The Bank of Russia has initiated a significant reform of the bondholders’ representatives (PVO) framework. The goal is to transform what has been a largely formal mechanism into an effective tool for protecting investors’ rights, particularly during crises and defaults. The longstanding issues of PVO passivity, conflicts of interest, and low market participation requirements have reached a critical point.

In a detailed feature by Kommersant, Alexander Kuznetsov, Partner and Head of the Capital Markets Practice at VERBA LEGAL, commented on the main problem limiting the effectiveness of the PVO system.

“The key issue with the PVO institution is the passivity and formalistic approach of some representatives to their duties. They often restrict themselves to minimal reporting and fail to act proactively in critical situations such as defaults or restructurings.

The regulatory framework itself does not encourage proactive behaviour. For example, there are no legislatively established deadlines for issuers to respond to PVO inquiries regarding circumstances that may affect bondholders’ rights, which can significantly delay engagement.”

Read the full article on the Kommersant website.