Russia enacts law on delisting Russian companies' depositary receipts from foreign exchanges

MOSCOW. April 27 (Interfax) - The Russian law banning Russian companies from trading new depositary receipts for shares on foreign stock exchanges and obliging them to delist existing depositary receipts was enacted on April 27.

Federal Law No. 114-FZ on Amendments to the Federal Law on Joint-Stock Companies and Certain Legislative Acts of the Russian Federation gives companies five business days, until May 5 inclusive, to take "necessary and sufficient" steps to terminate depositary receipt agreements. The same period is provided for the submission of confirmatory documents to the Central Bank.

Holders of depositary receipts established as of the date the law comes into effect will automatically receive shares of the relevant Russian issuers instead. Shares underlying depositary receipts become non-voting, and dividends will not be paid on them.

The government on April 16 published a resolution, No. 672, on the rules for maintaining the listing of depositary receipts of Russian issuers outside Russia. Companies will have five working days - from April 27 up to and including May 5 - to submit applications to the Ministry of Finance with a request to maintain listings.

The decision on maintaining or refusing the listing will be made by a subcommittee of the government commission for monitoring of foreign investments. It will be able to do so not only at the request of the issuers, but also independently in the absence of such an application, the document reads. The decisions will be made within five working days of the five-day deadline for submission of appeals to the commission.

Steel makers NLMK and MMK as well as retailer Lenta have said they plan to file requests to continue trading its depositary receipts on foreign exchanges.

The new law was drafted soon after the collapse of the value of the depositary receipts of the largest Russian issuers on the London Stock Exchange (LSE) amid news of sanctions against Russia, after which the LSE on March 3 stopped trading in the securities of 27 Russian companies. As of March 2, the value of the receipts of Sberbank fell to 1 cent, while Gazprom receipts fell 89%, Lukoil was down 97.2%, Nornickel was down 37%, Rosneft was down 70.4%, Novatek was down 91%.