Collective protection of bondholders: proposals for reform
The Bank of Russia proposes to tighten the requirements for bondholder representatives (BRs) and develop a more flexible mechanism for convening general meetings of bondholders (GMBs) to ensure maximum protection of investor rights, especially during periods when issuers are experiencing financial distress. The regulator’s proposals are presented in the consultation paper.
The current BR model, created more than 10 years ago, no longer meets the actual needs of the bond market or the nuances of bond issues. The existing collective protection practices do not always provide legal guarantees to investors, with certain market participants merely adhering to the formalities.
One problem is a low entry threshold, allowing any company operating in the market for three years to act as a BR. The Bank of Russia plans to establish additional requirements for the amount of a BR’s authorised capital and for business reputation of its employees and executives. This should enhance collective protection of bondholders. Organisations that have been effectively inactive for two years will be excluded from the relevant list maintained by the Bank of Russia. Entities affiliated with issuers will also be prohibited from acting as BRs to prevent conflicts of interest.
Additionally, the regulator suggests extending the list of cases where an issuer must designate a BR in order to offer securities.
Furthermore, the changes will affect the procedure for convening GMBs. Currently, major decisions (e.g. on debt restructuring) require a three-fourths majority of all bondholders. This may be quite hard to ensure, as many bond issues involve hundreds or even thousands of holders. To encourage more active participation by investors, the regulator suggests introducing a quorum, together with a mechanism providing for its reduction where the first GMB fails to secure the required number of votes.
Please send your answers to the questions raised in this consultation paper as well as your comments and suggestions through 15 September 2026.