Changes to the procedure for conducting transactions involving large blocks of stocks in public joint-stock companies

The Government Commission has approved a bill by the Ministry of Economic Development on changes to the procedure for transactions involving large blocks of stocks in public companies. The amendments are planned to be made to the Federal Laws “On Joint Stock Companies” and “On the Securities Market” and aimed at protecting the rights of minority shareholders of public JSCs during takeovers. The document specifies that these adjustments should contribute to “increasing investor confidence in the Russian financial market”. In addition, the adoption of the bill could equalize the interests of all participants in the transaction and ensure a high degree of protection of minority shareholders' interests.

According to the bill, it is proposed to switch from the term “affiliated person” who exercise control over a JSC, to the concept of “person and related persons”. That is, both direct and indirect obtaining of control over the company should be taken into account. It is proposed that persons related to a certain person should include:
  • spouses, parents, children, siblings, adoptive parents and adopted children;
  • persons controlled by it and those who control it;
  • persons who have entered with it into a long-term asset management / partnership / assignment agreement or a shareholders' agreement or other written agreement that relates to the acquisition of control over the relevant public company.

This will help to identify the persons who act jointly in an economic relationship.

A new mechanism is being introduced for minority shareholders to protect their interests. A person who alone or jointly with related parties intends to acquire 30, 50 or 75% of a public company's stocks is now obliged to send a public offer to PJSC to acquire shares from its shareholders. Not only voting shares, but also non-voting preferred shares and issuable securities convertible into shares will be subject to redemption. Minority shareholders who have not received an offer will be able to make demands to the purchasers. Related parties will be jointly and severally liable to minority shareholders. Claims may be directed both to all such persons and to each of them individually. At the same time, conditions are prescribed under which there is no need to make an offer.

The bill also establishes a direct prohibition on accounting for shares acquired from related persons for the purposes of compulsory redemption.

The main purpose of this bill is to protect the rights of shareholders with a small number of shares and to establish a certain threshold value of the amount of shares to be acquired for a person intending to acquire more than 30% of securities.