The registration of securities ensures the enforceability of shareholders’ ownership rights, a higher degree of circulation safety and greater trust on the part of investors, partners and financial institutions.
The Nasdaq CSD records securities issues in book-entry form and allocates an International Securities Identification Number (ISIN) to each securities issue. The Nasdaq CSD is a national numbering agency and has the authority to assign ISINs to financial instruments issued in Estonia, Latvia and Lithuania.
The following types of financial instruments may be registered in the CSD: equities, debt instruments, rights and options. The registration of other financial instruments could potentially be added if there was sufficient client demand.
The Nasdaq CSD provides the initial recording of securities and admits such securities to the settlement system specified by the issuer, provided the securities for which admission is requested comply with the following general admission criteria:
- Law under which the securities are constituted allows securities to be represented in book-entry form subsequent to a direct issuance in dematerialized form;
- Law under which the securities are constituted does not prohibit securities to be validly issued and transferred in the Settlement System to which admission is requested;
- All securities of the same issue are fungible;
- Admission of securities complies with the requirements of the law applicable to the Settlement System to which the admission is requested.
As a general rule, the Nasdaq CSD admits securities to the “home” Settlement System for the respective Issuer:
- Shares of companies registered in Estonia and other securities constituted under Estonian law are admitted to Estonian Settlement System;
- Shares of companies registered in Latvia and other securities constituted under Latvian law are admitted to Latvian Settlement System;
- Shares of companies registered in Lithuania and other securities constituted under Lithuanian law are admitted to Lithuanian Settlement System.
The Nasdaq CSD may also admit securities of a foreign issuer seeking to exercise the freedom of issue (an issuer incorporated in a different jurisdiction from that of the settlement systems where initial recording of securities is applied for) to any settlement system, provided the issuer complies with the admission requirements.
The registration of shares of a private limited company on the Nasdaq CSD is optional. If a private limited company registers its shares, the company will free itself from the need to carry out notarial procedures related to shares and ensure its owners a neutral and safe record-keeping of the shares.
A legal entity which seeks the right to issue securities in one or several of the Nasdaq CSD’s SSSs must submit a standard application form and supporting documents. After receiving an application, the Nasdaq CSD will decide whether to initially record and admit securities to the settlement system specified by the issuer no later than within three months, or more rapidly if so provided by the applicable law.
The CSD has the right to request additional information and documents within 15 business days after the date an application is submitted if:
- Information provided in the application or supporting documentation is inaccurate, misleading or incomplete;
- Additional information or documentation is necessary to assess the applicant’s compliance with the requirements and admission criteria;
- Additional information or documentation is necessary for carrying out a comprehensive risk assessment provided by Article 49 (3) of the Regulation (EU) No 909/2014.
If admission is requested by a foreign issuer, the Nasdaq CSD shall have the right to request that the issuer provide, at its own expense, a reasoned and independent legal opinion from a reputable law firm or attorney-at-law in the form and substance acceptable to the depository, demonstrating and establishing that possible conflict of laws issues would not jeopardize compliance with admission criteria.
Registration of equities
Documents to be submitted to the Nasdaq CSD by issuers of equities:
- An application for the registration of shares;
- Articles of association;
- A specimen signature of a board member, if electronic signature is not an option;
- List of shareholders;
- The foundation agreement or a notarized copy of the foundation resolution;
- In case of any existing share pledges (in case of limited liability company), a corresponding application must be submitted for their registration.
After the documents are submitted, the Nasdaq CSD will verify whether they meet the requirements. If they do, then the Nasdaq CSD will make the necessary (register) entries within five business days.
An application for registration and additional documents may be submitted to the Nasdaq CSD:
- By mail;
- By e-mail signed with a digital signature;
- On the spot at the Nasdaq CSD local offices.
Deregistration of equities
The shares of a company entered in the register shall be deleted from the register upon:
- Dissolution of the company after the termination of the liquidation or bankruptcy proceedings;
- Dissolution of the company in the event of merger or division;
- Transformation of a public limited company into a private limited company, the shares of the private limited company shall be deleted from the register on the basis of an application of the issuer;
- Shareholders’ decision to deregister shares from the Depository, if the shares are not pledged.
The process of deregistration from the depository is initiated before an application is submitted to the Commercial Registry, but shares are deleted from securities accounts after the relevant entry is made in the Commercial Registry.
Registration of debt securities
In order to hold debt securities with the depository, registration of the securities in the central registry must be specified in the issue terms and conditions. The registration of debt securities makes it easier for a company to manage them.
Holding debt securities in the central registry also makes it easier for a company to obtain bank loans. For investors, it facilitates the purchase and sale of the securities. In addition to including the option of registration in the issue terms and conditions, it is also necessary to provide for the relinquishment of the issuing of paper certificates of ownership for the securities.
In order to register debt securities, a company must provide the Depository with:
- Application to register the securities;
- A list of investors, including the numbers of their securities accounts;
- The issuer’s articles of association;
- In case of registration of a public issue of securities, a certified copy of the registration certificate of the issue, including the prospectus or the issue terms and conditions of the securities;
- The business name and the registry code of the payment agent, if the payment agent is determined;
- The issue terms and conditions.
Once the properly completed documents are submitted, the Nasdaq CSD makes the necessary entries in the central registry. When entered into the central registry, securities are given a unique internationally acknowledged identification code (ISIN) and transferred to the investors’ securities accounts within no more than five business days.
Redemption of debt securities
The cancellation of debt securities takes place on the redemption date, when the company buys the debt securities back and redemption payments are made to the investors. For debt securities on this day these debt securities are deleted from the investors’ securities accounts.
In order to cancel the debt securities, the issuer company must provide to the CSD:
- Application for redemption of debt securities from the registry;
- A list of investors in case of partial redemption of securities. The list of investors includes the name of the owner of the debt security, personal identification code/registry code, the number of the securities account, and the number of securities to be deleted;
- Other special instructions.
The CSD makes the deletion entries of securities within two working days following the reception of the application, if the application does not set forth a longer deadline for making the entries.
Obligations of registered companies
After the shares of a company have been registered in the Nasdaq CSD, the issuer is required to notify the depository as the keeper of the register of all circumstances concerning amendments to rights and obligations related to issued securities. The circumstances to be notified are as follows:
- Increase/reduction of nominal value;
- Changes in share capital• merger;
- Fund issue;
- Changes in issue terms;
- Payments from shares;
- The adoption of a liquidation resolution by the issuer or initiation of bankruptcy proceedings with regard to the issuer;
- Changes in management;
- Change in company’s name;
- Changes in company’s contact details.