ЗАКОН ГРУЗИИ О владении дематериализованными ценными бумагами

ON HOLDING OF DEMATERIALISED SECURITIES

 

Article 1– Scope of the Law

1. This Law regulates relations associated with the holding and circulation of dematerialised securities. Issues that are not regulated by this Law shall be regulated by the Law of Georgia on Securities Market and other legislative and subordinate normative acts of Georgia.

2. This Law shall apply to the dematerialised securities that are held in Georgia, namely as follows:

a) government securities determined by the Law of Georgia on Public Debt;

b) shares issued by joint-stock companies in accordance with the legislation of Georgia;

c) debt securities issued by joint stock companies or other issuers on the basis of public or private law, including debt securities issued in Georgia by foreign issuers on the basis of public or private law;

d) units of investment funds issued in accordance with the Law of Georgia on Investment Funds;

e) debt securities issued in Georgia by international financial institutions;

f) shares, debt securities, and units of investment funds, issued in a foreign country by Georgian or foreign issuers on the basis of public or private law;

g) depositary receipts related to the securities referred to in this paragraph;

h) any other securities as provided for by the legislation of Georgia.

 

Article 2 – Definition of terms

1. For the purposes of this Law, the terms used herein shall have the following meanings:

a) dematerialised security – a security that exists only as an entry in a securities account;

b) identical dematerialised securities – securities having the same securities identification number. The National Bank of Georgia is authorised to determine, by a legal act, additional cases of considering securities as identical dematerialised securities;

c) securities account – an account (except for an issuer's account), which is maintained by an intermediary and on which securities are credited or debited;

d) intermediary – a financial institution (including a central depository) which, as determined by the legislation of Georgia, is authorised to open and maintain a securities account for a client;

e) account holder – a person in whose name an intermediary maintains a securities account, whether that person is acting on behalf of its own account or for others (including in the capacity of an intermediary);

f) investor – an account holder (who, among others, may be an intermediary) who acts only in its own interests in relation to dematerialised securities. An investor shall have the right to ownership of the dematerialised securities in accordance with Article 6 of this Law;

g) central depository – the National Bank of Georgia and/or a central depository as determined by Article 2(50) of the Law of Georgia on Securities Market;

f) measures for securing an obligation – measures applied in accordance with the legislation of Georgia, which are intended to ensure the performance by a person of an obligation provided for by the legislation of Georgia and/or a contract, and which include any procedural compulsory enforcement measure (including measures for securing a claim and the enforcement of a decision) and the means of securing claims as provided for by the Tax Code of Georgia and the Civil Code of Georgia (including measures for securing the enforcement of the payment of tax liabilities, a pledge, and a mortgage);

i) reconciliation – a comparison of the internal records of an intermediary with the records of another intermediary or other persons in order to certify the accuracy of the data contained in them and to identify the correct data;

j) omnibus segregated account – an omnibus segregated account as provided for by Article 2(69) of the Law of Georgia on Securities Market;

k) individual segregated account – an individual segregated account as provided for by Article 2(70) of the Law of Georgia on Securities Market.

2. Other terms used in this Law shall have the meanings as defined in the Law of Georgia on Securities Market and other legislative and subordinate normative acts of Georgia.

 

Article 3 – Legal nature of dematerialised securities

1. The dematerialised securities held in a securities account are generic.

2. Provisions regarding a bailment contract as provided for by the Civil Code of Georgia shall apply to the relations between an intermediary and an account holder, taking into account the requirements of this Law and the features of dematerialised securities. In the case of a mixed contract between an intermediary and an account holder, it shall also be subject to the provisions regarding the contracts that are closest to the essence of performance and correspond to it.

 

Article 4 – Acquisition and disposition of dematerialised securities

1. Dematerialised securities are acquired and disposed of by the credit or debit of the dematerialised securities to an account holder's securities account.

2. The acquisition, disposition, and holding of dematerialised securities shall be rendered effective against third parties without any further action or condition.

3. An intermediary is obliged to follow the instructions of an account holder or his/her/its proxy holder in accordance with the agreement concluded between the intermediary and the account holder.

4. The right to a pledge of dematerialised securities (except for financial collateral) shall arise by making an entry in the relevant securities account or according to the procedure established by paragraph 1 of this article.

5. The emergence of financial collateral and the relations related to it shall be regulated by the Law of Georgia on Financial Collateral Arrangements, Netting and Derivatives.

 

Article 5 – Regime of holding

1. An intermediary may hold dematerialised securities for a third party's or its own account, either directly or indirectly (through another/other intermediary/intermediaries), in the account opened at a central depository.

2. The number and description of securities held in the accounts opened by an intermediary with a central depository or another intermediary (including foreign intermediaries) shall correspond to the number and description of the dematerialised securities credited to the accounts opened by the account holders with the intermediary.

