Moscow, Russia

Convertible loans as a new instrument in Russian law  

By Nadezhda Minina, Nektorov, Saveliev & Partners

A convertible loan is a popular way of financing companies in multiple jurisdictions. Its essence lies in the right of the lender, upon the occurrence of certain conditions, to receive shares of the borrower instead of a repayment of the loan.

On 13 July 2021, the Law on a Convertible Loan entered into force in Russia and introduced the legal concept of a convertible loan into Russian legislation.

What it was like before

Prior to July 2021, convertible loans were structured in Russian law using complex legal tools that helped to achieve a similar legal effect. Such structures had a significant drawback, i.e., the conversion depended on the decision of the borrower’s shareholders, taken after the conversion condition was met.

What changed

The conclusion of the convertible loan agreement now must be unanimously approved by the borrower’s general shareholders’ meeting resolution (“BGSM”). This resolution is in fact a resolution to place shares in favour of the borrower. The assignment of the right to conversion must also be unanimously approved by the BGSM.

The convertible loan agreement must provide for determination of the conversion price and for conversion triggers – i.e., the term or conditions upon the occurrence of which the lender is entitled to receive the borrower’s shares. The deadline for filing a request for conversion is three months from the maturity date, or upon the fulfilment of the conditions for conversion. If the borrower is an LLC, the agreement is subject to notarisation. If the borrower is a JSC, it is suffcient to draw up an agreement in a simple written form. Information about the concluded convertible loan agreement is included in the unified state register of legal entities, which is publicly available.

The conversion may not take place if the borrower objects. In this case, the lender will need to go to court. A court decision will be the basis for transferring the borrower’s shares to the lender if the court concludes that grounds for conversion are present.


Nadezhda Minina

Nadezhda Minina

GGI member firm
Nektorov, Saveliev & Partners
Law Firm Services
Moscow, Russia
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Nektorov, Saveliev & Partners is a law firm established in 2006 in Moscow, Russia, focused on providing comprehensive legal solutions to corporate and private clients under Russian and English law. Their main practice areas are public-private partnership, tax, corporate and M&A, arbitration and litigation, banking and finance, investments, and real estate. They provide legal support to clients in Russia, CIS countries (Belarus, Kazakhstan, Ukraine), and worldwide.

Nadezhda Minina is an attorney at Nektorov, Saveliev & Partners. She specialises in capital markets, investment transactions and M&A. She studied at Moscow State University, Humboldt University in Berlin, and the University of Regensburg (Germany), and is fluent in Russian, German, and English.


Published: M & A Newsletter, No. 01 Autumn 2021 l Photo: Dmitry Vereshchagin - stock.adobe.com

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