Automatic conversion of depositary receipts begins on 15 August

In April 2022, the law obliged Russian issuers to wind down their programmes of depositary receipts and convert them into shares. However, the sanction restrictions made it difficult to carry out such procedures. Automatic conversion allows investors to receive shares instead of receipts, without using foreign accounting infrastructure.

Russian issuers, who earlier received the right to maintain depositary programmes, may apply to the Government Commission on Monitoring Foreign Investment for a permit either not to perform automatic conversion, or to postpone it. This should be done no later than 17 August 2022.

The Bank of Russia recommended that companies should disclose information about the launch of the conversion or about applying to the Government Commission in the form of a material fact.

In the course of automatic conversion, all Russian depositories currently recording receipts will write them off from the holders’ accounts and credit Russian issuers’ shares instead. No action is required from receipt holders, regardless of whether they are residents or not. The conversion process will take from 2.5 to 3 weeks.

The Bank of Russia also reminds receipt holders whose rights are recorded by foreign depositories that, beginning from 14 July 2022, they may apply for forced conversion of their receipts. For this, they should send a free-from application to the Russian depository storing the shares, for which receipts were issued, no later than 11 October 202. Besides, they should attach any available documents certifying their title to the receipts.

Within ten business days after the deadline for accepting applications — that is, no later than October 25 — depositories will write off Russian companies’ shares from the depository accounts of the depository programmes and credit them to the depository account of the holder who sent the application. The depository may request additional documents from the owner and may also refuse to carry out the procedure if it has any reasonable doubts. The depository must refuse to perform forced conversion to all the holders who applied if their applications indicate a larger number of the Russian issuer’s shares than recorded in the depository account of the depositary programmes.

Currently, the depositary programmes of Russian issuers are served by five depositories: Raiffeisenbank, Citibank, J.P. Morgan Bank, Bank GPB, and Sberbank.

As of 15 August 2022, the depositary programmes were distributed among the Russian depositories as follows: