is a legal entity designated by the issuer that represents and defends the rights and interests of investors, primarily before the issuer, the guarantor, as well as other persons and authorities, including in courts.
In the Russian Federation, the approval of the Representative takes place simultaneously with the issuance of the Release Decision, which often indicates the legal entity chosen for this role or the procedure for its appointment. Thus, immediately prior to the issue, the representative is approved by the issuer. After the issue of bonds, the bondholders’ representative is elected by the General Meeting of Bondholders. At the same time, General Meeting of Bondholders has the right to re-elect a Representative, including instead of the one previously appointed by the issuer or previously determined by the General Meeting.
One of the existing market participants, such as a dealer, broker
, (special) depository
, credit institution or management company, mutual fund, non-state pension fund, or a company founded in accordance with the legislation of the Russian Federation and operating for at least 3 years, can be elected as a bondholders’ representative.
Functions of the Representative of bondholders and similar institutions in the Russian Federation and world practice:
1) control over the actions of the issuer, including in the field of completeness of information disclosure, implementation of decisions of the General Meeting of Bondholders, maintenance of the financial performance of the issuer, etc.;
2) appeal to the court on behalf of investors;
3) participation in negotiations with the issuer on behalf of bondholders;
4) ensuring proportional distribution of payments (in case of default
5) providing the issuer with protection from an unconstructively minded bondholder;
6) identification of circumstances that affect the rights and interests of holders, informing bondholders about such circumstances, as well as taking appropriate measures;
7) transfer of funds and transfer of non-monetary property to bondholders.
Analogues of the Bondholders’ Representative in other countries:
1) Trustee (Attorney of bondholders)
2) Fiscal agent
3) Paying agent
Benefits of appointing a Bondholders’ Representative:
1) coordination of actions of bondholders in communication with the issuer;
2) resolution of conflicts between investors and the issuer (the role of an intermediary);
3) permanent public monitoring of the issuer’s activities, including in the field of information disclosure;
4) for the issuer, the attractiveness of the issue increases due to the good reputation of the appointed Representative.
Examples of the Bondholders’ Representative are Legal Capital Investor Services
for the issue of ER-Telecom Holding, PBO-02-02
and Region Finance
for the issue of MV Finance, 001Р-03