Category: Uncategorized

A full decade apart, the Romanian real estate market booms that began in 2004 and 2014 have key similarities but at the same time some important differences.

Then as now, we as a law firm remain leaders in real estate and finance both in Romania and the broader region. While our name has changed from Salans to Dentons, the team and offices have never stopped setting the standard for superior legal advice by fully integrated practice groups, wherever our desks happen to be located. This year alone, we have been proud to assist on (i) the acquisition by TPG (via P3) of CA Immo’s portfolio in Romania, Poland and Serbia; (ii) the sale by Aberdeen Asset Management of the iconic Metropolitan office building in Warsaw to Deutsche Asset & Wealth Management; (iii) the acquisition by Blackstone of a portfolio of 6 logistics and distribution parks located throughout Poland and the Czech Republic from Pramerica Real Estate Investors; and (iv) the sale by ING Real Estate of 50 percent shareholding in Allee Shopping Center to Allianz, and the remaining 50 percent to REI Investment Central Europe.

As 2014 draws to a close, we witness a pile of cash chasing too little product in the entire region, similar to the situation in 2004. Yet this time, it is a wall of equity that fuels the impending boom rather than bank debt. When an investor can plunk down EUR 150 million in cash to buy a shopping center in Bucharest, we know that bank debt has moved from “must have” to a “nice to have.” Until more banks enter or re-enter the Romanian real estate market, and until margins drop from 400+ bp to more realistic levels, we expect the equity to continue to flow. Many investors, at any rate, are betting that they will be able to refinance once debt becomes cheaper and lighter on the covenants.

Speaking of cash chasing too little product, yield compression in this Romanian real estate revival appears to be on the way to mirroring yield compression in the 2004-2008 boom. Of course, that may beg the question of what ARE current yields. With two players – NEPI and Globalworth – snapping up the lion’s share of assets in the past year, it is difficult to gauge true yields in such a distorted market. But the trend seems clear. Unless of course it is made unclear by assets securing NPLs that are expected to flush through the system and affect pricing on residencial, office, and retail. Massive portfolios – a few valued at half a billion euro each – have this year been sold or are on sale by Erste, Volksbank, Bank of Cyprus, and other lenders.

Ten years on, the rest of CEE has evolved irreversibly. Poland is now more like Western Europe than CEE. Czech Republic – although less liquid – is close behind. Chasing yields leads the way to Romania, which in the meantime has joined the European Union and found itself the beneficiary of intensified strategic interest by NATO. I, for one, don’t think there is any going back this time around. Romania’s keenest regional competitors are arguably no longer part of the region anymore. Romania is the elephant in the middle of the room: geographically and population-wise too big to miss. A freshly minted president with German roots has inspired confidence among foreign investors and optimism among Romanians who voted him into office. Vital infrastructure projects are, in fact, inching ahead despite doubts, qualms, and naysaying. While in the last boom, blue-chip real estate investors joined the stampede mostly toward the middle or end, this time it is the blue-chip investors (e.g., TPG, Lone Star, Cerberus) who lead the way. These remarkable changes underlie my belief that Romania is transforming into the new Poland.

Anecdotally, there seems to be a greater degree of comfort with the Romanian legal system and use of Romanian law documentation even among first-time investors. (Query whether this is justified!). This may be a result of an improved perception about the level of corruption, partly based on a number of astonishingly successful high-level prosecutions in recent years, including one involving a former prime minister, another involving the head of a political party that formed part of the governing coalition, another an infrastructure mogul, and the list goes on. It may be that, by and large, the judicial system has proven itself fairly sturdy and able to deal better than expected with sometimes difficult contractual disputes. Or maybe it’s simply familiarity with a system that, despite its flaws and frustrations and occasional blatantly incorrect court judgments (of which I have seen my share over the 11.5 years I have lived here), now has a proven track record to evaluate.

