What does a holder of the depositary receipts (DRs) need to do to convert them into shares?
Standard conversion. If the DRs were not converted automatically and the investor did not use the declarative conversion procedure, then the standard conversion procedure can be used up to August 3, 2023;
Declarative conversion. This option was available for holders or beneficial owners of the DRs the rights to which were recorded in foreign depositories. The declarative conversion was completed on November 24, 2022, but you can still use the standard conversion procedure;
Automatic conversion was performed only with regard to the DRs which are in the custody of Russian depositories (those are mostly the DRs that were purchased at SPB Exchange). The shares were credited to the accounts of investors in the same depositories where the respective DRs were placed.
What is the deadline for submitting the request for conversion?
The standard conversion option is available up to August 3, 2023, i.e. within one year from the termination date of the Deposit Agreement. For Rule 144A DR program (one DR of this kind represents ten shares), the deadline for the conversion of the DRs is June 9, 2023. We recommend that you initiate the conversion process as soon as possible, considering that delays and restrictions may occur in securities databases.
The declarative conversion procedure was completed on November 24, 2022.
Gazprombank transferred the shares under the automatic conversion procedure in September 2022.
What should I do if my broker refuses to perform the instruction for conversion?
If a broker refuses to perform the standard conversion procedure, you may transfer the depositary receipts to another broker (while doing so, you must not change their owner under any circumstances!) or submit an application for conversion by yourself using the instructions.
Please note that if the depositary receipts were purchased at SPB Exchange (and/or they are in the custody of a Russian depository), they were converted automatically (see the previous question).
Is it mandatory or optional to convert the DRs into shares?
Conversion of the DRs into shares is voluntary, except for the automatic conversion procedure.
After the conversion is completed, can shares be credited to an account opened with a foreign broker/depository?
They cannot. After the conversion, shares can only be credited to your account with a Russian depository.
How can I open an account with a Russian depository to receive shares on it after the conversion of the DRs?
You need to contact a broker that provides direct access to the Russian stock market. It can be a Russian financial company or a foreign one that holds the required licenses issued by the Bank of Russia.
You can also directly contact a Russian depository you wish to open an account with, including the depository of Gazprombank. More information is available here.
Are holders of the DRs entitled to receive dividends?
As per Federal Law No. 114-FZ dated April 16, 2022, holders of DRs cannot receive dividends before the DRs are converted into shares. At the same time, under the current corporate legislation, the right to receive undrawn dividends is retained for three years. Therefore, shareholders will be able to receive the “missing” payments after the conversion.
What will happen to the DRs if they are not converted into shares?
If you did not use the standard or declarative conversion procedure and your DRs were not subject to automatic conversion, then you have the right to demand, from August 3, 2023, the receipt of the monetary equivalent of the value of your DRs from The Bank of New York Mellon (the depository bank of Gazprom’s DR programs). The date for Rule 144A DR program (one DR of this kind represents ten shares) is June 9, 2023.
The depository bank will become entitled to sell Gazprom’s shares represented by the ADRs and will use the proceeds from such sales to make payments to the remaining owners of the depositary receipts. Please note that the ability of The Bank of New York Mellon to sell the shares and distribute the obtained funds between the remaining owners of the depositary receipts is limited by the regulatory requirements of the Bank of Russia and the Russian President’s Decree No. 95 dated March 5, 2022.
What will happen to my DRs that were purchased after April 27, 2022?
Such DRs cannot be converted into shares. As per Federal Law No. 114-FZ dated April 16, 2022, the right to use conversion belongs only to the holders of the depositary receipts whose ownership rights to such receipts already existed as of April 27, 2022. At the same time, Federal Law No. 319-FZ dated July 14, 2022, provides for a number of exceptions, mainly with regard to the transactions that were in progress on April 27, namely, in the following cases:
- if a transaction was entered into before April 27, 2022, but was not performed by said date, as the respective operations could not be carried out due to hostile actions of foreign governments, international organizations, or foreign financial organizations, including those related to restrictions imposed against the Russian Federation, Russian legal entities and the citizens of the Russian Federation;
- if a transaction was entered into before April 27, 2022, but was scheduled to be performed on a later date;
- if the DRs were transferred to a new holder after April 27, 2022, within the second leg of the respective repo transaction which was entered into before said date;
- if the DRs were transferred to a new holder after April 27, 2022, on the basis of universal succession as a result of enforced collection of pledged property or due to circumstances that were beyond the control of the parties.
Will I be able to sell the shares after the conversion?
Russian residents can sell the shares after the conversion. Matters pertaining to the disposal of shares of Russian issuers by persons who do not reside in the Russian Federation are governed by the Russian President’s Decree No. 95 dated March 5, 2022, and the clarifications thereto.
Whom should I contact if I have any other questions?
You may contact:
- the issuer of the DRs, i.e. The Bank of New York Mellon (www.adrbnymellon.com/resources/contact-us);
- the depository of Gazprombank (email@example.com);
- the division for institutional investor relations of PJSC Gazprom (firstname.lastname@example.org).