On January 01, 2012 the Federal Law No.414-FZ “On central depositary” dated December 07, 2011 came into force (hereinafter the “Federal Law”).

The Federal Law introduces a central depositary institution whose purpose is to increase the circulation stability of equity securities turnover and to ensure centralized and transparent recordkeeping for securities transactions. The central depositary is a professional participant of the securities market, carrying out the exclusive duties of a depositary and nominal holder of securities circulating on the securities market, as well as a range of other duties.

In accordance with the Federal Law, the central depositary may only be represented by a Russian legal entity incorporated in the form of a joint stock company and being a non-bank credit institution.

The central depositary must have its own funds in the amount of no less than 4 billion Rubles. To obtain central depositary status from the Federal Service for Financial Markets, the legal entity must have a license to carry out depositary activities on the securities market and perform the duties of a clearing depository for no less than three years.

In connection with the Federal Law being adopted, amendments have been made to a range of legislative acts:

1. In particular, the following amendments have been made to the Federal Law “On joint stock companies”(Federal Law No.208-FZ “On joint stock companies” dated December 26, 1995):

• a joint stock company is not entitled to pay declared dividends on a share, the title to which is certified by securities of a foreign issuer if the information on the owner of such securities has not been provided to the company. The obligation of a joint stock company to pay such dividends ceases to exist and their amount is subject to recovery as part of undistributed profits one month after the expiry of the dividend payment term. This provision will come into effect starting from January 01, 2013;

• the period for notifying the joint stock company of a refusal to introduce a record to the register by the register holder has been reduced to 3 days (compared to the previous 5-day period).

2. The Federal Law “On securities market” (Federal Law No.39-FZ “On securities market” dated April 22, 1996) has also undergone changes as follows:

• the rights of the securities manager have been expanded (the manager is granted a right to independently apply to court with any claims related to securities management activities);

• the notion of transfer agents is introduced, who may be engaged by the registrar to perform a part of its duties and who are registrars, depositaries and brokers;

• new provisions are introduced dedicated to accounts opened by depositaries and register holders, activities of a nominal securities holder, as well as particularities for keeping records on the title to securities of foreign companies acting in the interests of other entities;

• the rules for introducing corrective records to ledger accounts (custody accounts) are stipulated.

3. Amendments to the Federal Law “On enforcement proceedings”(Federal Law No.229-FZ “On enforcement proceedings” dated October 02, 2007):

• securities are withdrawn from ledger accounts (custody accounts) of a securities holder, while no securities registered in ledger accounts (custody accounts) of a nominal holder or other accounts, may be withdrawn;

• seizure of certified securities is to be carried out at their location. The seizure of book-entry securities is to be executed on ledger accounts (custody accounts) of the securities holder. No book-entry securities registered in ledger accounts (custody accounts) of a nominal holder or other accounts, may be seized.

In addition to the foregoing changes, the Federal Law No.415-FZ “On amending certain legislative acts of the Russian Federation due to the adoption of the Federal Law ‘On central depository’” dated December 07, 2011, also stipulates a range of procedural matters. The following actions must be performed within 6 months from the day of this law coming into effect:

• entities which have on their ledger accounts (custody accounts) records of title to securities deposited with a notary or court are obliged to perform actions in regard to crediting such securities to the ledger deposit account (deposit custody account) or introducing respective changes to the ledger accounts (custody accounts);

• securities issuers which have on their ledger accounts (custody accounts) records of title to securities they issued must perform actions in regard to crediting such securities to the issuer’s ledger treasury account (treasury custody account) or introducing respective changes to the ledger accounts (custody accounts);

• a joint stock company which in connection with shares offering and/or circulation is obliged to disclose information pursuant to Article 30 of the Federal law “On securities market” providing for a procedure of disclosing and providing information and which was a holder of a shares owners’ register as of the date the Federal Law came into effect, must conclude a respective agreement with the registrar.

The entities for which ledger accounts (custody accounts) are opened prior to January 01, 2013, which include records of securities of Russian issuers the title to which is certified by securities of foreign issuers, are obliged to perform actions in regard to crediting securities of Russian issuers to a custody account of depositary programs within one year from the day of being awarded the status of central depositary, but no earlier than January 01, 2013.

The Federal law No.415-FZ is to come into effect on July 01, 2012, save for certain individual clauses.

The Federal Law No.414-FZ “On central depositary” dated December 07, 2011
The Federal Law No.415-FZ “On amending certain legislative acts of the Russian Federation due to the adoption of the Federal Law ‘On central depository’” dated December 07, 2011

Additional notes

Should any questions arise in connection with the above or if you need any additional materials, please contact Pavel Karpunin, St. Petersburg Office of Capital Legal Services.

This Information letter keeps the clients of Capital Legal Services and other interested parties abreast of information that may, to any extent, affect their activity or cater to their particular interests. The opinions and commentaries expressed in this information letter shall not be deemed as legal opinions and do not cancel the need to obtain legal advice or legal opinion on separate issues.