No. 75. The procedures for suspending securities issues and recognising them as void or invalid are changed


Goltsblat BLP advises that Federal Law of 19 July 2009 No. 205-FZ “On Amendments to Certain Legislative Acts of the Russian Federation” improves the regulatory framework for commercial entities and resolution of corporate conflicts.

In particular, amendments to the Federal Law “On the Securities Market” come into effect on 21 October 2009.

First, the term “bad faith issue” is excluded and a clear distinction is drawn between the concepts of suspending an issue, recognising the issue (or additional issue) as void or recognising it as invalid.

There is no change to the list of grounds for suspending an issue but it is specified that, if a securities issue is suspended, the security placement term is also suspended until the issue is started up again.

The grounds for recognising an issue as void have been substantially extended to include: a violation of the legislation of the Russian Federation committed by the issuer during the issue that can only be remedied by withdrawing the securities of the issue from circulation; refusal by the state registration authority to conduct state registration of the report on the results of the securities issue; failure to place a single security of the issue, etc.

The procedure for recognising a securities issue as invalid and the list of grounds for doing so are established. An issue is recognised as invalid on the basis of a court ruling on a suit filed by the registration authority or the authority responsible for registering legal entities, a participant (shareholder) in the issuer or an owner of securities of the issuer of the same category (type) as those of the relevant issue. It is stipulated for the first time that a refusal to satisfy such a suit does not prevent a person from claiming losses from the issuer or other parties if caused by such violations being committed.

The Federal Law envisages that invalidation claims with respect to resolutions adopted by an issuer on a securities issue, resolutions of the registration authority on state registration of the issue or the report on the results of the securities issue, or transactions concluded during placement of the securities may be filed with a court only in conjunction with a claim for the relevant issue to be declared invalid as well. Even so, invalidity of individual transactions performed during placement of securities does not entail the issue itself being recognised as invalid.

Material facts to be disclosed by an issuer now include information about a dispute over incorporation of the issuer, management of it or participation therein, including on initiation by a state arbitration court of proceedings and acceptance of a statement of claim for prosecution, on changing the grounds or the subject of a statement of claim already filed, on provision of interim relief, withdrawal of a suit, recognition of a suit, conclusion of an amicable settlement, and issue by a state arbitration court of a judicial act concluding consideration of a case at first instance.

For additional information, please contact:

Anton Sitnikov, Partner,
Head of Corporate / M&A,
Goltsblat BLP,

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