www.pwc.ru/capital-markets
Listing a domestic
company in Russia
Contents
The Moscow Exchange – Russia’s main listing venue
3
Common types of securities to issue
4
Securities issue and placement process
6
Prospectus requirements and registration/approval process
7
Admission to trading on the Moscow Exchange
9
Ongoing reporting requirements
2
PwC
11
The Moscow Exchange –
Russia’s main listing venue
Russia’s primary securities trading venue
is the Moscow Exchange (ME), which
was created through the merger of the
MICEX Group and the RTS Group in
December 2011.
Top 10 stock exchanges in EMEA region
Rank
Exchange
Market capitalisation
(USD bln)
1
London Stock Exchange
4,429
2
NYSE Euronext (Europe)
3,584
As of 31 December 2013, the ME ranked
among the top 10 stock exchanges in
the Europe-Middle East-Africa (EMEA)
region in terms of traded securities
volume and total domestic market
capitalisation.
3
Deutsche Börse
1,936
4
SIX Swiss Exchange
1,541
5
NASDAQ OMX Nordic Exchange
1,269
6
BME Spanish Exchanges
1,117
7
Johannesburg Stock Exchange
943
The ME securities market contains two
market sectors: the Main Market and
Classica. According to the ME, the Main
Market sector accounts for over 80 per
cent of equities and over 99 per cent of
bonds trading volume on the Russian
securities market. All ME IPOs were
listed in the Main Market sector.
8
Moscow Exchange
771
9
Saudi Stock Exchange - Tadawul
467
10
Oslo Børs
265
Since 2013, several foreign banks have
offered their clients direct access (Direct
Market Access) to shares traded on
the ME (in the T+2 mode).
In 2013 and 2014 Euroclear and
Clearstream have opened nominee
accounts with Russia’s National
Settlement Depository, offering
settlement services for transactions
in Russian government bonds (OFZ),
equities and corporate bonds.
Others
1,161
Total for EMEA region
17,483
Source: World Federation of Exchanges, December 2013 report
Total number of companies with securities
traded on the ME (including OTC list):
Foreign companies
672
9
Domestic companies
663
Source: PwC analysis of ME report on traded securities as of 31 December 2013
The Central Bank of the Russian
Federation (CBRF) has been as
Russia’s securities market regulator
since March 2014.
Listing a domestic company in Russia
3
Common types
of securities to issue
The most common types of securities on
the Russian securities market are:
Number of new issues of shares of domestic companies traded on the ME –
quotation and OTC lists*
• bonds (corporate and exchange
(birzhevie)); and
80
• shares (ordinary and preferred).
60
Companies can also issue and admit
to trading other types of securities,
including mutual fund shares, mortgage
certificates, and Russian Depository
Receipts (RDR).
40
Bonds can be issued as a stand-alone
issue or under a programme.
There is a simplified regime for issuing
exchange bonds that does not require
state registration of the offering
documents and features an unlimited
securities placement period.
Securities are admitted to trading on the
ME during “placement” or “circulation”
via inclusion in the official list of
securities admitted to trading. Securities
can be included in the list regardless of
whether or not listing procedures have
been completed. If listing procedures
have been completed, then the securities
will be included in the quotation list
(Level 1 or Level 2); otherwise, the
securities will be included in the OTC list
(Level 3).
The following charts present historical
data on ME admission to trading
for shares and bonds of domestic
companies.
73
27
23
20
5
12
28
0
2009
2010
2011
OTC list
2012
2013
Quotation list
Source: PwC analysis of ME report on traded securities as of 31 December 2013
Number of new issues of corporate bonds of domestic companies traded on the ME –
quotation and OTC lists*
150
96
100
72
58
50
0
21
31
65
31
12
2009
2010
OTC list
2011
2012
2013
Quotation list
Source: PwC analysis of ME report on traded securities as of 31 December 2013
Number of new issues of exchange bonds of domestic companies traded on the ME –
quotation and OTC lists*
200
100
14
63
44
96
115
22
2011
2012
OTC list
Quotation list
Source: PwC analysis of ME report on traded securities as of 31 December 2013
* Based on the ME listing requirements effective till 9 July 2014.
