The Bank of Russia recently prepared draft amendments to Bank of Russia Regulation No. 706-P "On Securities Issue Standards" dated December 19, 2019 (hereinafter referred to as the "Draft Amendments").
Many of the amendments proposed in the Draft Amendments are aimed at logical and expected improvements to electronic document flow between issuers and the mega-regulator, as previously announced by the Bank of Russia and is consistent with the overall focus on digitalization of the financial market.
However, hidden among these technical amendments is one that caught our attention. This amendment introduces a new obligation for issuers, when registering an issue (additional issue) of shares, to provide the Bank of Russia or the registrar with a special certificate containing the justification for the planned share placement by subscription.
The Bank of Russia's initiative did not arise out of nowhere. It fits into the general trend of recent years toward strengthening oversight of corporate actions that directly impact capital structure and minority shareholder rights. The preconditions for this can be seen in the law enforcement practices and signals the Bank of Russia has provided in its information letters and during the review of disputed registration cases.
For example, in the draft of the Main Directions for the Development of the Financial Market of the Russian Federation for 2026 and the Period 2027–2028, published on November 6, 2025, the Bank of Russia emphasized:
"With the departure of foreign investors, the incentives for issuers to respect investor interests to the same extent as before 2022 have weakened somewhat, requiring attention from both market participants and regulators to fostering a trusting environment. This requires the market to ensure the protection of shareholder rights, particularly minority shareholders, high standards of corporate governance, and transparency both in terms of share placement procedures and with respect to the issuers themselves."
Accordingly, the regulator has recently increasingly inquired about the actual purposes of share issues, particularly in situations that could lead to dilution of existing shareholders' stakes or raise doubts about the economic feasibility of the share placement.
We believe that the Bank of Russia's interest is also driven by trends in judicial practice, which has repeatedly emphasized the need to assess the economic feasibility of the issue. For example,
Resolution of the Arbitration Court of the Moscow District dated March 7, 2024, No. F05-6232/2021 in case No. A40-103424/2019:
"The defendant's actions resulted in a reduction in the size of the debtor's shareholding. No evidence of the economic justification for the additional share issue was presented by the company to the court of first instance. As a result of the illegal actions of these individuals, the debtor's shareholding was significantly reduced.
In the absence of economic justification for the increase in authorized capital, it must be recognized that the additional share issue was not aimed at raising funds, but rather at obtaining a majority stake by other individuals."
Resolution of the Arbitration Court of the Ural District dated December 5, 2023 No. F09-7202/23 in case No. A60-14808/2022:
"The courts recognized the plaintiffs' position as valid, stating that the economic unjustification of the additional share issue, which caused damage to the company itself and was carried out with the illegal intent of redistributing corporate control, became apparent to them only after the company's shareholders had already been deprived of the opportunity to influence the final outcome. This is because the impossibility of achieving the economic effect of the issue, i.e., obtaining additional financing, arose precisely after the chronologically continuous actions of Kompaniets N.I. and his subordinates aimed at simulating the presence of assets in Transstroy K. The case materials, however, do not disclose any circumstances that would allow for a different conclusion."
Resolution of the Volga-Vyatka District Arbitration Court dated November 2, 2023, No. F01-6561/2023 in case No. A79-4558/2022:
"In the absence of economic justification for increasing the authorized capital, it must be recognized that the additional share issue is not aimed at raising funds, but rather at effectively allowing one person to gain corporate control over the company.
The parties to the case did not provide evidence of the economic feasibility of the additional issue. <…>
This circumstance allowed the trial and appellate courts to correctly conclude that the contested decisions (actions) were aimed at increasing the authorized capital of the joint-stock company with the aim of diluting T.V. Nikolaeva's majority stake, thereby eliminating her ability to effectively participate in the management of the company's affairs, thereby changing the value of her shareholding, which is unacceptable under Article 10 of the Civil Code of the Russian Federation."
In our practice, when reviewing issue documents, the Bank of Russia, in particular, noted that, according to paragraph 12 of the Review of Judicial Practice on Certain Issues of the Application of Legislation on Business Entities (approved by the Presidium of the Supreme Court of the Russian Federation on December 25, 2019), a decision of a general meeting of shareholders to increase the authorized capital through additional contributions may be declared invalid if its adoption is not in the interests of the company and/or a participant (shareholder). Thus, the Bank of Russia noted that the Supreme Court of the Russian Federation, when assessing the compliance of a decision to increase the authorized capital with the interests of the company and its participants, applies, among other things, the criterion of necessity, which requires the provision of evidence of the preferability of the adopted decision over other alternatives that would not lead to such negative consequences for minority shareholders as a reduction in their stake.
From the above, it follows that the Bank of Russia has gradually aimed to move away from verifying the formal compliance of documents to a substantive assessment of the motives for increasing the authorized capital. The new regulation aims to institutionalize this approach, moving it from a tacit expectation to a direct and mandatory requirement.
This approach is expected to soon be supplemented by the publication of clear criteria that will allow issuers and the market as a whole to understand what justification the regulator considers acceptable and sufficient, thereby completing the formation of a new, more transparent and meaningful model for regulating issuing activities.