Debt-For-Equity Swaps: Problem Solved?

    May 2010

    In late 2009 a new law was adopted allowing companies to swap debt for their shares or participatory interests by setting off claims against a company when it increases its charter capital. This law was adopted as part of the measures to overcome the consequences of the global financial crisis. Pursuant to new provisions, financially strapped companies may use the new mechanism to restructure their debt. However, in setting off the claims towards payment for charter capital both the company and its creditors need to take into account a number of applicable legal requirements and keep in mind potential risks. The authors of this article have reviewed these new legal provisions from the perspective of practical issues which the debtor and the creditor may face in debt-for-equity swaps.

    This article is published by permission of the Aktsionerny Vetsnik.