PwC
104
70
0
4
18
14
9
6
2013
Summary of main regulatory requirements for issue and placement of shares and bonds
Requirements
Shares (ordinary and
preference)
Corporate bonds
Issuer - years in existence
3 years (or less - subject to additional requirements)
-2
Prospectus required
Yes
Yes
(short form)
Prospectus must be filed with
CBRF
ME
State registration with the
CBRF
Yes
(issue (prospectus1) and
results of the issue)
Yes
(issue or programme
(prospectus1) and results of
the issue).
No
(ME assigns issue or programme ID
number (approves prospectus), and grants
permission to trade)
Type of collateral (if applicable)
–
Pledge, surety or irrevocable
bank guarantee
Surety or irrevocable bank guarantee
Limitation on the securities
placement period after state
registration or approval of
prospectus
Yes
(up to 3 years from the date of state registration of the
prospectus, with annual extension for 1 year)
No
(according to the decision on the issue)
Type of offering
Private (closed subscription) or public (open subscription)
Public (open subscription) only
Redemption terms
(if applicable)
–
Cash only
Cash, property or conversion
1
If excemption terms are not met (see Prospectus requirements and registration/approval process).
2
Additional requirements imposed by the ME (see Admission to trading on the Moscow Exchange).
Exchange bonds
Listing a domestic company in Russia
5
Securities issue and
placement process
Typical timeline for issue and placement of securities (shares/corporate bonds)
Board or
shareholders’
approval1
CBRF
approval
2-6 months
Documentation
Marketing
3-10 days
20 days
preliminary
Premarketing
CBRF
approval
30 days4
Drafting
prospectus
amendment3
Drafting prospectus
and other legal documents
CBRF review
Pricing and
placement
10 days
final2
Drafting roadshow
presentation and/or
investment memorandum
Road show
Drafting report
on issue results
Placement
1 No later than 6 months from the date of the corporate decision on the securities offering.
30 days if no preliminary review by the CBRF.
If the issuer has released new Russian GAAP (consolidated) accounts or IFRS/US GAAP (consolidated) financial statements or any circumstances
have arisen that could have a significant impact on a decision by a potential investor to acquire the securities. There is no need in state registration of the
amendment. However, it should be disclosed before securities placement.
4
From the end of the securities placement period, or from the latest security placement date.
2
3
The typical timeline for exchange bonds is shorter because CBRF review and
approval are not required and the prospectus drafting process is shorter.
Parties involved in the issue
and placement process
in-depth understanding of the process are
essential for the success of an offering.
At the start of the process, a working
group (comprising the issuer, investment
banks and independent auditors)
convenes to discuss the timetable,
roles and responsibilities, potential
bottlenecks, and the structure of the
offering. Careful planning and an
Investment banks commonly assist with
drafting the prospectus and roadshow
materials (and/or an investment
memorandum), communicating with the
CBRF and ME, coordinating marketing
the securities issue to potential investors,
and finally with placing the securities.
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Independent auditors
commonly:
• audit and review Russian GAAP
(consolidated) accounts and/or
IFRS/US GAAP (consolidated)
financial statements, of the
issuer and the guarantor
(if applicable);
• read the prospectus as required
by applicable audit standards.
Prospectus requirements and
registration/approval process
Information about the guarantor (if
applicable) must be disclosed at the
same level of detail as for the issuer.
The issuer is responsible for the
completeness and reliability of
information in the prospectus, and must
include all information that is essential
for a prospective investor to make an
investment decision.
In addition, certain historical financial
information must be disclosed for the
prior 3-5 years.
The prospectus for several series of
securities may be drafted either as a
single document or in parts (i.e. the
base prospectus and the supplement).
Detailed amended requirements for
prospectus drafting and content will be
established in the special Regulation
on Securities, which is expected to be
updated before the end of 2015.
