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Conclusion of new agreements between shareholders of Ukrainian joint-stock companies and depository institutions
Dentons, Kyiv, Ukraine,
Tuesday, August 26, 2014
Published by U.S.-Ukraine Business Council (USUBC),
Washington, D.C., Tuesday, August 26, 2014
On 12 October2014 a year will have passed since the Law of Ukraine “On the Depository Systemof Ukraine” No. 5178-VI (the “Law”) entered into force. The Law stipulates thatall shareholders of Ukrainian joint-stock companies (“JSC”) must have asecurities account of the depositor (holder of securities) in the relevantUkrainian depository institution (before the adoption of the Law such personwas defined as a “custodian”) under the securities account agreement. At thesame time, the Law prescribes that the holder of the securities that have beendematerialized (converted from documentary form into non-documentary form) mustcontact the depositary institution specified by the issuer and enter into asecurities account agreement with such institution in its own name or transferrights to securities to its securities account opened with another depositaryinstitution. If within a year from the date of this Law’s entry into force(i.e. until 11 October 2014 inclusive) the holder of securities fails (1) toenter into a securities account agreement with the depository institutionspecified by the JSC in its own name or (2) to transfer its rights tosecurities to its securities account opened with another depositaryinstitution, then the securities of such holder (which give the right toparticipate in the bodies of the JSC) shall not be taken into consideration indetermining the quorum and voting in the bodies of the JSC.
Although theLaw expressly provides for the obligation of the holders of securities thathave been dematerialized only to enter into a new securities account agreement,it is becoming increasingly commonplace for depository institutions to requirethat all holders of JSC securities (shares) enter into new securities accountagreements, rather than only those whose securities have been dematerialized.
Taking intoaccount the above, please be informed that in order to avoid the risk ofrestrictions on the use of their rights attached to securities and voting inthe JSC bodies, it is recommended that JSC shareholders apply to the relevantdepository institutions which keep records of their property right tosecurities for signing a new securities account agreements.
At yourrequest we will be pleased to provide you with any additional informationconcerning the provisions of the Law and changes stipulated by the Law and toadvise you on measures to eliminate possible adverse effects of the Law on youractivities or investments.