Back in 2007, many a developer and many an investor concluded that the financial crisis had mercifully and magically bypassed Romania. Who could blame them? Bankers were still dumping bundles of euros on conference room tables. Margins were low and tumbling. Yields were compressing at a dizzying rate. Speculative development was bounding ahead. The party continued. Until it stopped. Flash forward to 2014. The boom we are witnessing has barely started and already dire economic figures are being announced. In Romania, unemployment is comparatively low, growth is higher than expected, and labor costs remain attractive. Yet Germany is flat. Italy is in recession. Aggravating economic factors is the simmering geopolitical dispute with a revanchist Russia. While we skip merrily along the yellow brick road over the coming months, singing happily as the Romanian real estate market regains its froth, let’s remember that it is a long way to the Emerald City, and the wicked witch could yet land in our path and cast us into a downturn sooner than expected.

Andras Posztl, Country Managing Partner, DLA Piper, Hungary

This Article was originally published in the Special Year-End Issue of the CEE Legal Matters Magazine. If you would like to receive a hard copy of the magazine, you can subscribe here.

A full decade apart, the Romanian real estate market booms that began in 2004 and 2014 have key similarities but at the same time some important differences.

Then as now, we as a law firm remain leaders in real estate and finance both in Romania and the broader region. While our name has changed from Salans to Dentons, the team and offices have never stopped setting the standard for superior legal advice by fully integrated practice groups, wherever our desks happen to be located. This year alone, we have been proud to assist on (i) the acquisition by TPG (via P3) of CA Immo’s portfolio in Romania, Poland and Serbia; (ii) the sale by Aberdeen Asset Management of the iconic Metropolitan office building in Warsaw to Deutsche Asset & Wealth Management; (iii) the acquisition by Blackstone of a portfolio of 6 logistics and distribution parks located throughout Poland and the Czech Republic from Pramerica Real Estate Investors; and (iv) the sale by ING Real Estate of 50 percent shareholding in Allee Shopping Center to Allianz, and the remaining 50 percent to REI Investment Central Europe.

As 2014 draws to a close, we witness a pile of cash chasing too little product in the entire region, similar to the situation in 2004. Yet this time, it is a wall of equity that fuels the impending boom rather than bank debt. When an investor can plunk down EUR 150 million in cash to buy a shopping center in Bucharest, we know that bank debt has moved from “must have” to a “nice to have.” Until more banks enter or re-enter the Romanian real estate market, and until margins drop from 400+ bp to more realistic levels, we expect the equity to continue to flow. Many investors, at any rate, are betting that they will be able to refinance once debt becomes cheaper and lighter on the covenants.

Speaking of cash chasing too little product, yield compression in this Romanian real estate revival appears to be on the way to mirroring yield compression in the 2004-2008 boom. Of course, that may beg the question of what ARE current yields. With two players – NEPI and Globalworth – snapping up the lion’s share of assets in the past year, it is difficult to gauge true yields in such a distorted market. But the trend seems clear. Unless of course it is made unclear by assets securing NPLs that are expected to flush through the system and affect pricing on residencial, office, and retail. Massive portfolios – a few valued at half a billion euro each – have this year been sold or are on sale by Erste, Volksbank, Bank of Cyprus, and other lenders.

Ten years on, the rest of CEE has evolved irreversibly. Poland is now more like Western Europe than CEE. Czech Republic – although less liquid – is close behind. Chasing yields leads the way to Romania, which in the meantime has joined the European Union and found itself the beneficiary of intensified strategic interest by NATO. I, for one, don’t think there is any going back this time around. Romania’s keenest regional competitors are arguably no longer part of the region anymore. Romania is the elephant in the middle of the room: geographically and population-wise too big to miss. A freshly minted president with German roots has inspired confidence among foreign investors and optimism among Romanians who voted him into office. Vital infrastructure projects are, in fact, inching ahead despite doubts, qualms, and naysaying. While in the last boom, blue-chip real estate investors joined the stampede mostly toward the middle or end, this time it is the blue-chip investors (e.g., TPG, Lone Star, Cerberus) who lead the way. These remarkable changes underlie my belief that Romania is transforming into the new Poland.

