21 December, 2012 the State Duma of the Russian Federation adopted in the third reading a draft law introducing material amendments to peculiar aspects of regulation of securities issuance procedures, further circulation of securities and peculiarities of exercise of rights attributable under securities.
The draft law "On Amendments to Certain Legislative Acts of the Russian Federation and Voidance of Certain Provisions of Legislative Acts of the Russian Federation" (hereinafter – the Draft Law) amends some of the current acts: Federal Law of 22.04.1996 No. 39-FZ "On Securities Market" (hereinafter – the SM Law), Federal Law of 26.12.1995 No. 208- FZ "On Joint-Stock Companies" (hereinafter – the JSC Law), Federal Law of 02.12.1990 No. №395 -1 "On Banks and Banking Activities", Tax Code of the Russian Federation and other laws. Amendments introduced by the Draft Law can be figuratively divided into several major units:
Documents related to securities issuance
Draft Law changes the approach towards defining events implying filing prospectuses by issuers on a mandatory basis. The current version of the SM Law provides an obligatory registration of a prospectus when issuable securities are being offered through a public offering or through a private offering to more than 500 holders. The Draft Law also contains a general requirement to file a prospectus when securities are offered through subscription, but it also provides various exceptions from this rule, e.g., offering to qualified investors, limitation of the amount of funds raised by an issuer through an offering (200 mln Roubles), offering to the company's shareholders, etc. Also the procedure of preparation of a prospectus has been changed. Now a prospectus can consist of two parts: the main part containing key information on the issuer, and an additional part containing information on the proposed issuance of securities. The main part can be filed in advance, the additional part should be filed simultaneously with securities issuance, but not later than within a year after the main part has been filed.
Now when issuers file a prospectus they have an opportunity to send documents for preview by Russia's FFMS. For the purposes of such preview it is not necessary to get documents approved by competent authorities, and such preview shall be conducted within 30 days.
Terms for the review of documents related to securities issuance by Russia's FFMS are reduced. In relation to securities issuance without a prospectus being filed such term shall be 20 days instead of current 30 days. In relation to securities issuance implying filing a prospectus the term shall be the same — 30 days, however, if an issuer sends documents for preview the term shall be cut down to 10 days.
An opportunity is provided to amend a resolution approving the issuance of securities in relation to rights attributable under such securities before their offering is launched. The current version of the SM Law prohibits amending a registered resolution in this way.
Issuance procedure in relation to certain types of securities
From now on it will be possible to conduct the offering of issuable securities through subscription with a prospectus being filed starting from the date on which an issuer provides access to the prospectus. Current regulation provides that offering cannot be launched earlier than two weeks after the information on the registration of a prospectus has been disclosed.
According to the current version of the SM Law an issuer shall complete the offering of issuable securities not later than within one year after the date of the state registration of the issue. The Draft Law gives an issuer an opportunity to extend the time period through amending a resolution approving the issuance of securities. If such a resolution was subject to the registration with Russia's FFMS such amendments shall be registered, too, provided that each extension of the time period for securities offering cannot exceed one year, and the total time period for offering securities, including its extension, shall not exceed three years after the date of the state registration of the issue.
Limitations on consistency of the nominal value of securities issued by a company with its charter capital or the amount of provided security are cancelled. Now the issuance of securities by an entity is subject only to the full payment of its charter capital. Similar amendments have been made to the Civil Code of the Russian Federation and the JSC Law of 08.02.1998 No. 4-FZ "On Limited Liability Companies".
Time period within which obligation under stock bonds shall be performed is no longer limited by three years.
The notion of Russian Depositary Receipts has changed – now not only shares and bonds issued by a foreign entity can serve as their basic asset but also the securities of another foreign issuer certifying rights in relation to the foreign entity's shares and bonds.
Now it is possible to avoid the state registration of an issue of Russian Depositary Receipts and a prospectus relating to them and to have them admitted to trading according to a resolution of a Russian stock exchange, as is the case with foreign securities.
Requirements to foreign securities issuers intending to get the securities admitted to an offering or issuance within the Russian Federation are now not so strict. According to the Draft Law if such issuers' securities are listed at one of foreign stock exchanges in Russia's FFMS index the country in which the securities are issued does not matter. Also it is not necessary anymore to get a prospectus in relation to foreign securities signed by a broker, it will be enough if the issuer signs it.
The Draft Law also introduces new provisions regulating the procedure of foreign securities issuance in cases when entities are reorganised.
Amendments to the JSC Law
Holders of preference shares receive an additional right – to vote on matters related to applying for listing or delisting of preference shares of this type. The Draft Law provides that such resolutions in relation to shares of any type shall be within the competence of general meeting of shareholders unless otherwise provided by a company's charter, and negative vote or non-participation in voting on a matter related to the delisting of shares or securities convertible into shares gives a right to a shareholder to claim their buyout. These provisions come into force 270 days after the publication of the adopted Draft Law.
New procedure of paying dividends to shareholders has been established, now dividends due to persons whose share rights are recorded by a nominee shareholder shall be paid to the nominee shareholder. No list of individuals entitled to dividends is made, a resolution on the payment of dividends only sets the date at which individuals entitled to such dividends are defined. Now the SM Law also includes provisions regulating the manner and terms of interaction in such cases between an issuer and a depositary. These provisions come into force on the 1 January, 2014.
New provisions included into the Tax Code of the Russian Federation through the adoption of the Draft Law define specific matters related to the performance of tax agents' duties by depositaries making payments under issuable securities recorded on a foreign nominee holder's depo account, on a foreign authorised holder's depo account or on a depo account of depository receipts programmes. This also implies that various information shall be provided on individuals and entities performing their rights under such securities, including their full names and grounds for tax benefits. If the required information is not provided all return on securities shall be taxable at the maximum rate – 30 per cent. These provisions come into effect 180 days after the publication of the adopted Draft Law.
Some supplements have been inserted in relation to obtaining the Bank of Russia's preliminary consent to the acquisition of more than 20 per cent of a credit organisation shares or notification of the Bank of Russia on the acquisition of more than 1 per cent of such shares. Now this requirement applies, in particular, to such acquisitions and to the set of control over the shareholders of a credit organisation by a group of persons, as defined in the Federal Law of 26 July, 2006 No. 135-FZ "On Protection of Competition".
On the other side, the Draft Law provides an opportunity to obtain a further consent of the Bank of Russia to such transactions if they involve public offering of shares.
In general, amendments suggested by the Draft Law intend to diminish existing administrative obstacles and to simplify the procedures of issuance and further circulation of various securities.
The adoption of the Draft Law proposes that the main part of its provisions will come into effect from 2 January, 2013. Certain provisions of the Draft Law shall come into effect later, as specified above.