The issuer and guarantor (if applicable) must include the following historical financial
information in the prospectus for a debut offering
The information can be “incorporated
by reference” if it has been already
disclosed in accordance with Russian
ongoing reporting requirements (see
Ongoing reporting requirements).
Disclosure of financial information in
the prospectus can be based on either:
• Russian GAAP (consolidated) accounts or
• IFRS/US GAAP (consolidated)
financial statements.
Audited annual1
Reporting periods
Russian GAAP accounts
3 years (or less – subject to additional
requirements)
Russian GAAP consolidated accounts
3 years, only if there are no IFRS/US
GAAP consolidated financial statements
IFRS/US GAAP (consolidated) financial statements2
3 years
Unaudited interim
Russian GAAP accounts
quarterly (3-, 6- or 9-month period)
Russian GAAP consolidated accounts
–
IFRS/US GAAP (consolidated ) financial statements2,3
semi-annual
Including the auditor’s report.
In Russian and using the Russian rouble as the presentation currency (in accordance with federal law
requirements regarding IFRS consolidated financial statements).
3
Including the auditor’s report (if available).
1
2
It is expected that in accordance with
the amendend special regulation on
securities requirement for Russian GAAP
consolidated amounts will be realised and
quarterly IFRS (US GAAP(consolidated))
financial statements have to be attached,
if available (including auditor’s report
(if available)).
Listing a domestic company in Russia
7
Prospectus review, state
registration or exchange
approval
Share or corporate bond prospectus
The CBRF is authorised to request that
the issuer provide supporting documents
for the information in the prospectus.
The prospectus can be registered
either as a single document or in
parts (i.e. the base prospectus and the
supplement). The supplement can be
registered simultaneously with the state
registration of the securities issue, but
no later than 1 year from the date of
registration of the base prospectus.
Any amendments to the base prospectus
must be registered together with the
supplement if:
• the issuer has released new Russian
GAAP (consolidated) accounts or
IFRS/US GAAP (consolidated)
financial statements;
• any circumstances have arisen that
could have a significant impact on
a decision by a potential investor to
acquire the securities; or
• the introduction section of the base
prospectus did not include details on
the offering, such as details about
the securities and the terms of their
placement.
The CBRF may exempt a prospectus
from state registration if at least one of
the following conditions is met:
• the securities are being placed with
qualified investors (QI), provided
that there are no more than 500
individuals (excluding QIs) with
pre-emptive rights to acquire the
securities;
• shares, and/or securities convertible
into shares, are being placed with
less than 500 individuals, excluding
QIs who were or are shareholders of
the issuer as of a specific date;
• the securities are being offered to
less than 150 individuals (excluding
QIs) and individuals who were or
are shareholders of the issuer as of
a specific date, provided that there
are no more than 500 shareholders
(excluding QIs);
• there is a private placement of the
securities (closed subscription)
among less than 500 individuals
(excluding QIs);
• the aggregate amount of funds to
be received by the issuer from the
placement of one or more securities
issues does not exceed RUB 200
million within one year;
• the aggregate amount of funds to
be received by a financial institution
from the placement of one or more
bond issues does not exceed RUB 4
billion within one year;
• each potential investor, excluding
those with pre-emptive rights to
acquire the securities, will pay at
least RUB 4 million for the securities
to be placed, provided that there are
no more than 500 individuals with
pre-emptive rights (excluding QIs).
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PwC
• registration of the bonds to be issued
under the programme, if the related
prospectus has been registered
simultaneously with the programme.
If an exemption is granted, the issuer
must draft, submit to the ME, and
publish the prospectus before the
placement process begins.
Exchange bond prospectus
An exchange bond prospectus is
submitted to the exchange for review
and approval. The exchange is entitled
to verify the accuracy of the information
disclosed.
The issuer and the exchange must
disclose the decision on the issue and
prospectus to all interested parties no
later than the date when the exchange
bond placement is scheduled to begin.
The exchange then publishes the results
of the exchange bond placement no later
than either 1) the day after the date of
the latest security placement, or 2) the
end of the placement period.
