Vladimir Putin proposed linking state subsidies and preferential loans for businesses to listing on the exchange.
LECAP is a co-author of the IPO standards for Russian companies developed by the Moscow Exchange.
Ecosystem News
LECAP ranked in the top tier of best law firms according to Pravo-300.
Winners of the Cbonds Awards 2024.
LECAP — Best Legal Team in the Bond Market — 1st Place.
LCPIS — Best Bondholders' Representative / Trustee.
FOCUS — Best Specialized Depository Manager (SDM).
Results and Forecasts
In 2023-2024, LECAP provided services for investors in relation to 18 Eurobond issues from more than 9 borrowers.
Capital in 2025: Key Trends and New Investment Products.
Liability Management, Russian Style: Practical Issues in 2023-24.
Market Research
Guaranteeing Creditor Rights under Aleatory Contracts in the Event of a Debtor's Reorganization.
Multiple Derivative Actions to Challenge Transactions of Subsidiaries.
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Market News
Vladimir Putin Proposed Linking State Subsidies and Preferential Loans for Businesses to Listing on the Exchange
"Today, it is mostly small companies that enter the stock market, while many large organizations, leaders in their industries, are still not represented on the stock market. This means that measures to support issuers should take into account both the needs of small businesses and promising startups, as well as incentivize large businesses to place their shares. For example, for them, obtaining subsidies from the state or preferential loans could be linked to going public. I think this is quite fair," he said at the VTB forum "Russia Calling!".
LECAP — Co-author of IPO Standards for Russian Companies Developed by the Moscow Exchange
On December 9, 2024, the Moscow Exchange presented the first-ever set of IPO transaction standards for the Russian market, developed over two years jointly with market experts. LECAP was one of the co-authors of the standards.
Mikhail Malinovsky spoke at the presentation of the [IPO Transaction Standards](https://fs.moex.com/f/21142/ipo-standarty.pdf) and discussed the importance of the Lock-Up Agreement, concluded with the issuer's shareholders and the issuer with the organizers, which restricts the alienation (encumbrance) of the issuer's shares.
LECAP Ranked in the Top Tier of Best Law Firms According to Pravo-300
On December 5, 2024, the 15th awards ceremony for the best law firms on the Russian market by one of the leading rating agencies, "[Pravo-300](https://300.pravo.ru/)", was held at The Carlton Moscow. LECAP was ranked in the top tier (Tier 1) in the "Capital Markets" practice and was also listed as a recommended law firm in the second tier (Tier 2) for the "Sanctions Law" practice.
We thank our clients for their trust and our colleagues for their professionalism and high level of engagement in project work.
Winners of the Cbonds Awards 2024
On December 6, 2024, the annual [Cbonds Awards 2024] (https://cbonds-congress.ru/events/1145/) ceremony was held as part of the XXII Russian Bond Congress in St. Petersburg.
LECAP received the award for "Best Legal Team in the Bond Market" for the thirteenth consecutive year.
This year, two of our partners also received awards.
The bondholders' representative LCPIS again won in the nomination "Best Bondholders' Representative / Trustee". The award reflects LCPIS's significant work in providing a full range of services for both Russian bonds and Eurobonds: acting as Bondholders' Representative, Trustee, Proxy, as well as Information and Tabulation Agent for collecting bondholder votes.
The young but fast-growing management company FOCUS received the award in the nomination "Best Specialized Depository Manager (SDM)". In two years, FOCUS already has over 50 SDMs under management and more than 70 completed projects.
Awards were presented in 41 categories — the full list of winners can be found on the [Cbonds](https://cbonds.ru/news/3195591/) website. The winners of the Cbonds Awards are determined by the participants of the Russian debt market through open voting.
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Results and Forecasts
In 2023-2024, LECAP Provided Services for Investors in Relation to 18 Eurobond Issues from More Than 9 Borrowers
LECAP provided comprehensive legal support to borrowers, including:
Analysis of existing documentation for Eurobond issues and developing proposals on matters for which it is advisable to obtain consent from the Eurobond holders of such issues.
Advising on the procedure for obtaining consent from Eurobond holders from the perspective of the Eurobond issue documentation and English law, considering the requirements of applicable legislation.
Preparation and coordination of the Consent Solicitation Memorandum (CSM) and other documents related to obtaining consent.
Advising on disclosure issues regarding the fact of holding a meeting for the purpose of obtaining consent.
The bondholders' representative [LCPIS] (https://lcpis.ru/) acted in the interests of Russian and foreign investors, in particular, performing the functions of Information and Tabulation Agent within the framework of the consent solicitation procedure for Eurobond holders.
After the relevant consents were adopted, LCPIS was appointed Trustee for all Eurobond issues of the borrowers to protect the rights and legitimate interests of the Eurobond holders. LCPIS also performed agency functions, representing investor interests in relation to 43 Eurobond issues.
LECAP and ALUMNI Partners Held an Online Webinar "Liability Management, Russian Style: Practical Issues in 2023-24"
At the webinar, together with colleagues from [ALUMNI Partners](https://alumnipartners.ru/), Tatiana Parshak and Artemy Bondarev, LECAP partners discussed leading trends in the securities market.
