Substantial amendments to the civil code of the russian federation relating to securities


Legal Update No. 427, 14 August 2013

Goltsblat BLP advises that Federal Law of 2 July 2013 No. 142-FZ “On Amending Subsection 3, Section I of the First Part of the Civil Code of the Russian Federation” (the “Law”) has been adopted. The Law will, among other things, introduce substantial amendments into the chapter of the Civil Code covering securities. Below is an overview of the amendments we believe to be the most important.

  • Starting from 1 October 2014, joint-stock companies will lose the right to maintain their shareholders’ register themselves

From 1 October 2013, only persons holding requisite licences (i.e., professional registrars) are entitled to record rights to uncertificated securities. The only exception is joint-stock companies that currently maintain their shareholders’ register themselves. These joint-stock companies retain the right to do so for another year subsequent to the corresponding amendments to the Civil Code coming into force, i.e., until 1 October 2014. Once that period has expired, joint-stock companies will have to transfer the right to maintain the shareholders’ register to a professional registrar.

  • Vindication of uncertificated securities, including ones converted into other securities, has been enshrined in the legislation

The Law has summarised, aligned and supplemented court-tested remedies for violated rights of holders of uncertificated securities.

In particular, from 1 October 2013, a person from whose account uncertificated securities have been illegally debited may require the person to whose account these securities have been credited:

– to recover the same number of the uncertificated securities; or

– to demand and obtain the securities into which the illegally debited uncertificated securities have been converted (if relevant).

If illegally debited uncertificated securities are listed (i.e., the possibility exists that similar securities may be purchased through exchange trading), the person from whose account such securities have been debited is entitled to require persons (i.e., a register holder, an issuer, etc.) liable to him for the losses so caused:

– to purchase similar securities at their own expense; or

– to reimburse the expenses required to purchase such securities.

In the meantime, (i) uncertificated securities confirming only the right to financial receivables, as well as (ii) uncertificated securities purchased through exchange may not be recovered from a bona fide purchaser (unless such securities have been acquired free of charge).

  • Legal effects of recovery of uncertificated securities from bona fide and unfair purchasers have been established

The Law introduces special provisions specifying the implications of recovering uncertificated securities from other persons’ unlawful possession. In particular, according to the Law, a person whose uncertificated securities have been recovered from someone else’s unlawful possession is entitled to demand that:

unfair purchasers return all the proceeds from those securities and reimburse associated losses;

bona fide purchasers return all the proceeds received from those securities from the time when the purchaser discovered or could have discovered that it owned them unlawfully or was notified by the court that a lawsuit for recovery of the relevant securities had been filed against it.

In the event that unauthorised persons exercise the right to participate in general shareholder meetings (or any other meeting), the lawful right-holder of the uncertificated securities is entitled to challenge the relevant resolutions, subject to the following conditions:

– these resolutions affect its rights and interests;

– joint-stock companies (shareholders, participants in another meeting) knew or should have known of the dispute over the rights to the uncertificated securities; and

– the right-holder’s vote could have influenced the resolution.

The resolutions may be challenged within 3 months following the date on which the lawful right-holder becomes aware that the securities have been unlawfully debited from its account but, in any event, no later than one year after the relevant resolution is passed.

  • Uncertificated securities become pledged or otherwise encumbered only after the relevant encumbrances have been recorded in the system registering rights to uncertificated securities

The Law formalises the court-tested rule that pledges or other encumbrances on uncertificated securities arise only after they have been recorded in the system registering rights to those securities.

The Law also establishes strict guidelines on how to record pledges. Thus, the general rule is as follows:

– an entry of any pledge or other encumbrances should be made pursuant to a relevant order provided by the right-holder of the uncertificated securities (a pledge order, etc.) or if the right-holder avoids signing such an order – pursuant to the relevant court ruling;

– an entry of any change to the terms for imposing or terminating an encumbrance is made pursuant to a relevant order from the right–holder but subject to written consent to be given by the beneficiary of such an encumbrance.

Meanwhile, a special law or, in a number of cases, an agreement with an authorised person, may provide otherwise.

  • Certificated securities
  • In the absence of requisite details certificated securities may not be treated as securities but retain the meaning of written evidence

The Law clarifies that, while, in the absence of any requisite detail, certificated securities may not be recognised as securities but can still be used as evidence confirming the rights attached thereto. Please note that, pursuant to the current version of the Civil Code, any defect in the execution of certificated securities results in their being recognised as null and void. Consequently, the clarification introduced by the Law simplifies significantly the procedure for submitting claims against persons that issue “defective” certificated securities.

  • Responsibility of a person executing certificated securities

The Law introduces a general rule stipulating that the person who has executed certificated securities is held liable, even if such securities have been issued against its will. Moreover, the person responsible for performing an obligation under a certificated security may raise only those objections to the holder’s requirements as result from the relevant security or are based on relations between these persons.

Exceptions only apply to those cases when a security holder, at the time of acquisition, was or should have been aware that:

– there are no grounds for the rights attached to the relevant security to arise, including when such grounds are invalid; or

– former security holders have no rights to such securities, including when the grounds for such rights to arise are invalid; or

– the security holder is not a bona fide purchaser.

  • Immobilisation of certificated securities

The Law has introduced a relatively new concept in Russian law: “Immobilisation of certificated securities”. Pursuant to the Law, immobilisation means transfer of certificated securities for safekeeping to a person entitled to store them and/or record rights thereto (i.e., a custodian). “Immobilised” certificated securities are covered by the rules relating to uncertificated securities.


Anton Sitnikov
Partner, Head of Corporate / M&A
Goltsblat BLP
Tel.: +7 495 287 44 44

Ekaterina Dedova
Partner, Corporate / M&A
Goltsblat BLP
Tel.: +7 495 287 44 44

Anton Vashkevich
Senior Associate, Corporate / M&A
Goltsblat BLP
Tel.: +7 495 287 44 44
E-mail.: Anton.Vashkevich

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