If any changes are made in the decision
on the securities issue or prospectus,
the issuer must then disclose this
in accordance with the exchange’s
requirements.
The CBRF and the ME may perform
a preliminary review of the related
prospectus at the issuer’s request.
Admission to trading
on the Moscow Exchange
Summary of the ME’s listing requirements (effective 15 September 2014)
Shares issued by domestic companies
Requirements
Level 1
Level 2
Total market value of the shares and free
float level1:
Ordinary shares:
If issuer’s market capitalisation exceeds
RUB 60 billion:
at least RUB 3 billion and 10 per cent of
total ordinary shares issued, respectively
If issuer’s market capitalization is less than or
equal to RUB 60 billion:
at least RUB 3 billion and FF2 of total ordinary
shares issued, respectively
At least RUB 1 billion and 10 per cent of total
ordinary shares issued, respectively
Preference shares:
At least RUB 1 billion and 50 per cent of total
preference shares issued, respectively
At least RUB 0.5 billion and 50 per cent of total
preference shares issued, respectively
Years in existence of issuer or legal entity:
At least 3 years
At least 1 year
Preparation and disclosure of issuer’s
audited annual IFRS/US GAAP
(consolidated) financial statements3
For 3 years before the date of inclusion of the
shares on the Level 1 list
For 1 year before the date of inclusion of the
shares on the Level 2 list
Compliance with specific corporate
governance requirements
Yes
Yes
a) after reorganisation through which
issuer was established;
b) which control one or more businesses
(more than 50 per cent of the business
of the issuer’s group) based on the
consolidated financial statements
1
in respect of placed shares.
2
FF = (0.25789 - 0.00263 + MarCap) * 100%, where MarCap – market capitalisation of the issuer (in RUB bln).
3
if entity reorganised, this requirement applies starting from the year when reorganisation was completed; or from the next year if reorganisation was completed
before 1 October.
Listing a domestic company in Russia
9
Bonds issued by domestic companies
Requirements
Level 1
Level 2
Issue value
At least RUB 2 billion
At least RUB 0.5 billion
Up to RUB 50,000
Up to RUB 50,000
Face value of the bond
Years in existence of issuer or guarantor
At least 3 years
At least 1 year
Shares or bonds of the issuer are traded
on the ME2
Yes
Yes
Preparation and disclosure of the issuer’s
(and, if applicable, guarantor’s) audited
annual IFRS/US GAAP (consolidated)
financial statements3
For 3 years before the date of inclusion of the
bonds on the Level 1 list
For 1 year before the date of inclusion of the
bonds on the Level 2 list
Absence of losses
If GPnL4 for 2 out of the last 3 years was
positive
If GPnL4 for 1 out of the last 3 years was
positive
No history of issuer default
The issuer has no history of default, or at least
3 years have expired since the discharge of any
liabilities for which the issuer had been in default
The issuer has no history of default, or at least
2 years have expired since the discharge of any
liabilities for which the issuer had been in default
Credit rating of either the issuer or bond
issue or the guarantor
Yes
–
Compliance with specific corporate
governance requirements
Yes
–
1
1
not applicable if there is collateral valued at no less than the bond issue value.
2
applicable only in respect of exchange bond issue.
3
if entity reorganised, this requirement applies starting from the year when reorganisation of the issuer or guarantor was completed; or from the next year if
reorganisation was completed before 1 October.
4
PnL = PnLe + PnLg for the periods specified above, where:
G
PnLe – financial result (income or loss) based on the issuer’s latest audited annual IFRS/US GAAP (consolidated) financial statements. If PnLe is positive, then
GPnL = PnLe.
PnLg – financial result (income or loss) based on the guarantor’s latest audited annual IFRS/US GAAP (consolidated) financial statements.
If the issuer and guarantor are part of the same corporate group, then GPnL is the financial result (income or loss) based on the group’s latest audited annual IFRS/
US GAAP consolidated financial statements.