During their presentation, Mikhail Malinovsky and Ivan Makhalin spoke about financial instruments with high potential in a environment of high key rates and the development of the pre-IPO financing market.
Tatiana Parshak, Partner of the Banking and Finance Practice at ALUMNI Partners, spoke about current practices and various models of relationships between creditors regarding the financial debt of a borrower's group, as well as the difficulties that arise in structuring intercreditor relationships.
Dmitry Rumyantsev, Director of [LCPIS](https://lcpis.ru/), spoke about the development of the institution of bondholders' representatives, their role in ensuring compliance with the rights and legitimate interests of bondholders. Dmitry's presentation touched upon current issues of restructuring bond obligations in the pre-default period and after a default occurs.
Within his presentation, Artemy Bondarev, Advisor of the Banking and Finance Practice at ALUMNI Partners, described the reasons and summarized the experience of credit debt restructurings over the past two years, taking into account sanctions restrictions, the need to exclude foreign elements on the side of both creditors and borrowers, and current Russian regulation.
We will be happy to provide webinar materials upon request.
Capital in 2025: Key Trends and New Investment Products
Mikhail Malinovsky and Dmitry Rumyantsev gave an interview to the Cbonds Review magazine and shared their views on how 2024 went for the Russian capital market, what long-term trends have emerged, discussed the stock market in detail, and assessed the prospects for the upcoming year 2025.
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Market Research
Guaranteeing Creditor Rights under Aleatory Contracts in the Event of a Debtor's Reorganization
Introduction
Under the provisions of Article 60 of the Russian Civil Code, creditors of a legal entity undergoing reorganization may demand early performance of the obligations of such legal entity, and if such early performance is impossible — termination of the obligations and compensation for related losses.
Effecting early performance for classic obligations, the performance of which is conditioned upon the arrival of a certain term, does not raise debatable questions, which cannot be said for effecting early performance under aleatory contracts. Current legislation of the Russian Federation does not contain a procedure for the early performance of aleatory contracts, which creates significant legal uncertainty regarding the admissibility of early performance of such contracts.
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Legal Nature of Aleatory Contracts
Civil law recognizes a special type of transaction — aleatory contracts. Performance under aleatory contracts depends on circumstances, the occurrence or non-occurrence of which is unknown to the parties at the time of concluding such a contract. A vivid example of an aleatory contract is an insurance contract.
We believe that to answer the question of the admissibility of early performance of aleatory contracts, it is first necessary to pay attention to the nature of such contracts.
Following M. I. Braginsky, we believe that aleatory contracts can be classified as conditional transactions. In fact, not only the emergence of an obligation of a party to such an aleatory contract (for example — the insurer's obligation to pay insurance compensation upon the occurrence of an insured event) can be made conditional, but also the amount of such obligation (the amount of the parties' obligations under an aleatory contract changes depending on the quotations of the underlying asset in various contracts that are derivative financial instruments: cash-settled futures, cash-settled forwards, and cash-settled options).
Under current legislation, conditional transactions can be divided into two main categories: transactions subject to a resolutive condition and transactions subject to a suspensive condition. Transactions subject to a resolutive condition produce legal effect from the moment of their conclusion until the moment the corresponding condition occurs; with suspensive conditions, it is different — they produce legal effect from the moment the corresponding condition occurs and until the proper performance of obligations or the occurrence of another event terminating the parties' obligations under the relevant transaction.
We believe that the "type" of condition is decisive in the question of the possibility of early performance of obligations under aleatory contracts.
Possibility of Early Performance of an Aleatory Contract
If an aleatory contract is concluded under a resolutive condition and such condition has not occurred, the debtor already has an obligation to the creditor, which can be performed early.
Whereas, when an aleatory contract is concluded under a suspensive condition and at the time of the debtor's reorganization the condition has not yet occurred, the creditor cannot demand early performance of the debtor's obligation, as such obligation has not yet arisen.
Prominent representatives of foreign doctrine reach similar conclusions when discussing the early performance of conditional transactions. L. Enneccerus in his work "A Treatise on German Civil Law" notes that during the period when a suspensive condition for an obligation has not yet occurred ("state of uncertainty of the condition"), the creditor cannot demand its early performance, as such a claim would be unfounded.
M. Planiol in "Treatise on the Civil Law" indicates that a creditor cannot demand performance from a debtor of a conditional obligation before the occurrence of a suspensive condition, as there is no obligatory link between the creditor and the debtor, due to which the debtor has no obligations to the creditor.
Protection of Creditor Rights under an Aleatory Contract in Case of Non-Occurrence of the Condition
But how to protect the creditor's rights in such a situation? In our opinion, the most relevant and civil-law-compliant method of protection would be to compensate the creditor for losses in an amount equal to the cost of concluding a replacement transaction with a third party. Compensation for losses in the amount of the cost of concluding a replacement transaction with a third party will allow the creditor, by concluding an aleatory contract on similar terms with a counterparty not undergoing reorganization, to remain in the position they would have been in if the debtor had not decided to reorganize.