Anecdotally, there seems to be a greater degree of comfort with the Romanian legal system and use of Romanian law documentation even among first-time investors. (Query whether this is justified!). This may be a result of an improved perception about the level of corruption, partly based on a number of astonishingly successful high-level prosecutions in recent years, including one involving a former prime minister, another involving the head of a political party that formed part of the governing coalition, another an infrastructure mogul, and the list goes on. It may be that, by and large, the judicial system has proven itself fairly sturdy and able to deal better than expected with sometimes difficult contractual disputes. Or maybe it’s simply familiarity with a system that, despite its flaws and frustrations and occasional blatantly incorrect court judgments (of which I have seen my share over the 11.5 years I have lived here), now has a proven track record to evaluate.

Back in 2007, many a developer and many an investor concluded that the financial crisis had mercifully and magically bypassed Romania. Who could blame them? Bankers were still dumping bundles of euros on conference room tables. Margins were low and tumbling. Yields were compressing at a dizzying rate. Speculative development was bounding ahead. The party continued. Until it stopped. Flash forward to 2014. The boom we are witnessing has barely started and already dire economic figures are being announced. In Romania, unemployment is comparatively low, growth is higher than expected, and labor costs remain attractive. Yet Germany is flat. Italy is in recession. Aggravating economic factors is the simmering geopolitical dispute with a revanchist Russia. While we skip merrily along the yellow brick road over the coming months, singing happily as the Romanian real estate market regains its froth, let’s remember that it is a long way to the Emerald City, and the wicked witch could yet land in our path and cast us into a downturn sooner than expected.

Perry Zizzi, Partner, Dentons

This Article was originally published in the Special Year-End Issue of the CEE Legal Matters Magazine. If you would like to receive a hard copy of the magazine, you can subscribe here.

Throughout 2014 the legal trade press has meted out the departure and re-sizing of international law firms in Central and Eastern Europe. Undeniably, more international law firms in 2014 than in any previous year decided to shut down (some of) their operations in the region. This is in stark contrast with the many firms in the region achieving pre-crisis levels of revenue and profit and markets gaining momentum, leading many to question whether the model used by international law firms in CEE – with expats present on the ground – is still valid.

I believe it is.

When I first came to Prague in 1999 the city was swarmed with young and ambitious international lawyers, mostly – but definitely not all – UK-trained. In our own perception the Iron Curtain had only just fallen and we were operating on the new frontier. Our services were in high demand and within a few years we had all managed to build strong track records of advising both sellers and buyers on the most prominent privatizations, the first private equity investments, and various parties in international disputes. Even now, after having (just recently) celebrated the 25th anniversary of the end of the socialist regimes in the region, there are still many English-qualified lawyers around. Actually, it is mostly the same people who stuck it out. 

This is quite contrary to many other industries, where multinationals have started to replace their expats with well-educated local managers (who are in increasing supply). One might argue that this has had a detrimental effect on international law firms, which lack strong relationships to such local managers. This argument, however, overlooks the fact that no law firm consists exclusively of expat partners, and that in fact locally-educated partners already form a majority at most international firms. 

In fact, many of the firms that have recently decided to leave the region no longer had any English-qualified partners on the ground. They had therefore actually lost their differentiating factor – their USP, if you like – and were thus competing with domestic firms for work. Their departures were thus the result of developments over time, rather than sudden decisions or unexpected changes of strategy. For market observers who follow the region closely, the departure of some of these global firms was no surprise. In addition, a number of the firms in question had just come out of global mergers, which had resulted in strategic changes of course in which CEE was no longer a priority.

The markets in CEE over time have become more local, both in terms of the management at multinationals and the increasing share of transactional activity that is driven by domestic investors. We have all had to adapt to this. That being said, English law capability has remained a key message in winning these new market players as clients, and I believe that international firms are increasingly successful in adding local companies to their clientele. It often takes time to convince domestic companies of the advantages of working with an international law firm, but as these companies have started to invest outside their home markets and become involved in increasingly sophisticated transactions their demand for international lawyers has steadily increased. As the number of law firms they use increases it becomes almost inevitable that they will decide to formalize their relationships with external counsel by putting a panel or other formal arrangement in place. This offers the international firms that have advised the company on transactions abroad the opportunity to cement the relationship and win work in new markets, including the company’s home market.

