Сommentary on the Draft Clarification of the State Commission on Securities and Stock Market “On the Possibility of Depositary to Register Shareholders at General Meeting of Shareholders”.

Andriy Gorbatenko, senior lawyer of Legal Alliance Company

Pursuant to the Commission's opinion upon the convocation of the General Meeting of Shareholders (further — "GMS") of the company, which shares are issued in electronic form, depositary is entitled to:

• Prepare consolidated register of shareholders (list of shareholders entitled to participate in GMS) — on the basis of agreement on administration of shares issue;
• Provide registration of shareholders (their representatives), who arrived to participate in GMS — on the basis of agreement with company or with shareholders, who own more than 10% of the company's shares.

The Law on Joint Stock Companies in fact provides for the possibility to delegate depositary the right to register shareholders at GMS on the basis of agreement.

However, according to the depositary system legislation, depositary may have the following clients:

• Custodians — on the basis of depositary agreements;
• Issuers — on the basis of agreements on administration of shares issue;
• Other depositaries — on the basis of agreements on correspondence relations.

Thus, the Commission's statement regarding the possibility of depositary to register shareholders on the basis of agreement with shareholders, who own more than 10% of the company's shares is disputable as it conflicts with the law.

Moreover, on the basis of agreement on administration of shares issue according to the Regulation on the Depositary Activity (para. 3 of the Chapter VIII), depositary conducts the preparation of consolidated register of shareholders, inter alia, in the following cases:

• Decision of issuer on convocation of annual or extraordinary GMS's;
• Decision of shareholders who own more than 10% of the company's shares.

Considering the above, we suggest to exclude the last sentence from the Draft Clarification: "... or shareholders (shareholder), who own in total more than 10% of the company's shares..."