On 2 July 2013 the Federal law No. 142-FZ “On amending subsections 3 section 1 of part I of the Civil Code” (hereinafter “the Law”) was signed by the President of the Russian Federation. The Law was published 03 July 2013 on the official web portal of legal information.
The Law under review is the third bundle of amendments to Civil Code of the Russian Federation (hereinafter – the “Civil Code“) in frames of civil legislation reform. The Law introduces substantial changes in the legal regime of securities as objects of civil rights. The legislator has given a special priority to mechanisms of securities owners’ protection. In addition, the Law has introduced the concept of “joint immovable complex” and has amended the norms about regime of indivisible and composite things, fruits, products and revenues, protection of honor, dignity and business reputation.
Separation of securities in documentary and non-documentary can be noticed among the most important amendments. Particularly, new edition of the Civil Code expressly provides attribution of documentary securities to things and non-documentary – to obligatory and other rights.
Documentary securities are documents consistent with formal requirements and certifying rights, exercise of which is possible upon presentation of securities by their holder. The Law stipulates certain peculiarities of legal regime of documentary securities:
- The document is not a security in case of absence of mandatory requisites, inconsistence with established form and other requirements, however, such documents remains as a written evidence.
- The concept of “immovable securities” has been introduced. Immovable securities are securities excluded from the civil circulation in documentary form because of their transfer for the depositary storage. In this regard, certain rules about non-documentary securities are applicable to immovable securities. At present time “immobilization” of documentary securities may be observed in case of circulation of documentary bonds with centralized storage.
- It has been established, that reclamation of documentary securities from unlawful possession of third parties shall be made in accordance with vindication rules with distinctions provided for by Art. 147.1 of the Civil Code.
The right to vindicate the securities belongs to the person being the lawful possessor at the moment of securities’ withdrawal from his/her possession. It should be noted that bearer securities as well as order securities and registered securities verifying the monetary claim can not be vindicated from bona fide possessor.
The title holder who lost the securities is entitled to claim from the final acquirer (also from bona fide possessor) the return of securities or refund of their value, if such final acquirer facilitated the loss of lawful owner’s title by his/her fraudulent and other unlawful actions or knew or should have known about existence of other persons’ rights to securities.
Non-documentary securities are obligatory and other rights stipulated by the decision on issue or other issuer’s act, exercise and transfer of these rights are possible provided the compliance with rules on accounting of such rights. Peculiarities of legal regime of non-documentary securities:
- It has been envisaged, that accounting of rights for non-documentary securities can only be kept by the independent registrar acting upon the issuer’s order or the depositary acting on the basis of agreement with securities’ owner. Issuers keeping the register of non-documentary securities independently shall transfer such registers to the independent registrar within 1 year after enforcement of the Law.
- As before, transfer of rights to non-documentary securities is made by writing off from the seller’s account and by placing the securities to the acquirer’s account on the basis of the seller’s order. It has been defined, that in case of the seller’s evasion from making the transfer of rights for securities in violation of sale and purchase agreement, the buyer is entitled to claim the entry of required record on transfer of rights for securities in court.
- It has been established, that the owner from the account of which the non–documentary securities were unlawfully wrote-off is entitled to claim the return of the same quantity of securities from the person to the account of which the securities were placed. If unlawfully written-off securities were converted in other securities, the owner is entitled to vindicate the securities in which the written-off securities were converted.
Securities verifying only the monetary claim and securities acquired in organized market can not be vindicated from bona fide possessor. However, in case of gratuitous acquisition of securities from the person not entitled to alienate them, the securities’ owner may vindicate them in any case.
- If the non-authorized person exercised the right for participation in the management of the joint stock company, the securities’ owner would be entitled to challenge the resolution of the general meeting in cases provide for by the Law. Such claim may be submitted by the owner within three months from the day, when he/she knew or should have known about unlawful writing-off the securities from his/her account, but not later than one year from the date of contested resolution of the general meeting.
Apart from making the legal regime of securities more detailed, the Law has introduced the concept of joint immovable complex (Art. 133.1 of the Civil Code). This complex is the independent object of civil rights and represents the aggregation of premises, buildings and other things united by the joint functionality.
This aggregation is acknowledged as the joint immovable complex provided that one of the criterion is present:
- indissoluble physical or technical connection of real estate objects (for instance, rail ways, electrical transmission lines, line pipes etc.);
- location of real estate objects on the one land plot.
Joint immovable complex is established as an independent object of civil rights from the moment of state registration of the ownership right for the aggregation of things being a part of such immovable complex.
In accordance with para 1 Art. 3 of the Law the amendments shall be in force from 1 October 2013. Introduced amendments change substantially the regulation of securities in the Russian law and are generally aimed at making the legislation consistent with investors’ needs in protection of their rights from securities holding and in creation of unified law enforcement practice. In addition to the securities, the Law amended the norms regulating other objects of civil rights.
However, one will be able to evaluate the efficiency of the Law only in course of law enforcement practice and at the moment it is hard to forecast the development of such practice.