13 Dec 2022 13:36

Sanctioned individuals to be permitted to transfer ownership schemes of Russian companies to Russian jurisdiction - amendments

MOSCOW. Dec 13 (Interfax) - The holders of securities of Russian companies, who own them through foreign entities or foreign-controlled companies (FCC), will be permitted to transfer the securities to Russian accounting infrastructure, as stipulated in an amendment to the second reading in a government bill on extending the corporate "sanctions" rules to 2023, as supported by the State Duma's committee on property, land and property relations.

Transfer will be possible if a Russian investor has lost the opportunity to dispose of the securities because of sanctions, according to the corresponding amendments.

In order to complete a transaction, the actual holder of the securities, the sole owner of a FCC, or several owners with a 100% share, have the right appeal with the corresponding application to the Russian depository where a depo account is opened for a FCC or a foreign organization. Based on the results of considering an application from the beneficiaries of a FCC, the depository transfers the accounting of the securities to the depo accounts. When reviewing applications from the holders of securities owned through foreign structures, the relative objections are taken into account, as indicated in the amendments. Changes in accounting are effected only for the number of securities for which there are no objections from a foreign organization in terms of the number belonging to the actual owner.

The bill also envisages a procedure to transfer the accounting of an international company's shares from a SAR to the Russian infrastructure. The shares' owner may submit an application to the Russian registrar for the forced transfer of the securities if said securities have been recorded on the accounts of foreign individuals.

Furthermore, the bill stipulates that the holders of securities may submit applications until May 1, 2023, while the government could also extend the timeframe by three months, in agreement with the Central Bank of Russia (CBR).

A similar timeframe is set in the bill prepared for the second reading for cases automatically transferring the accounting of securities without the request of the owners. This envisages situations when securities are "registered" in a foreign infrastructure on the accounts of Russian (client) depositories acting as nominal holders and having all the necessary information about the owners. In this case, the client depository must begin the procedure for replacing the accounting of the securities by May 1, 2023.

Law No. 319-FZ, adopted in July 2022, permitted investors to transfer the accounting of domestic issuers' securities forcibly to Russian infrastructure if a foreign depository prevented transactions with these securities. An investor had to apply to the Russian depository where a depo account of a foreign nominal holder had been opened in order to do this.

As originally planned, investors would be able to submit applications until October 11, though the deadline was then extended until November 10, inclusive. Difficulties in collecting the necessary documents owing to the unwillingness of foreign depositories to provide them in the required format, as well as difficulties in delivering the documents via post to Russia, were the reasons for the extension, a source previously told Interfax.

The State Duma committee on the financial market in November proposed extending the deadline for filing applications. The committee attributed the initiative to the difficulties that investors faced when collecting documents abroad.

SAR in Russia operate on two islands in Primorye and the Kaliningrad Region.