English law is often considered to be important only in M&A and finance transactions. Although this is where a majority of our work stems from, we are witnessing an increasing number of commercial contracts – including outsourcing arrangements and regional agreements with all kinds of service providers – which are governed by English law. In addition, few domestic law firms are retained to advise on the most complex regulatory matters, as they lack the ability to discuss these with colleagues in more advanced markets. 

Moreover, English-qualified lawyers in CEE are hardly ever dedicated to just one market. They may work in one country more than another, but in principle they advise clients across the region. This puts them in a position to advise on complex, first-of-a-kind agreements, not because these would be governed by English law, but because the lawyer can add value by transferring his or her knowledge from a previous transaction elsewhere. 

Just as with managers in other industries, the skill level of local lawyers has improved tremendously over the last twenty-five years. The quality of local law faculties has improved, and law students have gained language skills and additional degrees abroad. Thus far, this has not led to a dramatic decrease of English lawyers in the region. The recruitment market is a good measure of the continued demand for English-qualified lawyers. Domestic law firms are eager to obtain English law capability and international lawyers with experience in CEE still find employment with London-based firms without their own network of offices in the region.

In short, English law capability remains an important differentiating factor for law firms in CEE. For international firms operating with English-qualified lawyers in the region, it is important not to take this for granted. It will become an important task to convince young lawyers to pack up all they have to come to CEE. As law firms expand their global network, offices in CEE will start to compete for talent with other offices from their own firm in what one might consider more exotic places. After all, we all want our own new frontier. 

Helen Rodwell, Managing Partner, CMS, Prague

This Article was originally published in the Special Year-End Issue of the CEE Legal Matters Magazine. If you would like to receive a hard copy of the magazine, you can subscribe here.

Capital markets in Bosnia and Herzegovina (BiH) are regulated at the entity level between the Republic of Srpska and the Federation of Bosnia and Herzegovina. Nonetheless, the regulations of these two entities are in considerable harmony.

The legal framework for capital markets in the two entities can be found in the regulations governing securities. The same regulations govern the basic postulates of financial capital markets: definitions of terms, participants in trade, institutions and their authorities, rights and obligations of participants on the market, etc. These regulations also control the manner of acquiring the rights to securities.

The regulatory framework of the capital market in BiH also includes by-laws, i.e. regulations adopted by the Commission for Securities, as well as regulations of the Central Registry, i.e. the Registry of Securities. These regulations define the basic institutions of the Commission, such as the Registry of Securities.

The Commissions of both entities maintain a register of issuers of securities, which include, along with  information required under other laws, information about issuances of securities and certain basic information about the securities and share capital.

STOCK EXCHANGES 

Trading in securities in BiH takes place through stock exchanges. There are two stock exchanges in BIH, one in the Republic of Srpska in Banja Luka, and the other in the Federation of BiH, in Sarajevo. Both are organized on the same regulatory principles. 

According to the legal regulations governing this area, the stock exchanges are “places for bringing together supply and demand for securities and trading with securities, in accordance with previously defined rules.” 

Linking supply and demand for securities produces rates (or prices) for the securities being traded. The second function of a stock exchange is to secure information on supply and demand in order to determine market value of the securities.

The Banja Luka Stock Exchange

The Banja Luka Stock Exchange (BLSE) has two stock exchanges: (1) the official market of shares (quotes); and (2) the free market of shares.

The free stock exchange market includes securities that meet general requirements for participation (i.e., that they can be traded in an organized way and that they are fully paid for, transferable without restriction, and issued in a dematerialized form). 

Participation in the free stock exchange market can be administered at the request of issuers, individual shareholders, or in the normal course of business.

The official stock exchange market includes securities which meet both the general requirements and additional special requirements.