Minimum credit rating of the issuer, guarantor or securities, necessary for Level 1
Rating agency
National credit rating
International credit rating
1. Fitch Ratings
A-(rus)
B+
2. Standard and Poor's
ruA
B+
3. Moody's Investors Service
A2.ru
B1
4. National Rating Agency
AA-
-
5. Analysis. Consulting and Marketing
A+
-
6. Rus-Rating
ВВВ-
-
7. Expert-RA
A+
-
Exclusion of securities from the quotation list means either they have been:
• transferred to the OTC list; or
• excluded from the list of securities admitted to trading and de-listed from trading on the ME.
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PwC
Ongoing reporting requirements
Ongoing reporting requirements are
established by applicable Russian laws
and exchange rules. They include:
• Annual reports
The annual report must be drafted
and approved by 30 June for joint
stock companies and by 30 April for
limited liability companies.
• Quarterly reports
Quarterly reports must be published
within 45 days from the end of the
relevant reporting quarter.
Summary of main regulatory requirements for contents of quarterly reports
Timing
To be included in
quarterly report for
Audited annual
90 days from the end of the
reporting year
1Q
Unaudited interim for 3-, 6- or
9-month period
45 days from the end of the
reporting quarter
1Q, 2Q or 3Q,
respectively
Issuer’s Russian GAAP accounts
Issuer’s IFRS/US GAAP (consolidated) financial statement
Audited annual
120 days from the end of the
reporting year
1Q (if issued before
31 March) or 2Q
Unaudited interim for 6-month
period
60 days from the end of the
reporting period
3Q
45 days from the end of the
reporting quarter
Each quarter
Other information
Quarterly reports should also include information about the guarantor and the guarantee if guaranteed corporate
or exchange bonds have been issued.
• Issuer’s IFRS/US GAAP
(consolidated) financial statements
• Significant event notice
The list of significant events is
prescribed by the regulator.
They include:
– steps in the securities issuing and
placement process;
– disclosure of the issuer’s annual
and interim Russian GAAP
(consolidated) accounts and
IFRS/US GAAP (consolidated)
financial statements;
– correction of errors in the issuer’s
Russian GAAP (consolidated)
accounts and IFRS/US GAAP
(consolidated) financial
statements, and etc.
The shareholders or participants in
the issuer who hold 5 per cent or more
of the voting shares (interest) of the
issuer must disclose either information
about the controlling shareholders or
participants, or confirm the absence of
such shareholders or participants.
To be disclosed
When
Where
Audited annual IFRS/US
GAAP (consolidated) financial
statements
within 3 days from
the date of the audit report
90 days from the end of the
reporting year
on the issuer’s
website and the
website of a selected
information agency
(i.e. AK&M, Azipi,
Interfax, or PrimeTASS)
Unaudited interim IFRS/US GAAP
(consolidated) financial statements
within 3 days from the date
of preparation
In addition to regulatory ongoing
reporting requirements, the ME
requires issuers with Level 1 and Level 2
securities to file the following within
5 days from each quarter end:
has been duly registered with the
CBRF;
• quarterly issuer’s questionnaire; and
• the issuer’s securities are not
included on the list of securities
admitted to trading on the
exchange; and
• corporate governance compliance
report.
• the issuer has no more than 500
shareholders.
Exemptions from ongoing reporting
requirements
Limited liability companies, however,
are not entitled to such exemptions.
A joint stock company issuer may be
exempt from the ongoing reporting
requirements if all of the following
conditions are met:
Consequences of non-compliance
with ongoing reporting requirements
• decision to apply to the CBRF
for the exemption approved by
shareholders;
If an issuer fails to comply with ongoing
reporting requirements, it will be
charged with penalties and its securities
may be de-listed.
• the issuer has no securities other
than shares for which a prospectus
Listing a domestic company in Russia
11
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© 2014 ZAO PricewaterhouseCoopers Audit. All rights reserved.
PwC refers to ZAO PricewaterhouseCoopers Audit, or, as the context requires, other member firms of PricewaterhouseCoopers International Limited, each of which is a
separate legal entity.
24.12.2014 (1051)