Enter to open, tab to navigate, enter to select
Russian draft law to recognise conversion of debt into equity
Practical Law UK Legal Update 0-500-4998 (Approx. 2 pages)
Russian draft law to recognise conversion of debt into equity
by White & Case LLP
| Published on 13 Sep 2013 • Russian Federation |
This article is part of the PLC Global Finance September e-mail update for the Russian Federation.
Speedread
The State Duma has adopted in the first reading Draft Law No. 217109-5 on the possibility to convert debt into equity. The Draft Law proposes to amend a range of laws, such as the Law on Joint Stock Companies and the Law on Limited Liability Companies to make it possible for organisations - other than credit organisations - to covert their debt into equity.
On 18 September 2009, the State Duma adopted in the first reading Draft Law No. 217109-5 on the possibility to convert debt into equity.
The Draft Law amends, in particular, the:
- Civil Code.
- Law on Joint Stock Companies.
- Law on Limited Liability Companies.
- Securities Market Law.
It seeks to establish the possibility to convert debt into equity (that is, a company will be able to discharge its debt by increasing its charter capital). However, this will not be possible for credit organisations.
Further, the Draft Law seeks to amend rules regarding the decrease of charter capital of a company and a decrease in its net assets below the charter capital. In particular, the company's creditors' rights to claim early performance of obligations by the company or compensation of damages (in connection with the decrease of its charter capital or decrease in its net assets) will be limited. The amended rules will not apply to credit organisations.
The law also seeks to lift some current limits on the issue of bonds for certain types of bonds and issuers. In particular, the rule stating that the nominal value of all bonds issued by a company should not exceed the amount of its charter capital and (or) the amount of respective security granted by third parties, will not apply to the bonds of credit organisations.
The provisions of the Draft Law will apply if adopted by the State Duma in three readings, approved by the Federation Council, signed by the President, and officially published.