Receipt-to-share conversion of the depositary receipts: new mechanism to be implemented by Russia

Receipt-to-share conversion of the depositary receipts: new mechanism to be implemented by Russia

Major Russian companies (Gazprom, Lukoil, Novatek etc.) terminated their agreements with the foreign depositaries. Depositary receipts (DRs) can be converted into ordinary shares, but the procedure remains extremely complicated due to various international restrictive measures. To facilitate the conversion, the Russian legislators proposed new mechanisms.

These mechanisms will be used by the Russian depositaries without participation of the foreign depositaries which keep the DRs.

As of 01 July 2022, it is just a bill; amendments are still possible, but we expect it to be adopted in July.

Conversion of the DRs kept on the accounts of the foreign depositaries

The DR holder (within 90 days from the date when the law enters into force) will have the right to file an application with the Russian depositary that keeps the shares secured by the DRs. In the application, the DR holder would ask to convert his DRs into shares. For example, in case of PJSC Gazprom, the DR holder shall file the application with the Russian depositary Gazprombank.

The DR holder will have to provide the depositary with the documents confirming that the DR holder is the real owner of those DRs. The list of such documents is not available yet.

If the Russian depositary satisfies the application, it will open a “type “S” (in Russian “С”) account” for the DR holder and credit the shares within 10 working days after the date of expiration of the 90 days’ term mentioned above. The operations with the “type “S” account” are very limited and the shares currently cannot be sold and transferred.

Mosgo & Partners provide full support and assistance to the DR holders within the procedure of the conversion.

Please do not hesitate to contact us should you have any questions.

Contact person:

Oleg Mosgo
Dr. Jur., LL.M.
Managing Partner
Mosgo & Partners

Malaya Dmitrovka street 16/12, 127006 Moscow, Russia
Tel.: +7 (495) 228 48 78

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This newsletter shall not be viewed as legal advice. It is prepared for educational and informational purposes only. Mosgo & Partners is not responsible for any consequences of reliance on the information contained in this newsletter without specific professional advice.

© Mosgo & Partners. Moscow, 2022.

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