The BLSE (which includes block trades, reported activities according to acquisitions, auctions for packages of shares, bonds, public offerings, and treasury bills) achieved a total turnover of USD 239 million in 2013, which is 43.53% higher than in 2012.

Total turnover in 2013 consisted of:

• USD 121 million – public offering of treasury bills
• USD 49.5 million  – ordinary trading of bonds
• USD 23 million – ordinary trading of shares
• USD 13.6 million – block trades
• USD 10 million – takeovers
• USD 8.4 million – ordinary trading of treasury bills
• USD 7.5 million – public offering of shares
• USD 5.4 million – auction for packages of shares

Structure of total turnover in 2013:

• 50.79%  – public offering of treasury bills
• 20.72%  – ordinary trading of bonds
• 9.63% – ordinary trading of shares
• 5.65%  – block trade
• 4.27%  – takeover
• 3.52% – ordinary trading – treasury bills
• 3.15% – public offering of shares
• 2.27% – auction for packages of shares

The Sarajevo Stock Exchange 

The Sarajevo Stock Exchange (SASE) has three segments, with trading conducted under separate rules: (1) Official Quotation; (2) Fund Quotation (as a sub-segment of official quotation); and (3) Free Market.

The Official Quotation is the market segment which refers to trading with local companies of the highest quality. To be accepted into this segment a company must satisfy certain conditions and criteria.

The Fund Quotation is a part of the Official Quotation reserved for investment funds (IF). Shares of IF are included in a similar way as those of regular issuers, but the process is governed by the Law and Regulations of the Securities Commission.

The Free Market is the segment of SASE with the fewest conditions.

The SASE achieved a total turnover of USD 156 million in 2013, which is 66% less than in 2012.

Total turnover in 2013 consisted of:

• USD 20.2 million on the Primary Free Market
• USD 17 million Bond Quotation
• USD 11 million on the Official Quotation
• USD 9.3 million on the Secondary Free Market
• USD 8.7 million at the Fund Quotation

Structure of total turnover in 2013:

• 30.03% – Primary Free Market
• 25.25% – Bond Quotation
• 16.63%  – Official Quotation
• 13.88% – Secondary Free Market
• 13.03%  – Fund Quotation

The capital markets of Bosnia and Herzegovina are open to outside investors from all countries.

By Natasa Krejic, Partner, SAJIC

This Article was originally published in Issue 6 of the CEE Legal Matters Magazine. If you would like to receive a hard copy of the magazine, you can subscribe here.

I was speaking at an M&A conference in Budapest earlier in 2014 and the mood was one of post-traumatic optimism. Six, seven years of shelling and trench warfare and finally the smoke was clearing. It wasn’t just the pipeline that had improved – everyone was busier than they could remember being for some time. Then someone from the audience asked the (slightly tortuous) final question: “Is there anything else that the panel hasn’t covered, which in one year’s time we will look back on and realise that a particular factor might have been overlooked that will have a major impact on M&A in the year ahead?”. “War in Ukraine,” I said, perhaps a little too glibly. There was a very nervous silence in the room, and the panel host asked the panel if there was anything else they could think of. Further silence followed and we shuffled off, me a little chastened that perhaps I had been too melodramatic.

As it turned out, the war in Ukraine has indeed had an unexpected and disproportionately negative effect on the CEE economies, relative to those of the US, Europe, and Asia. That is hardly surprising, given the geographical proximity and interwoven economies, but it continues to show that even in spite of the so-called ‘wall of finance’ and general pent-up demand that one has continued to expect would finally break through after all these crisis years, events still have a habit of knocking back fledgling signs of recovery.

25 years after the fall of the Berlin Wall, the situation in Central Europe is different from the one we expected, back in the 90s, would emerge from its communist past. With a huge influx of investment from the US and Western Europe, pending EU membership, and a predicted massive overhaul of infrastructure and pretty much every aspect of society and the economy, it was expected that CEE would slowly converge to European standards and norms in every respect. Western banks would move in to provide retail as well as corporate lending, Western utilities would provide power, water, and communications, and other Western companies would dominate retail and consumer markets. While nobody imagined that local civil code systems would be replaced or superseded, it was assumed that English, US, and to a lesser extent German, Swiss, and Austrian law were to set the tone, with English law dominating international finance and M&A.

