The Russian Ministry of Economic Development is preparing amendments with regard to the shareholders who have not exercised their rights for a long time
Pepeliaev Group advises that a new draft law on “lost shareholders” has been issued.
On 9 November 2020 for the purposes of an anti-corruption expert assessment the Russian Ministry of Economic Development (the “Ministry of Economic Development”) Federal Law “On amending the Federal Law “On joint stock companies” and article 8 of the Federal Law “On the securities market” with respect to issues being settled concerning the shareholders regarding whom no information is available and who have not exercised the shareholders’ rights for a long period of time”.
The specified draft law has been developed as part of the “road map” for the implementation of the “Transformation of the business climate” mechanism of managing the systemic changes in the regulation of business activity in the sphere of “Corporate governance, special administrative districts, bankruptcy procedure, assessment activity” (approved by the Russian Government on 2 July 2020).
The draft law introduces a number of important changes. Please find below our analysis of some of these changes.
A decision not to send the documents or not to pay dividends may be taken by the shareholders or by the board of directors if it has been vested with the relevant power by the general meeting of shareholders. Such decision may be taken simultaneously with regard to all of the shareholders that qualify as “lost”.
However, such decision being taken does not deprive the “lost shareholders” of an opportunity to restore their rights to participate in the management and to receive dividends. They may apply to the registrar for the sending of the documents and the payment of dividends to be renewed. The issuer of the shares should publish on its website the information as to what the lost shareholders need to do, within three business days from the date of the decision to suspend the sending of the documents and the payment of dividends.
At present, as the draft law is being discussed, the business community has an opportunity to offer its proposals as to how the draft law should be improved.
On 9 November 2020 for the purposes of an anti-corruption expert assessment the Russian Ministry of Economic Development (the “Ministry of Economic Development”) Federal Law “On amending the Federal Law “On joint stock companies” and article 8 of the Federal Law “On the securities market” with respect to issues being settled concerning the shareholders regarding whom no information is available and who have not exercised the shareholders’ rights for a long period of time”.
The specified draft law has been developed as part of the “road map” for the implementation of the “Transformation of the business climate” mechanism of managing the systemic changes in the regulation of business activity in the sphere of “Corporate governance, special administrative districts, bankruptcy procedure, assessment activity” (approved by the Russian Government on 2 July 2020).
The draft law introduces a number of important changes. Please find below our analysis of some of these changes.
Some details of how the lost shareholders’ rights will be exercised
The Ministry of Economic Development proposes that a new article be introduced into Federal Law No. 208-FZ On Joint-Stock Companies dated 26 December 1995. The new article will be dedicated to the exercise of the rights of the shareholders who have not exercised their rights for a long time. It is proposed to suspend:- the sending to the mailing addresses of messages concerning the holding of the general meetings of shareholders, voting ballots and other information that should be provided to parties entitled to participate in the general meetings of shareholders; and
- the payment of dividends on the outstanding shares
A decision not to send the documents or not to pay dividends may be taken by the shareholders or by the board of directors if it has been vested with the relevant power by the general meeting of shareholders. Such decision may be taken simultaneously with regard to all of the shareholders that qualify as “lost”.
However, such decision being taken does not deprive the “lost shareholders” of an opportunity to restore their rights to participate in the management and to receive dividends. They may apply to the registrar for the sending of the documents and the payment of dividends to be renewed. The issuer of the shares should publish on its website the information as to what the lost shareholders need to do, within three business days from the date of the decision to suspend the sending of the documents and the payment of dividends.
What to think about and what to do
Since the preparation of the text of the draft law has just started, it is highly likely to be amended. Therefore, we recommend monitoring the status of the draft law.At present, as the draft law is being discussed, the business community has an opportunity to offer its proposals as to how the draft law should be improved.