On 1 January 2020 amendments to the Federal Law "On the Securities Market" (SM Law) specifying the procedure for depositing securities under an escrow agreement entered into force.
We remind you that the possibility of depositing securities under an escrow agreement became part of Russian law on 1 July 2018, when a new article 47.1 dedicated to the escrow of movable things, non-cash money and securities was added to the Civil Code of the Russian Federation. However, until recently the technical issues connected with the registration of rights to such securities remained not expressly regulated.
Now in accordance with amendments to the SM Law a new type of a personal account (escrow account) appeared in the registration system of registrars and securities depositories – a personal account (escrow account) of an escrow agent, on which rights to securities deposited under an escrow agreement are registered.
The SM Law establishes that an escrow agent regarding transactions with securities may be directly a registrar or a securities depository registering rights to such securities. In this case the securities are considered to be placed into escrow from the moment of making the entry on the encumbrance of such securities on the participant's personal account.
Otherwise, depositing is performed by means of the credit of securities to the account of the escrow agent. Accordingly, the moment when securities are placed into escrow is the moment such credit is made.
As a result of such amendments the legal regulation of an escrow agreement has become more comprehensively integrated in Russian laws, which, in particular, makes it a convenient instrument when structuring M&A transactions under Russian law.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.