Riga Stock Exchange decides to retain Free list

23.10.2003 RIG

The RSE Supervisory Board has supported the recommendations developed by the Management Board with regard to Free list issuers after January 1, 2004. The RSE has decided not to dissolve Free list and retain it at the RSE. Pursuant to the amendments to the RSE Enforcement Note on Securities Lists, there will not be any quantitative criteria for Free list issuers. This means that any public joint stock company registered in Latvia will be able to list on the RSE irrespective of the size of share capital, capitalisation, profitability, number of shareholders, number of public shares, or any other criteria. The provision that each Latvia-registered stock exchange should maintain a list of this type is included in the new “Financial Instrument Market Law”.

As a part of strategic movement from quantity to quality, in 2001 the RSE announced on the intention to close Free list from 2004. The RSE was and still is pursuing the objective to offer high quality issuers to the market that would be observing the interests of minority shareholders and corporate governance principles. The dissolution deadline was set:

1)     Pursuant to the provisions of the law “On Securities”, stipulating that the majority shareholders who have obtained control interest in the company as a result of privatisation, had a grace period ending on September 26, 2003, with regard to mandatory share buyout offer;

2)     Most of Free list companies had a control interest holder on the said date.  This allowed minority shareholders to freely transfer their shares in a regulated market environment, and till the moment when control interest holder announces share buyout offer.

Unfortunately, the sub-optimal buyout results evidence that the majority shareholders do not care for minority shareholders, and they seek every opportunity  to avoid the obligation to express the buyout offer. Considering an earlier resolution by the RSE Management Board regarding dissolution of Free list, a large number of investors, including those who participated in public privatisation offer for privatisation certificates, found themselves in a disadvantageous situation. In contrast to the shareholders of Official and Second list issuers, Free list minority shareholders, in fact, in future would be deprived of the possibility to transfer their shares. 

In order to protect the interests of minority shareholders, the RSE discussed the situation with the Financial and Capital Market Commission, banks and brokerage companies, and reached a common understanding how to resolve the issue. The tools have already been included in the draft “Financial Instrument Market Law”. The amendments stipulate that all regulated market places in Latvia have to provide listing without any quantitative criteria.

The present Free list companies, in order to continue their listing, have to sign an agreement with the RSE by the end of the year. The rest of Free list companies will be delisted starting with January 1, 2004.

Supervisory Board meeting also approved the amendments to the RSE Enforcement Note on Fees for Services Provided by the RSE, providing for introducing annual listing fee LVL 5,000. The fee has been set proceeding from the costs arising from the share quotation and servicing.

Guntars Kokorevičs, President of the Riga Stock Exchange, says: “Though it was clear already in 2001 that the provisions of the law will not be sufficient to protect the interests of minority shareholders, however, we were not prepared that majority shareholders would neglect the interests of minority shareholders to such extent. The holders of control interest in public companies have to be aware that obtaining a half of the company shares is not a reason for disposing with the entire company at own discretion, and for neglecting the interests of minority shareholders. In fact, the fee collected by the RSE is rather the cost of the infrastructure the company is offering its shareholders to freely transfer shares, than a fee to the exchange. If a company happens to be a public company, it has to take care of all its shareholders – and not the holder of control interest only.”

Irrespective of the amendments introduced to the RSE regulations, the RSE would still like not to associate itself with most of Free list companies: we believe these are the consequences of privatisation. Considering our responsibility for the processes going on in this market, we could not stay aloof because of the tens of thousands of people who bought the shares in public privatisation offers for privatisation certificates. We hope that, in long-term, a part of the companies will be willing and able to qualify for Second list, whereas the remaining Free list companies will exit from public market after fully meeting their commitments to minority shareholders.

We would also like to add that such list without any quantitative requirements is clearly in contradiction with the RSE strategic goals concerning a transparent and open market, as well as with the EU directives that regulate capital markets.”

 

For more information, please contact:
Krista Grintale
Corporate Communications Director
Riga Stock Exchange/Latvian Central Depository
Phone: +371 7212431