Investors suggested the Central Bank update the corporate code to protect minority shareholders

The ARI letter was addressed to the first vice president of the Central Bank, Vladimir Chistyukhin. In it, the association emphasized the need to strengthen the protection of the rights of retail investors and presented a series of measures to improve the interaction of companies with minority shareholders and increase transparency.

Top ARI Offers

Independent director from minority shareholders

ARI proposes to introduce the possibility of including on the boards of directors of companies an independent director who represents the interests of retail investors. Currently, minority shareholders can nominate their candidate if they own at least 2% of the shares, which is difficult to achieve due to the large number of shareholders. ARI offers two ways to solve this problem:

• The majority shareholder appoints a representative of the minority shareholders from a list of candidates drawn up by the relevant association.
• The issuer creates an advisory body from which an independent director is elected to protect the interests of minority shareholders.

Expansion of financial information

To ensure transparency, ARI proposes requiring companies to disclose financial metrics such as adjusted net income, cash flow, and earnings per share. These indicators must be published for the last year, the previous four years and a forecast for next year. It is also recommended to include information on key performance indicators (KPIs) and the implementation of the company’s strategies, as state-owned companies do, the letter notes.

Strengthen communication channels with shareholders

ARI considers it important to develop communication channels with retail investors. This includes holding hybrid shareholder meetings, investor days, tours and educational programs. The association also proposes to use modern communication channels, such as instant messaging and applications, and to appoint a person responsible for investor relations (IR specialist).

Simplifying electronic voting

For the convenience of retail shareholders, ARI recommends introducing electronic voting through brokerage applications. This will create a single interface where investors will be able to buy shares and vote on key issues simultaneously.

Transparency of dividend policy

The association proposes to enshrine in the code a transparent mechanism for determining and paying dividends. This will reduce the likelihood of abuse when minority shareholders miss out on profits. ARI emphasizes that for minority shareholders, dividends are the only way to receive income from shares.

Regulation of quasi treasury shares

The association also draws attention to the need to regulate quasi-owned shares transferred to the issuer’s subsidiaries. ARI emphasizes that such shares should be subject to voting and dividend bans to avoid redistribution of control and reduced payouts to actual investors.

Protection of the rights of minority shareholders during redomiciliation

The ARI considers that companies registered abroad but operating in Russia, when selling assets, should offer to purchase shares from dissident shareholders. This will eliminate cases where minority shareholders lose the opportunity to participate in decisions about the sale of company assets.