Q&A regarding issuers’ disclosure of information on relations with foreign countries of the risk zone

The NSSMC (National Securities and Stock Market Commission) provides answers to frequently asked questions regarding the NSSMC`s Resolution No. 181 dated 04/24/2023 on Establishing the Procedure for Disclosure by Issuers of Securities of Information Regarding the Presence of Connections with Foreign Countries of the Risk Zone During Martial Law (with changes) (hereinafter – Resolution No. 181).

1. How and by what criteria should the issuer determine that the counterparty/client is controlled by a foreign country of the risk zone, in particular 50 percent or more, or by other means of calculation?

The concept of control is defined by the Law of Ukraine on Protection of Economic Competition.
Control is the decisive influence of one or more related legal entities and/or natural persons on the economic activity of an economic entity or its part, which is exercised directly or through other persons, in particular thanks to:

– the right to own or use all assets, or a significant part of them;
– the right that provides a decisive influence on the formation of the composition, voting results and Resolutions of the management bodies of the economic entity;
– conclusion of agreements and contracts that make it possible to determine the conditions of economic activity, give mandatory instructions or perform the functions of the management body of the economic entity;
– replacement of the position of head, deputy head of the supervisory board, board, other supervisory or executive body of the economic entity by a person who already holds one or more of the specified positions in other economic entities;
– holding more than half of the positions of members of the supervisory board, board, other supervisory or executive bodies of the economic entity by persons who already hold one or more of the specified positions in another economic entity.
Related persons are legal entities and/or natural persons who jointly or jointly carry out economic activities, including jointly or jointly influencing the economic activities of the business entity. In particular, related natural persons are those who are spouses, parents and children, brothers and (or) sisters.

2. According to Resolution No. 181, it is necessary to provide information on relations with the states of the risk zone. Is it necessary to carry out an analysis only by citizenship and take into account the country in which the counterparty is a resident?
According to subparagraphs 1-2 of paragraph 2 of Resolution No. 181, it is stated that the information on the presence of natural persons in the issuer’s property structure includes persons who have the citizenship of a foreign country of the risk zone and/or whose permanent residence is a foreign country of the risk zone.
In addition, in accordance with subparagraph 4 of paragraph 2 of Resolution No. 181, information on the presence in the issuer’s management bodies of natural persons who have the citizenship of a foreign state of the risk zone is indicated.

3. What amount of information must be disclosed regarding the ownership structure, in accordance with subparagraphs 1-3 of paragraph 2 of Resolution No. 181?
The composition and volume of information that must be disclosed regarding the ownership structure is determined by Clause 1 of Appendix 1 of Resolution No. 181.

4. Will the information from the Unified State Register of Legal Entities, Individual Entrepreneurs and Public Organizations be sufficient about the owners of legal entities, the founder, participant, shareholder of which is the issuer together with the persons specified in subparagraphs 1-3 of clause 2 of Resolution No. 181?
The issuer independently determines the ways of collecting information for the implementation of Resolution No. 181. At the same time, the issuer is responsible for the reliability of the disclosed information.

5. Is it necessary for banks to duplicate information for the National Bank of Ukraine about the composition of issuers that include banks, if such information is provided to the National Bank of Ukraine?
The first part of Article 5 of the Law of Ukraine on State Regulation of Capital Markets and Organized Commodity Markets, establishes that state regulation of the securities market is carried out by the NSSMC. Other state bodies exercise control over the activities of securities market participants within the limits of their powers defined by current legislation.
Resolution No. 181 was adopted in accordance with Article 6, Clause 3726 of the second part of Article 7, Clause 13 of Article 8 of the Law of Ukraine on State Regulation of Capital Markets and Organized Commodity Markets, in connection with the introduction of martial law in accordance with Decree of the President of Ukraine No. 64/ 2022 dated February 24, 2022, with the aim of minimizing the negative impact of the consequences of the military aggression of the russian federation against Ukraine and promoting the stability of capital markets.
Taking into account the above, issuers of securities, including banks, must by 31.05.2023 disclose all available information regarding the presence of relations with foreign countries of the risk zone from 01.01.2021 to 31.12.2022 in full in accordance with the content, form and methods of submission to theNSSMC, determined by Resolution No. 181.

