Finance Ministry says Federal Property Management Agency's offer to UGC minority shareholders not covered by budget code, purchaser will need to be new investor

MOSCOW. Oct 22 (Interfax) - The Russian Finance Ministry does not agree with the Central Bank of Russia's view that the Federal Property Management Agency (Rosimuschestvo) is obligated to make an offer to the minority shareholders of PJSC Uzhuralzoloto Group of Companies (UGC) in light of the court's decision to transfer the company to state management.

UGC is one of Russia's biggest gold miners. It has two hubs - Urals, in the Chelyabinsk region, and Siberia in the Krasnoyarsk territory and Khakassia. Until recently, Strukov was the controlling shareholder, but in line with a court decision, in mid-July 67% of the gold mining company was transferred to state ownership. The CBR ordered Rosimuschestvo, as UGC's new controlling shareholder, to make an offer to the company's minority shareholders, but the agency responded by saying that there was no legal mechanism for this to be done.

"We are operating on the basis that such an action is not covered by the Budget Code," Deputy Finance Minister Alexei Moiseyev told journalists, commenting on the potential offer by Rosimuschestvo.

He said that the case had brought about a collision of laws - the Russian Budget Code and the law on joint-stock companies, which dictates that an offer must be made by the new shareholder - but the Budget Code takes precedence over the federal law, according to the Finance Ministry.

In effect, Rosimuschestvo did not acquire the shares, but simply executed the court's decision on their transferal, which it had no choice but to do, and ordering for an offer to be made in this instance is not in line with the "spirit of the law", Moiseyev said.

"It is not all as clear-cut as our colleagues imagine. But, of course, there is a problem," he said.

"We are currently in discussions with the CBR; these discussions, as we have noted, have not been very productive so far... we have different points of view. But clearly we will arrive at some kind of decision, and I think that it will be to everyone's liking," Moiseyev said. He also said that the problem could be solved through amendments to the law on joint-stock companies.

He said that the offer to minority shareholders would be "one of the topics of discussion" with UGC's new investor.

"We are operating on the basis that the investor will have to do it [make the offer]," Moiseyev said.

The Finance Ministry has said previously that UGC could be sold by the end of this year. Moiseyev said that the ministry still hoped to meet this deadline, but "there are certain problems" slowing down the process. These are to do with Strukov's coal mining assets, which are not part of UGC itself and are in a very bad state, making significant losses.