08.07.08

The Federal Financial Markets Service (FFMS) has proposed to allow shareholders to round their fractional shares in a reorganizing company to the nearest whole number. If original number is less than one, it must be rounded up to one whole share. This may help protect minority shareholders’ rights. Current legislation allows conversion during reorganization that may lead to fractional shares being created.

These changes will likely be welcomed by minority shareholders, but they may bring certain problems for majority holders in making managerial decisions in a general stockholders' meeting. Although a majority shareholder can regulate the process and withhold his share from redistribution. Some also expect even minority holders will be unhappy when their shares are rounded down since loss of even small percent of shares may lead to loss of blocking shareholding package.

These changes have been submitted to the Ministry of Justice for consideration.

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Source: B&FM