3. If the number and description of securities held in the accounts opened by an intermediary with a central depository or another intermediary (including foreign intermediaries) do not correspond to the number and description of the dematerialised securities credited to the securities accounts opened by the account holders with the intermediary, the intermediary shall act according to the procedure established by Article 9(1) of this Law, or if the liquidation proceedings have been initiated against the intermediary, it shall act in accordance with Article 7(4) and (5) of this Law.

4. A foreign intermediary shall implement preventive measures, maintain information/documents, and be subject to regulation/supervision in accordance with the recommendations of the Financial Action Task Force (FATF).

 

Article 6 – Ownership rights to dematerialised securities

1. The crediting of dematerialised securities to a securities account opened for an investor shall give rise to the investor's shared ownership right, in proportion to the number of securities credited to that securities account, to the combination of identical dematerialised securities credited to the omnibus segregated account maintained by a central depository or an intermediary, to which the dematerialised securities of the respective investors are credited. The provisions on joint ownership and co-ownership rights provided for by the Civil Code of Georgia shall not apply to the shared ownership right determined by this paragraph.

2. The crediting of dematerialised securities to a securities account opened for an investor shall give rise to the investor’s ownership right to the dematerialised securities credited to the corresponding individual segregated account maintained by a central depository or an intermediary.

 

Article 7 – Exercising rights, derived from the ownership right to dematerialised securities, in relation to an intermediary and a central depository

1. An investor shall have the right to exercise rights, deriving from the ownership right to the dematerialised securities, only in relation to the intermediary with which the investor maintains the dematerialised securities, or in relation to a central depository, if the investor maintains the dematerialised securities directly with it. The following cases shall be exceptions:

a) the exercise of the rights related to the restitution of dematerialised securities in accordance with this article in the case of the liquidation of the intermediary or, in view of paragraph 10 of this article, the introduction of a resolution regime in relation to the intermediary;

b) the application to an issuer of contractual requirements or corporate rights derived from dematerialised securities;

c) the introduction in respect of an issuer of the regime provided for in Article 2(w) of the Law of Georgia on Financial Collateral Arrangements, Netting and Derivatives, in which case the rights are exercised in relation to the issuer.

2. An intermediary may exercise the rights provided for in paragraph 1(b) of this article on behalf of an investor, including in accordance with the concluded agreement.

3. In the case of the liquidation of an intermediary, a combination of identical securities maintained by a central depository in the name of the intermediary, or on an omnibus segregated account maintained by another intermediary (including foreign intermediaries), shall be claimed by the liquidator of the intermediary collectively on behalf of all account holders. If an individual segregated account is opened by an intermediary in the name of an account holder with a central depository or another intermediary (including foreign intermediaries), the liquidator of the intermediary shall, on behalf of the account holder, claim the securities that are allocated on the respective individual segregated account.

4. If, in the case provided for in paragraph 3 of this article, the combination of identical securities credited to the omnibus segregated account is not sufficient for full restitution of the dematerialised securities credited to the respective accounts, the securities shall be distributed among the account holders in proportion to their rights.

5. If the combination of identical securities allocated to an omnibus segregated account and/or an individual segregated account is not sufficient for the full restitution of the dematerialised securities credited to the respective accounts, the right of claim of the account holders shall also apply to the identical securities held for its own account by the intermediary being in the liquidation proceedings, in the proportion required for the complete satisfaction of the rights of the account holders.

6. Account holders shall have unsecured claims against an intermediary in proportion to the rights that could not be satisfied under paragraphs 4 and 5 of this article.

7. In the case of initiating liquidation proceedings against a mala fide acquirer that is obliged to carry out the restitution of dematerialised securities, an authorised person shall have the right to require that the same number of returnable identical dematerialised securities (if any) be allocated from the liquidation estate.

8. The restitution of dematerialised securities shall be carried out by transferring them to a securities account opened with another intermediary. Another intermediary shall be selected by the liquidator of the intermediary.

9. The liquidation estate of an intermediary being in the liquidation proceedings shall not include securities regarding which the account holders have the right to claim in accordance with paragraphs 3-5 of this article.

10. If a commercial bank being in the resolution regime is an intermediary, when introducing the resolution regime against it, paragraphs 3-9 of this article shall be applied, taking into account the requirements of the Law of Georgia on Commercial Bank Activities.

 

Article 8 – Ensuring the integrity of the issuance

1. A central depository shall take appropriate measures related to reconciliation in order to ensure that the number of dematerialised securities held at the central depository, which were issued within the framework of a single issuance of securities or part of the issuance of securities held in the central depository, is equal to the sum of the dematerialised securities existing in the securities accounts maintained by the central depository. A central depository shall carry out reconciliation as provided for in this paragraph with the frequency determined by the National Bank of Georgia.

