On 12 October 2014 a year will have passed since the Law of Ukraine “On the Depository System of Ukraine” No. 5178-VI (the “Law”) entered into force. The Law stipulates that all shareholders of Ukrainian joint-stock companies (“JSC”) must have a securities account of the depositor (holder of securities) in the relevant Ukrainian depository institution (before the adoption of the Law such person was defined as a “custodian”) under the securities account agreement. At the same time, the Law prescribes that the holder of the securities that have been dematerialized (converted from documentary form into non-documentary form) must contact the depositary institution specified by the issuer and enter into a securities account agreement with such institution in its own name or transfer rights to securities to its securities account opened with another depositary institution. If within a year from the date of this Law’s entry into force (i.e. until 11 October 2014 inclusive) the holder of securities fails (1) to enter into a securities account agreement with the depository institution specified by the JSC in its own name or (2) to transfer its rights to securities to its securities account opened with another depositary institution, then the securities of such holder (which give the right to participate in the bodies of the JSC) shall not be taken into consideration in determining the quorum and voting in the bodies of the JSC.
Although the Law expressly provides for the obligation of the holders of securities that have been dematerialized only to enter into a new securities account agreement, it is becoming increasingly commonplace for depository institutions to require that all holders of JSC securities (shares) enter into new securities account agreements, rather than only those whose securities have been dematerialized.
Taking into account the above, please be informed that in order to avoid the risk of restrictions on the use of their rights attached to securities and voting in the JSC bodies, it is recommended that JSC shareholders apply to the relevant depository institutions which keep records of their property right to securities for signing a new securities account agreements.