The Central Bank has simplified the procedure for issuing securities
FAO CEOs, chief accountants and companies' financial, tax and legal departments
Pepeliaev Group advises that the Central Bank has adopted a new version of the Regulations “On the standards for an issue of securities” which has simplified the procedure for issuing securities.
On 11 May 2020, a new version of the Regulations “On the standards for an issue of securities” (the “Standards”) came into effect to change the procedure for issuing securities.[1]. The new Standards have been developed in pursuance of the Federal law on amending items of Russian legislation regarding the legal regulation of an issue of securities[2] (the “Law”) and they make some of the Law's provisions more specific. Please note that documents that issuers had submitted before the effective date of new Standards (before 11 May 2020) will be considered by the Central Bank or a registration authority pursuant to the requirements set out in the previous Regulations “On the standards for an issue of securities”[3], and no rules stipulated by the new Standards will apply to them.
An issuer prepares and discloses a prospectus without registration
The Law[4] provides for the possibility of notifying that a prospectus for securities has been prepared instead of registering such prospectus in cases for which relevant regulations of the Central Bank provide.
For an issuer to take advantage of such a possibility, as at the date when the notification is filed, the following conditions must be met for which clause 5.8 of the Standards provides:
- the issuer must have been founded not earlier than three years ago;
- no bankruptcy proceedings have been initiated against the issuer;
- the issuer has completed at least three issues (additional issues) of securities during the last three reporting years, provided that:
- when each of the issues was registered the relevant prospectus for securities was also registered; or
- when each of the prospectuses for securities was submitted to the stock exchange, the latter assigned an identification number to each issue before 1 January 2020;
- the securities with respect to which a prospectus for securities was prepared are not shares or convertible securities, or subordinated bonds;
- during the last three completed reporting years, the Central Bank did not send to the issuer any orders that violations be rectified in connection with:
- the procedure and/or deadlines for disclosing information set out in the prospectus;
- when inaccurate and/or misleading information was identified in the prospectus for securities ;
- the prospectus for securities was approved or signed;
- an issuer’s authorised person who signed the prospectus for securities has not been held criminally liable over the last three years for including information in the prospectus for securities that is known to be inaccurate or confirming a prospectus for securities which contains information that is known to be inaccurate.
When the Central Bank or a stock exchange receives such notification, this entails the same legal consequences as when the prospectus for securities is registered, provided that all requirements of the Standards have been met.
A shorter list of the documents necessary to register an issue of securities
The new Standards have changed the list of documents confirming the issuer's compliance with the procedure and conditions on which a resolution is adopted to offer securities, as well as other requirements with which compliance is required to effect the issue of securities[5]. For instance, no application from the issuer or copy of a document confirming the issuer's state registration will be required for the purpose of state registration of an issue (additional issue) of securities.
Electronic registration of equity securities
The rules stipulated by article 20(2) of the Law “On the securities market”[6], as amended by the new Law, allow for documents to be submitted for the registration of an issue (additional issue) of equity securities to the Central Bank or a registration authority in the form of electronic documents via information resources on the Central Bank's or the registration authority's official website in the Internet. In furtherance of this provision, the Standards enact certain provisions, such as a requirement that a set of electronic documents must be signed with an enhanced certified digital signature of the issuer[7].
Please be reminded that under the Law “On the securities market”[8] a registration authority can be a registrar, a stock exchange or a central depository. A similar provision is set out in clause 1.6 of the new Standards.
Issue documents can be signed not only by the CEO of an issuing company
The new Standards for an issue extend the scope of the persons who may sign issue documents (i.e. documents required for the registration of an issue (additional issue) of securities). Thus, previously a resolution for an issue (additional issue) of securities could be signed exclusively by a person who occupied the position (carries out functions) of a sole executive body of an issuer.[9]
After the effective date of the Standards (i.e. starting from 11 May 2020), a resolution for an issue of securities may also be signed by:
(1) a person who occupies the position (carries out functions) of a sole executive body of the issuer, and
(2) by an officer of the issuer authorised by the above person.[10]
Help from your adviser
Pepeliaev Group's lawyers are keeping track of changes in legislation and are ready to provide legal support with respect to corporate and registration procedures, as well as to comment on contentious matters connected with applying the new items of legislation. Among other things, we will reach out to the Bank of Russia and other state authorities for official clarifications on issues stemming from the performance of regulatory acts regarding corporate relationships.
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1. The Bank of Russia’s Regulation No. 706-P dated 19 December 2019 “On standards for an issue of securities” (registered under No. 58158 in the Russian Ministry of Justice on 21 April 2020)”
2. Federal Law No. 514-FZ dated 27 December 2018 “On amending the Federal Law “On the securities market” and certain items of the legislation of the Russian Federation to enhance the state regulation of the issuing of securities” came into force on 1 January 2020 (except for specific provisions).
3. The Bank of Russia’s Regulation No. 706-P dated 19 December 2019 “On standards for an issue of securities, and the procedures for the state registration of an issue (additional issue) of equity securities and the state registration of the results of an issue (additional issue) of equity securities and the registration of prospectuses for securities” (registered under No. 34005 in the Russian Ministry of Justice on 9 September 2014)
4. Article 22(2) of the Law
5. The list of documents has been approved by clause 5.5 of the Standards
6. Federal Law No. 39-FZ “On the securities market” dated 22 April 1996
7. Clause 22.10 of the Standards
8. Article 20(1) of Federal Law No. 39-FZ “On the securities market” dated 22 April 1996
9. Clause 3.6 of the Bank of Russia’s Regulation No. 428-P dated 11 August 2014 “On standards for an issue of securities, and the procedures for the state registration of an issue (additional issue) of equity securities and the state registration of the results of an issue (additional issue) of equity securities and the registration of prospectuses for securities”