Russia has adopted legislation that will substantially change the requirements for the acquisition of large percentages of shares in open joint stock companies. The new legislation was enacted in Federal Law No. 7-FZ “On Amendments to the Federal Law ‘On Joint Stock Companies’ and to Certain Other Legislative Acts of the Russian Federation” dated January 5, 2006 ("Law No. 7-FZ") and will take effect on July 1, 2006.
In many jurisdictions, it is unlawful for a company whose shares are being, or have been, acquired to give financial assistance for the purpose of that acquisition. Such financial assistance may take place in the context of an M&A transaction where, before or after the acquisition, the buyer is inducing the target company to provide financial backing for the bid. In essence, this would mean that a company has effectively paid for its own acquisition to the detriment of its minority shareholders and creditors.
