Payments to foreigners for suspension of rights at major Russian cos to go into special accounts - source

MOSCOW. Sept 22 (Interfax) - Compensation to foreign holding companies (FHC) if their corporate rights are frozen at Russian "economically significant organizations" (ESO) will be deposited in C-type accounts, which have restrictions on withdrawal, a source familiar with preparations of a government resolution told Interfax.

The document is needed due to the passage of law No. 470-FZ, which introduced the concept of ESOs and gave the government the power to compile a list of such Russian organizations. Inclusion in this list, among other things, makes it possible, through the courts, to suspend FHCs' corporate rights at these ESOs, such as the right to vote at meetings, receive dividends and dispose of shares or equity stakes, until the end of 2024.

Inclusion in the list of ESOs also allows its Russian beneficiaries to obtain direct ownership of shares and equity stakes through the courts, as well as directly receive dividend payments.

If after this procedure some of these assets remain undistributed they revert to the ESO and the FHC has the right, "at any time in the period of suspension" of its rights, to demand compensation for them from the Russian organizations "in the amount of the market value." If the FHC does not seek such compensation, the equity stake in the Russian entity will be returned to it when the freeze on its corporate rights at the ESO is lifted.

Provisions regarding payment of compensation "in the amount of the market value" are still being fleshed out as work on the draft resolution continues. The document now states that this value is determined on the basis of a valuation on the date when the court decision on the suspension of an FHC's corporate rights at an ESO goes into effect, the source said. The market value of shares in public companies is supposed to be determined based on the weighted average price in trading in the six months preceding the court ruling.