Thus, compensation for losses in the amount of the price of concluding a replacement transaction will preserve the balance of interests of the parties to the aleatory contract and protect the creditor's rights properly.
Author: Vladimir Lukin, Junior Lawyer at LECAP
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Multiple Derivative Actions to Challenge Transactions of Subsidiaries
Introduction
On December 9, the Moscow Exchange presented the Standards for transactions on initial public offering/placement of shares (hereinafter — the "Standards"), which contain a separate section describing recommended corporate governance in a holding structure when its parent company goes for an IPO.
In accordance with the provisions of the Standards, it is recommended that the competence of the board of directors of the parent company include making decisions on important issues of the activities of subsidiaries. Simultaneously, it is recommended to limit the authority of the executive bodies of the subsidiary, instructing the latter to act solely in accordance with the decision of the board of directors of the holding company.
Despite the progressive nature of the proposed corporate structure, it does not fully protect the holding company from the voluntaristic behavior of the general director of the subsidiary. But how can a holding company protect itself if the general director enters into transactions on behalf of the subsidiary or makes decisions bypassing special provisions of the charter? The institution of multiple derivative actions could come to the rescue, the problematic aspects of whose application within the current Russian legislation we will consider below.
A Participant of the Parent Company is Not Entitled to Challenge a Transaction of the "Daughter" Company
Under the provisions of Art. 65.2 of the Russian Civil Code, a participant of a corporation may challenge, acting on behalf of the corporation, transactions entered into by it on the grounds provided for in Art. 174 of the Russian Civil Code (including on the grounds where the general director of the company entered into a transaction in violation of restrictions established by the company's charter).
A literal interpretation of this article implies that the right to challenge transactions entered into by a general director on behalf of a corporation in violation of the provisions of its constitutive documents is granted only to a participant of that particular corporation.
A literal interpretation of the provisions of Art. 65.2 of the Russian Civil Code is often found in judicial practice. In particular, in the Ruling of the Arbitration Court of the East Siberian District dated June 6, 2023, No. F02-2780/2023, F02-2812/2023, F02-2958/2023 in case No. A19-24607/2022, the court considered a claim by a shareholder of a parent company, which was the sole participant of a subsidiary, to recognize lease agreements concluded by the subsidiary as invalid.
The court noted that "the authority to file a claim to challenge transactions, to apply the consequences of their invalidity, is granted by law to the corporation or its direct participants" and that "an expansive interpretation of the provisions of Article 65.2 of the Civil Code may lead to a violation of the will of the legislator, who established the right of participants to file claims on behalf of the company in certain cases."
The AC of the East Siberian District indicates only one specific exception to the provisions it cites to justify its position: the right to challenge decisions of a subsidiary may belong to a shareholder of the parent company only if he is the sole participant of the parent company.
Thus, following the approach outlined in the Ruling of the AC of the East Siberian District, a shareholder of a parent company will not be able to challenge transactions entered into by a subsidiary, which significantly reduces the effectiveness of applying charter provisions that limit the competence of the executive bodies of subsidiaries.
Admissibility of Challenging a Transaction of a "Daughter" Company by a Participant of the Parent Company
However, there are also positive precedents in judicial practice where the court satisfied claims by a shareholder of a parent company to recognize a transaction entered into by a subsidiary as invalid. The most significant precedent is the decision in the "Aspect-Finance" case. According to the facts of the case, CJSC "Aspect Finance" was the ultimate subsidiary in a large holding, whose parent company was Lotaso.
Lotaso was owned by three shareholders, including M. V. Moskalev, who was the plaintiff in the case under consideration. M. V. Moskalev applied to the court with a demand to recognize the transaction concluded by CJSC "Aspect Finance" for the alienation of 89.88% of the shares of CJSC AB "Aspect" (a bank) as invalid.
The court satisfied M. V. Moskalev's claim, recognizing the right of the holding's beneficiary to challenge transactions of subsidiaries, based on the fact that the share purchase and sale transactions were concluded at a price 10 times lower than the market price (which indicated the infliction of clear damage), the sold shares were the company's main asset, the loss of which led to the impossibility of the company conducting business activities, and the challenged transactions violated the public interest, since the shares were sold to individuals who did not have a stable reputation in the field of banking and experience in making business decisions in this area (the latter ground seems untenable to us due to the absence of requirements for experience in making business decisions in the banking sector for bank shareholders — note by V.L.).
Conclusion
Thus, there is no consensus in judicial practice on the admissibility of challenging transactions entered into by a subsidiary by a participant of the parent company, which can create significant difficulties in the practical implementation of protecting the rights of shareholders of the parent company from management voluntarism, even if the corporate structure proposed in the Standards is implemented in the holding.
At the same time, we positively assess the recommendations proposed by the Standards in this part. Despite the inconsistency of judicial practice, the inclusion of relevant provisions in the charters of subsidiary organizations will discipline the management bodies in their decision-making and will set a vector for productive interaction between the management bodies of the holding's parent company and the subsidiaries.