6. Is it necessary to include information about the bank’s clients who receive banking services and/or to whom the bank provides services within the framework of professional activity in the capital markets on the basis of a license issued by the NSSMC (is it sufficient to provide information on counterparties who are not bank clients)?
According to subsection 5 of paragraph 2 of Resolution No. 181, information on the existence of relations with foreign countries of the risk zone includes the presence of the issuer in business relations with clients/counterparts of the state of the risk zone or clients/counterparts controlled by the state of the risk zone.

7. Should the persons specified in Resolution No. 181 disclose information, in particular, about the bank’s clients to whom banking services are provided (opening and maintaining bank accounts) and information about which constitutes banking secrecy?
Yes, it is necessary to disclose such information.

8. Is it necessary to disclose information about natural persons who have the citizenship of a foreign country of the risk zone, but have a permanent residence permit in Ukraine?
According to Resolution No. 181, it is necessary to disclose information about natural persons who have citizenship of a foreign country of the risk zone and/or whose permanent residence is a foreign country of the risk zone.

9. What is the procedure for disclosing information regarding concluded several contracts with one client/counterparty by a natural person?
According to subsection 4.2 of paragraph 4 of Appendix 1 of Resolution No. 181, for clients/contractors – natural persons, the total value of all contracts is indicated, in total for all contracts of natural persons of clients/contractors.

10. What value of contracts must be disclosed if it changed during the period specified in Resolution No. 181?
In the event of a change in the value of the contracts in the period from 01.01.2021 to 31.12.2022, it is necessary to disclose information about the latest value of the contracts.

11. Is it necessary to provide information to issuers of securities located in territorial communities located in the area of military (combat) operations or temporarily occupied, surrounded (blockade).
The requirements of Resolution No. 181 do not apply to issuers of securities located in territorial communities, located in the area of military (combat) operations or under temporary occupation, encirclement (blockade), in accordance with the list approved by order of the Ministry of Reintegration of the Temporarily Occupied Territories of Ukraine.

12. Is it necessary to disclose information if it is confidential and/or is personal data, the disclosure of which requires a person’s permission, in particular, regarding the place of permanent/temporary residence.
According to Resolution No. 181, it is necessary to disclose information, in particular, about the place of permanent/temporary residence, while only information about the country and the settlement of the place of residence is indicated.

13. If disclosure of information in accordance with Resolution No. 181 through SMIDA is impossible due to a difficult financial situation or suspension of expenditure transactions?
Resolution No. 181 is mandatory for all issuers of securities, except for persons who are in territorial communities located in the area of military (combat) operations or who are under temporary occupation, encirclement (blockade), in accordance with the list approved by the order Ministry of Reintegration of the Temporarily Occupied Territories of Ukraine.

14. Is it necessary to disclose information regarding the existence of business relations with clients/contractors of the risk zone state only if there is a contract with such a client/contractor?
According to the requirements of Resolution No. 181, it is necessary to disclose information about clients/counterparts with whom a contract has been concluded, indicating a description of existing contractual relations.

15. Is it necessary to disclose information regarding the existence of business relations with clients/counterparts of the country of the risk zone, if the client/counterpart had a bank account in which there was no balance of funds during the specified period and no transactions were carried out?
According to the requirements of Resolution No. 181, it is necessary to disclose information about customers/contractors with whom a contract has been concluded, indicating the description of the existing contractual relations, despite the lack of balance of funds and no operations on the account.

16. Is it necessary to disclose information about the existence of business relations with clients/counterparts of the risk zone state if there was no bank account opened, but the funds of such a person were accounted for in account 2903 «Funds of bank clients on inactive accounts»?

Yes, it is necessary to disclose such information.