribed by law and regulatory acts issued by NCSSM in order to execute the agreement and deliver the services, making the procedure for lodging claims and complaints by the issuer complicated, and the terms making the parties to Agreement non-equal, limiting or impairing the right of one of the parties as compared to the requirements set forth by law and other provisions contrary to the law.

The Resolution is subject to final approval with decision of NCSSM after a public discussion (taking into account the proposals delivered), and further registration with the Ministry of Justice of Ukraine and official publication.

Approved Requirements to Agreement for Services to Securities Issues

According to the information published by the Press Service NCSSM, as at 25 April 2013 a draft Resolution “On approval of requirements to depositary agreement between a depositary institution and the Central Depositary” was adopted. The information reads that the draft document stipulates the requirements to cover depositary institutions, and the Central Depositary (NDU) executing the depositary agreements and amendment thereof. Under the agreement the Central Depositary (NDU) maintains and accounts on the depositary institution’s securities account the securities where the right to such securities and the rights under such securities are granted to the depositors of relevant depositary institution, in case the securities have been deposited on notary’s deposit – to the relevant creditor and the depositary institution under the securities held by such depositary institution. On April 25, 2013 the official language of the document was published on the official web-site of NCSSM for discussion and furnishing proposals. The Draft Resolution provides that the depositary agreement between the depositary institution and the Central Depositary is to be executed as a single document signed by its parties with the affixed seals or in the form of an electronic document under the Laws of Ukraine “On electronic documents and electronic document circulation”, “On electronic digital signature.” The terms and conditions of the agreement must stipulate the delivery of services under terms equal for all depositary institutions.

Under the draft Resolution, the agreement must contain:  the date and place of execution, details of the parties to the agreement, subject matter of the Agreement, rights and obligations of the parties; rates for the services and payment procedure; liability of the parties; the procedure for resolution of disputes that may arise between the parties during the agreement implementation, amendment or termination, effective term, amendment and termination and other terms not violating Ukrainian laws and other terms set forth in draft regulations.

Under the draft Resolution it is prohibited to enter any provisions into the agreement stipulating collection of a separate fee from the depositary institution for the work and services not being independent and aimed to ensure due quality of services, elimination of  technical damage or accidents occurred not through fault of the depositary institution; receipt and/or payment by the depositary institution for the services not prescribed by law and/or not ordered by the depositary institution; and terms making the parties to the Agreement non-equal, limiting or impairing the right of one of the parties as compared to the requirements set forth by law and these Requirements; and other provisions contrary to the law.

The Resolution is subject to final approval with decision of the NCSSM after a public discussion (taking into account the proposals delivered), and further registration with the Ministry of Justice of Ukraine and official publication.