Disclosure amendments to the securities legislation.

11.10.2010

Legal Update No. 176.

Goltsblat BLP advises of adoption of Federal Law No. 264-FZ “On Amendments to the Federal Law ‘On the Securities Market’ and Certain Legislative Acts of the Russian Federation” (the “Federal Law”), dated 4 October 2010, with effect from 8 October 2010 (save for certain provisions).

The Federal Law is designed to increase the transparency of Russian issuers and improve the conditions for investing in prospectus-based securities and other financial instruments on the Russian stock market.
Issuers are now required to disclose information relating to their controlling and controlled entities and “controlling entity” and “controlled entity” are defined.

Controlling entities are defined as parties entitled to control, directly or indirectly (through controlled entities), more than 50% of the voting power in the highest management body of the controlled entity or the right to appoint (elect) the single-member executive body and/or more than 50% of the collegiate management body of the controlled entity. 

This right may be granted by way of a participatory interest or by a property trust agreement, simple partnership, mandate, shareholding or other agreement regarding exercise of rights certified by shares (participatory interest) in the controlled entity.
A controlled entity is a legal entity under the direct or indirect control of the controlling entity.

Many new provisions have been added to regulate disclosure and submission of information. In particular, the list of information to be disclosed as material facts has been significantly updated (supplemented with data previously classed as information with significant influence on the securities’ value, etc.).

We believe that, in this context, the Regulations on Disclosure of Information by Issuers of Prospectus-Based Securities (approved by Order No. 06-117/pz-n of the Federal Service for the Financial Markets of 10 October 2006) will be amended and aligned with the Federal Law.

The Federal Law prescribes civil liability for damages caused to an investor and/or owner of securities owing to disclosure or provision of false, incomplete and/or misleading information.

This liability may be imposed on issuers, persons signing or approving the securities prospectus (voting for its approval), signing or approving a securities issue report or notice (voting for their approval), signing or approving the quarterly report, and auditors.

Failure to submit information or breach of the prescribed procedure and deadlines for submitting (disclosing) it are subject to administrative liability in the form of a fine of RUB 10,000 to 20,000 for officials and RUB 300,000 to 500,000 for legal entities. 

A joint-stock company with fewer than 500 shareholders may, subject to a General Shareholders’ Meeting resolution adopted by a ¾ majority of votes, apply to the Federal Service for the Financial Markets seeking relief from the obligation to disclose or submit information.

For additional information, please contact:

Anton Sitnikov, Partner, Head of Corporate / M&A, Goltsblat BLP,
Tel..: +7 (495) 287 44 44,
E-mail: info@gblplaw.com

Anton Rogoza 
Partner, Corporate / M&A, Goltsblat BLP,
Tel..: +7 (495) 287 44 44,
E-mail: info@gblplaw.com

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