Western companies have still influenced CEE economies in a fundamental way, and we should not underestimate the profoundly positive influence of international professional services firms and the relative certainty of their legal systems. Nevertheless, I don’t think we expected that one or two sectors of the economy would feel almost like occupied (though not abandoned) villas of a lost empire. This is of course a too melodramatic metaphor, but it may be interesting to think for a moment about where in CEE regional or global brands remain influential, and about where those brands have retreated, and why. One reason might be the relative lack of the ultimate fungibility and portability of some of the goods and services within the region. For example, in the case of retail banking once you went over the border from Slovakia into Hungary it didn’t seem to make any practical difference that you also had a bank account in Slovakia with XYZ Bank.  Similarly, perhaps it didn’t make any practical difference to a consumer in one country that there were energy companies with operations in various other CEE countries, and those synergies were hard to identify or understand. I’m not suggesting that the partial retreat of some companies from CEE was solely because of that – too many other well-documented reasons exist – but maybe those companies that now view the region with the greatest optimism might be those whose products and services really are more portable (such as technology or life sciences), or those who genuinely identified and extracted real synergies (i.e., call-centers, logistics, etc.), or those which made optimal use of local talent and resources (for example, automotive companies). Whilst the transfer of know-how has enabled many Western brands to make great in-roads into CEE markets, it is those who have successfully retained and continually developed new know-how who have the edge, rather than those who have in fact transferred it (or built it and sold it).

So if I look forward to 2015, I look at it as one of a few years of a profound state of flux, some behind us, some still ahead of us, where there will be some areas which will go more local, and other areas which will continue to grow as part of a homogenised globalisation process. In terms of where international law firms sit in that process, as always, it is about being adaptable. Whereas in the 1990s we were guiding international companies through uncharted CEE waters, we are equally now guiding local players on their expansion plans into international waters. A strong and ambitious local company will be just as unsure about expanding into Poland or Germany as a US company may have been about investing in the Czech Republic all those years ago. And besides, for as long as I can remember, when someone asked me how much of our business was made up of ‘local’ or ‘international’ clients, that became harder and harder to answer, as international clients acquired local businesses; identifying whether your client was under ‘local’ or ‘international’ management didn’t really matter (and often because after a short time often ‘local’ management in fact became international management too).

Perhaps in the short term, the market may look to be dominated by decisions whether to exit (non-core divestments and so on) but after a period of rationalisation and shake out (which is broadly coming to an end), the situation should normalise and companies will once again set about implementing growth strategies, developing infrastructure and above all developing technology and products, still ultimately as part of a globalised market (funded by a globalised financial services market). For that reason, international law firms have to continue to evolve and innovate to remain at the forefront of the markets and clients that they service. As part of a global law firm, we feel the changes that affect global finance markets and the trends in finance and M&A in particular, and how these feed into the structure and negotiations of deals. We feel, too, how those changes from the UK and US (and also Asian and Middle Eastern) markets have affected the structure and methodology of the legal industry. But we also have long experience in understanding what is appropriate and what works and what does not on the local CEE markets.

So I hope that 2015 allows the recovery to spread it wings a bit. It will be interesting to observe some of the trends and some of the divestment and investment plans to develop more fully, and for the CEE landscape to show its true colors. There are clearly a lot of unfulfilled plans for development and investment waiting for the right conditions, and although these days it seems that we continue to play the waiting game a little longer, I hope that a measure of stability will return for things to get moving at the rate it seemed they would earlier last year.

By Hugh Owen

This Article was originally published in the Special Year-End Issue of the CEE Legal Matters Magazine. If you would like to receive a hard copy of the magazine, you can subscribe here.

The Belarusian Capital Market has developed rapidly over the last few years. Belarusian securities laws are coming into compliance with international standards, undoubtedly increasing the attractiveness of acquiring shares of Belarusian joint-stock companies for foreign investors.

