The government has updated the ability of companies to close public information

The White House extended the regime of secrecy in the corporate reporting of companies in order to reduce sanctions risks. New rules for the disclosure of sensitive information by issuers deprived them of the right to completely refuse to publish data, but significantly expanded the non-disclosure regime. Sub-sanctioned companies and banks, as well as legal entities operating in new regions, will be able to hide information if its disclosure entails sanctions against them or other persons. The list of information that can be hidden has also been expanded. According to lawyers, such a regime is inevitable in the face of sanctions risks, but this limits the possibility of attracting private capital – it has not yet been possible to balance the interests of investors and issuers.

By Decree No. 1102 of July 4, 2023, the government approved new rules for the disclosure of corporate information – more precisely, it specified the ability of companies not to disclose data due to the risks of spreading sanctions. The document defines the list of corporate information that stock market participants will be able not to disclose, as well as the circle of market participants who have this option available. Recall that companies received the right not to disclose information in March 2022, when the first sanctions were imposed on the Russian Federation due to the military operation in Ukraine. The regime introduced at that time was valid until the end of 2022, then it was extended until July 2023, which caused criticism from the financial authorities. The head of the Central Bank, Elvira Nabiullina, has repeatedly called for the restoration of the publication of data by issuers, at least with exceptions. “Very important for investments is accessible and high-quality information about issuers and instruments. There will be no investment without disclosure. Therefore, we need to restore the publication of reports, while there are sanctions risks. But it is important that “under the guise” of the risks of sanctions do not hide the information that is needed for the development of the market,” she demanded.

The Ministry of Finance explained to Kommersant that from July 1, all companies must disclose their data, taking into account government decree No. 400 (a by-law to corporate law governing the procedure and requirements for publishing data). The new government decree introduces exceptions to this procedure and corrects the previous regime of secrecy.

“If you fall under the criteria specified in this resolution, then some information (which is prescribed in this resolution) can not be disclosed,” the department explains. Unlike the previous version, the document does not provide for the right of issuers to completely refuse to disclose information, while the cases of partial disclosure and provision of information are detailed. In the first case, this right can be exercised by sanctioned companies or banks (as well as having the status of an authorized bank) registered or operating in the territories of Crimea, the DPR, LPR, Zaporozhye and Kherson regions, as well as enterprises from the MIC register. In the second case, there are issuers who themselves do not belong to the “risk group”, but the information they disclose affects the interests of the persons listed above.

The data disclosure regimes for these groups of companies will be different – for the second they are softer, the issuer may not publish data on persons from the “risk group”, on their participation in the capital, if any, on transactions, as well as data on operations under the state defense order and on military-technical cooperation. For persons from the first list, the list of information with optional placement exceeds 20 items – this is data on persons who have been members of the board of directors in the last three years, about shareholders, affiliates and subsidiaries, about financial investments and foreign exchange transactions. Among other things, there is also data on the issuer’s risks, disputes, counterparties, geography and business segments in terms of the provision of services and products. According to Dmitry Olenkov, head of the information disclosure service at Interfax, the new document has expanded the list of information that is allowed not to be disclosed: data has been added on candidates for management and control bodies, on reorganization entities and persons among whom a closed subscription for shares was carried out.

The document is a compromise from the point of view of the security interests of issuers and the need for investments – but it does not solve the problem of lack of information, since it still contains wide opportunities for closing it. According to Kristina Ikayeva, Senior Associate in the Commercial Practice of the Kosenkov and Suvorov Law Firm, all kinds of sanctions have been used from the point of view of the qualitative approach, but the quantitative approach has not been exhausted – the sanctions lists will be expanded quantitatively. “The openness and accessibility of Russian public registries and information disclosure platforms creates opportunities for foreign regulators to tighten sanctions and increase the number of sanctioned persons,” she explains the risks.

Anastasia Kayukova, Senior Associate in Antimonopoly and Regulatory Practice at VEGAS LEX Law Firm, agrees that information that is not subject to mandatory disclosure may be sensitive in terms of sanctions risks, but the investor’s right to access information is also fundamental for business turnover, helps to increase business transparency, and also due control of regulatory bodies over the activities of issuers. “Both issuers and investors have to adapt to the new legal and economic reality and proceed from the information that is available,” she notes. Forward Legal lawyer Evgeny Zubkov believes that the government needs to find a “golden mean”. “On the one hand, to protect Russian individuals and legal entities from sanctions pressure, and on the other hand, not to discourage private investors from making investments. Therefore, most likely, the list proposed by the government will be adjusted depending on the practical effect,” he states.

Diana Galieva