Dividend Claims of Foreign Shareholders in Russia

Hereby we would like to remind foreign shareholders of Russian joint stock companies of their right to receive dividends on shares held in such entities. Despite ongoing restrictions applicable to "unfriendly" jurisdictions, this right remains in force under Russian corporate law.

Procedure and deadlines. Under the current legal framework, dividends transferred by issuers to custodians but not further distributed to foreign shareholders are subject to return to the issuer (Decision of the Board of Directors of the Bank of Russia dated 10 June 2022). As a result, to receive such dividends, shareholders must apply directly to the issuer of the shares. In case the issuer refuses to pay the dividends, the shareholder may bring a lawsuit with a Russian court.

Such dividend claims are subject to a three-year limitation period under Article 42(9) of the Law on Joint Stock Companies. This period runs from the date when the corporate decision to distribute dividends was adopted by the general meeting of shareholders of the issuer. Failure to act within this timeframe results in the loss of the right to claim unpaid dividends.

Chain of custodians and timing. If the shares are held through a chain of foreign and Russian custodians, foreign shareholders must consider the time required to collect the confirmation of ownership on each level of the custody chain. This usually involves obtaining statements and confirmations from each depository in the chain — a process that may take several weeks or even months, depending on the jurisdiction and responsiveness of the intermediaries. This timing should be managed carefully to ensure the claim is submitted to the issuer before the expiration of the three-year limitation period.

Enforcement of payment. If the shareholder is classified as an "unfriendly" foreign person under Russian countersanctions regulations, the dividends — if paid — will be credited to a special Type “C” account opened in the shareholder’s name in Russia – the account normally opened by the depositary. These accounts are subject to various restrictions, including on conversion and transfer of funds abroad. Nonetheless, filing a timely claim is necessary to preserve legal entitlement to the dividends.

Recommended next steps based on ALRUD’s experience: (i) check the limitation period; (ii) prepare to prove the custody chain; (iii) reach out to the issuer; (iv) consider options for unblocking or using funds in Type “C” accounts; (v) consider your local sanctions regulation concerning license procedures if applicable.