When effecting a deal involving shares of a Belarusian joint-stock company it is necessary to consider the following: (1) The acquisition of shares of a Belarusian insurance organization by a foreigner requires the consent of the Ministry of Finance of the Republic of Belarus; (2) The acquisition of shares of Belarusian banks by a foreigner requires the permission of the National Bank of the Republic of Belarus; (3) In particular cases before concluding a share purchase agreement (SPA) it is necessary to obtain the consent of the antitrust authority (for example, in cases where more than 25% of all shares are purchased); (4) Regional (Minsk City) executive committees have a preemptive right to purchase shares of some issuers (for example, entities manufacturing agricultural products); and (5) In respect of shares belonging to the state there is a special sequence of transfer through privatization procedure.

Belarusian laws differ from those in many other European countries with regards to the procedure required for acquiring shares of closed and open joint-stock companies (CJSC and OJSC). 

The procedure of share acquisition of a CJSC by a non-resident includes the following steps: 

1. The adherence of a pre-emptive right of shareholders and the right of the CJSC to purchase the shares. The seller of the shares shall notify the other shareholders and the CJSC about its intention to sell the shares. If there is a waiver of the preemptive shareholder’s right the CJSC has the right to buy the shares, or to specify a third person to purchase the shares. If the CJSC refuses to buy its shares and does not specify a third person, the shares can be sold by the seller to any third person at its own discretion. The acquisition of shares by a third person can be at a price not lower than the price suggested to the shareholders. 
2. Conclusion of SPA. An SPA must be concluded in written form and registered by a professional securities market participant. 
3. Opening a custodial account by the buyer. The buyer shall open a custodial account on which the purchased shares will be transferred.
4. Stock transfer. The seller shall give a request to its depositary to transfer the sold shares to the buyer’s depo account.
5. Confirmation of purchaser’s rights on shares. The purchaser gets the custodial account statement with information on the purchased shares. 
6. Notification. In purchases involving a large stock of shares (more than 5% from all shares with voting rights) the purchaser must notify the CJSC and the Securities Department of the Ministry of Finance of the Republic of Belarus.

The procedure of acquisition of shares of an OJSC by a nonresident includes the following steps:

1. Opening a custodial account by the buyer. The buyer shall open a custodial account into which the purchased shares will be transferred. 
2. Conclusion of commission agreements with the professional securities market participant (trader).  The purchaser and seller shall conclude the commission agreements with the traders, who are members of the open market OJSC “Belarusian currency and stock exchange” (BVFB) section. 
3. Publication and notification. A purchaser who intends to buy more than 50% of shares shall publish its offer in advance. Not later than three days before the date of beginning of the purchase, the purchaser is obliged to provide the securities authority and BVFB with the text of the published offer.
4. Preparing for trading shares. The purchaser passes funds on purchasing the shares to the account of trader. The seller blocks the shares on his custodial account for trading. The seller’s trader files an application to sell the shares to the trade system of BVFB, and the purchaser’s trader files an application for buying the shares.
5. Bidding. Trading of the shares is held in the trading system of BVFB. According to the results of the trading the protocol on the auction results is issued. On the basis of protocol the transfer of shares on the buyer’s custodial account shall be conducted, along with payment for the shares to the seller’s trader account. Then the seller’s trader transfers the funds from the sold shares to the bank account of the seller or dispenses cash. 
6. Confirmation on purchaser’s rights on shares. The purchaser gets the custodial account statement with information on the purchased shares. 
7. Notification. In purchases involving a large stocks of shares (more than 5% from all shares with voting right) the purchaser must notify the CJSC, the Securities Department of the Ministry of Finance of the Republic of Belarus, and the BVFB.

By Alexander Bondar, Partner, and Elena Selivanova, Advocate, Sysouev, Bondar, Khrapoutski

This Article was originally published in Issue 6 of the CEE Legal Matters Magazine. If you would like to receive a hard copy of the magazine, you can subscribe here.