New requirements for M&A transactions in Ukrainian financial services market

On 9 January 2012, the Law on Amendments to Certain Laws on the Regulation of Financial Services Markets entered into force introducing the requirement to obtain a special regulatory approval for the acquisition of shares or other interest in financial institutions.  The new regulatory approval requirement covers both non-banking financial institutions (e.g., companies providing financial services) and professional participants of stock market (e.g., securities traders, custodians, asset management companies, depository or stock exchanges).

Transactions requiring approval include:

• acquisition of a significant shareholding - direct and/or indirect, independent or joint holding of 10% or more of the authorised share capital or voting rights stemming from the purchased shares of a legal entity, or the ability to exercise decisive influence on a legal entity’s activities, or
• increase of a significant shareholding so that the investor will directly or indirectly, independently or jointly own 10%, 25%, 50% or 75% of the financial institution’s authorised share capital or the voting rights under the acquired shares, and/or irrespective of formal ownership will have the ability to exert decisive influence on the management or activities of the financial institution.

The new disclosure regime requires the investor (acquirer) to notify either the National Commission On State Regulation of Financial Services Market (in case when the target is a non-banking financial institution) or the National Securities and Stock Market Commission (in case when target is a professional participant of stock market) one month prior to the acquisition of such interest and to file thereto the set of documents evidencing financial state, business reputation and ownership structure of such investor.  The exact list of documents to be filed will be defined by each regulator separately in 2012.  Approval from the relevant regulators must be obtained prior to completion of the transaction. Those investors who fail to obtain the written approval from named regulators are prohibited from voting at shareholder meetings, and will be banned from participating in the management of the financial institutions.  Any decision of the shareholder meeting, if held with the participation of investors who failed to obtain the approval, shall be void.  In addition, any of the regulators may appoint an authorised person, who will vote at the shareholders meetings of a financial institution in which a significant shareholding was acquired or increased without the written approval required under new rules.

This requirement is similar to the regulatory approval and disclosure regime applicable to banks. However, unlike in the banking sector where tacit (silent) consent was recently introduced, potential investors in the financial institutions will have to wait for a written consent of the relevant regulator.  For the avoidance of doubt, the new disclosure regime for financial institutions does not replace the requirement to seek a separate approval from the Antimonopoly Committee of Ukraine, where applicable under Ukrainian competition laws.

Vladimir Sayenko is a partner at Kyiv based Sayenko Kharenko. He has over 17 years of experience, admitted in Ukraine and in the State of New York (USA). He specializes in M&A, corporate, competition and securities law. Vladimir advises extensively in the financial, energy, oil & gas, real estate and media sectors and litigates numerous investment, corporate and property disputes in Ukrainian courts and international arbitration tribunals.