2. Where necessary, if other persons are involved in the process of the reconciliation of a certain category of dematerialised securities, in order to ensure the integrity of the issuance, these persons and a central depository shall exchange information and cooperate with one another.

3. There shall not be a negative balance on the dematerialised securities accounts maintained by a central depository.

 

Article 9 – Liability

1. If the number of identical securities allocated by an intermediary in the accounts maintained by a central depository or another intermediary (including foreign intermediaries) is less than the number of identical securities credited to the securities accounts opened by the account holders with the intermediary, the intermediary shall:

a) if this discrepancy is caused by its fault, increase the number of securities in the accounts maintained by the central depository or another intermediary (including foreign intermediaries) by the appropriate amount;

b) if this discrepancy is caused by force majeure:

b.a) ensure the recovery of the lost dematerialised securities;

b.b) if the dematerialised securities cannot be fully recovered, reduce the number of dematerialised securities in the securities accounts of the affected account holders.

2. If, in the case provided for in this article, an intermediary has opened both an omnibus segregated account and an individual segregated account with a central depository or another intermediary (including a foreign intermediary), for the purposes of reducing the number of securities credited to the securities accounts opened by the account holders with the intermediary, only the relevant number and description of the securities credited to the respective omnibus segregated account or individual segregated account shall be taken into consideration. Identical securities credited to an omnibus segregated account shall be distributed among the affected account holders in proportion to their rights.

 

Article 10 – Payment of dividends, interest, and principal amount

1. An issuer shall make the appropriate amount available in a predetermined bank account for the purposes of the payment of dividends, interest, and principal amounts related to the dematerialised securities. After the said amount becomes available, the issuer shall be discharged from the corresponding obligation, unless it becomes impossible to use that amount due to a seizure or other measures for securing an obligation.

2. A central depository shall transfer the amount referred to in paragraph 1 of this article to the accounts of the intermediaries upon maturity, in proportion to the dematerialised securities maintained in their name, which shall discharge the central depository from the corresponding obligation.

 

Article 11 – Proof of ownership right

The ownership right to the dematerialised securities shall be proven by a credit balance on the securities account, which shall be certified by the statement of account issued by a respective intermediary. Upon the request of an account holder, an intermediary shall issue a document certifying that person's ownership right to the dematerialised securities.

 

Article 12 – Bona-fide acquirer

Article 187(1) of the Civil Code of Georgia shall apply to bona-fide acquirers. Bona-fide acquirers cannot become the owners of dematerialised securities if they have acquired the dematerialised securities free of charge.

 

Article 13 – Application of the law of an appropriate country to individual matters

The matters provided for in this article shall be regulated by the law of the country where the respective securities account is opened. Such matters shall be as follows:

a) the legal nature and consequences of the rights, deriving from the holding of dematerialised securities in a securities account, against an intermediary and third parties;

b) the legal nature and consequences of the rights, deriving from the disposal of dematerialised securities held in a securities account, against an intermediary and third parties;

c) requirements related to the validity of the disposal of dematerialised securities held with an intermediary;

d) the issue of the emergence and annulment of rights to dematerialised securities held with an intermediary, or the priority of such rights in relation to the rights of a third party;

e) the duties of an intermediary towards other persons (except for the account holders) who make claims regarding the dematerialised securities held with the intermediary;

f) in the case of the disposal of dematerialised securities held with an intermediary, the issue of the transfer to the acquirer of the rights to dividends or other distributions related to the dematerialised securities, or to the income received/receivable as a result of repurchase, settlement, or sale, or other income.

 

Article 14 – Powers of the National Bank of Georgia

The National Bank of Georgia shall be authorised, along with exercising the powers granted to it under the Organic Law of Georgia on the National Bank of Georgia, to issue legal acts which shall:

a) regulate issues related to the maintenance of securities accounts, including the issue of the emergence of the right to a pledge as referred to in Article 4(4) of this Law;

b) determine the form of a document to be issued to an account holder, and the procedure of its issuance;

c) determine the procedure for the payment of dividends, interest and principal amounts in relation to dematerialised securities;

d) determine the frequency of the carrying out of reconciliation by a central depository.

 

Article 15 – Transitional provision

The National Bank of Georgia shall, before 1 March 2024, issue the legal acts provided for in Article 14 of this Law.

 

Article 16 – Entry into force of this Law

1. This Law, except for Articles 1-13 of this Law, shall enter into force upon its promulgation.

2. Articles 1-13 of this Law shall enter into force on 1 March 2024.

 

 

 

President of Georgia                                                    Salome Zourabichvili

 

Tbilisi,

16 November 2023

No 3713-XIII მს -X მპ