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. Last Updated: 07/27/2016

British to Aid Russian Firms Float Shares

The British government announced a model program Wednesday to help Russia's new private companies unlock the mysteries of equity markets and issue stocks to raise badly needed capital.


The program, a joint project between the British Know-How Fund and the Russian Securities Commission, will spend ?3-4 million ($4.5-6 million) to assist eight Russian companies and create a model that other enterprises can follow.


A separate program will also attempt to identify and assist brokers who could manage and distribute the shares.


"The purposes of the program are to introduce good quality shares for issue and trading in key domestic markets, as well as to demonstrate to those markets how well-managed companies can further their development by raising new equity," said Arnold Shipp, director of Samuel Montagu, a British merchant bank that is participating in the project.


The focus of the entire Western aid effort has shifted in the past six months from attempting to help Russia privatize to helping the privatized companies survive. The United States has created two funds that together will offer up to $400 million in equity and loans to the enterprises, while the European Bank for Reconstruction and Development also plans to invest several hundred millions dollars.


The British program, much smaller in scope, will select two companies in each of four regions -- Moscow, St. Petersburg, Perm and Yekaterinburg. British financial firms will advise the companies in structuring equity issues and registering shares.


Officials have yet to choose the companies, but stressed they will be looking for the financially most healthy enterprises because they want the share issues to succeed.


To be considered for the program, the companies must have quality management, low debt and good long-term prospects. In addition, the state must not hold more than a 20 percent interest in the enterprise.


"What we are seeking to do is give impetus to the market," Shipp said at a press conference. "In order to do that, you have to start with the best and it's absolutely imperative that the first issues succeed."


With many Russian companies heavily in debt and their future uncertain, Shipp acknowledged that the program might have to relax its standards if it cannot find companies that meet the initial criteria.


Dmitry Vasiliev, deputy chairman at the State Property Committee and also deputy chairman of the Russian Securities Commission, said the country still lacks many of the securities laws that it needs to safeguard investors and regulate the market.


"There is more to be done," he said. "We need a law on joint-stock ventures and a law on the market."


He said that the government is considering a tax break for people who buy and sell shares. For example, workers who received shares of their company in the privatization process will be able to sell them tax-free.