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Money and credit - Ivanov V.М.

10.2. Types of securities

In accordance with the Law of Ukraine "On Securities and Stock Exchange" in Ukraine, the following types of securities can be issued and traded: shares, bonds, treasury bonds, savings certificates, bills of exchange, privatization papers.

A share is a security without a fixed circulation term, which attests to the share participation of its owner in the statutory fund of the joint-stock company, confirms membership and the right to participate in the management of the joint-stock company, entitles the owner of the share to receive part of the profit in the form of a dividend, Division of property in the liquidation of a joint stock company. Shares can be registered and bearer, privileged and simple.

Citizens can be owners, as a rule, of registered shares. Preference shares give the holder a preemptive right to receive dividends, as well as priority participation in the division of property of the joint-stock company in the event of its liquidation. Privileged shares may be issued with a fixed percentage of their nominal value, paid annually by the dividend. Dividends are paid in the amount indicated on the share, regardless of the amount of profit received. If the profit is not sufficient, payment of dividends on preferred shares is carried out at the expense of the reserve fund. Privileged shares may be issued for an amount not exceeding 10% of the statutory fund of the joint-stock company. The promotion must contain the following requisites:

• the company name of the joint-stock company;

• name of the security - "share";

• serial number;

• release date;

• type of share and its nominal value;

• the name of the owner (for registered shares);

• the size of the statutory fund of the joint-stock company on the day of issue of shares;

• number of shares;

• the term of dividend payment and the signature of the chairman of the board of the joint-stock company;

• seal of the joint-stock company.

The decision to issue shares is made by the founders of the joint-stock company or by the shareholders' meeting. Issue of shares by the joint-stock company is carried out in the amount of its authorized fund or for the whole value of the property of the state enterprise. The additional issue of shares is possible if all previously issued shares are fully paid at least equal to their face value. Issue of shares to cover losses associated with the economic activities of the joint-stock company is prohibited.

A joint-stock company may buy shares from shareholders for the purpose of their subsequent resale, distribution to their employees or cancellation.

Dividends on shares are paid at the end of the year at the expense of profits, which remains at the disposal of the joint-stock company after paying taxes provided by law, other payments to the budget and interest on a bank loan.

Bond is a security that indicates the depositing of certain money by its owner and confirms the issuer's obligation to reimburse the nominal value of this security for the period stipulated therein with the payment of a fixed interest. There are bonds:

• enterprises;

• domestic republican and local loans. Bonds of enterprises are issued by enterprises of all forms

Property, their associations, joint-stock companies and other companies and do not give their owners the right to participate in management. Bonds may be registered and bearer, interest-bearing and interest-free (target), freely negotiable or with limited circulation. Bonds of domestic republican and local loans are issued to the bearer. The obligatory requisite of the target bonds is the indication of the goods (services) for which they are issued. The decision on the issue of bonds of domestic republican and local loans is made respectively by the Cabinet of Ministers of Ukraine and local councils of people's deputies. The decision should specify the issuer, the terms of the issue and the order of placement of bonds. The decision on issuing bonds of enterprises is made by the issuer and executed by a protocol. Joint-stock companies may issue bonds in an amount not exceeding 25% of the statutory fund and only after full payment of all issued shares. Issue of bonds of enterprises for the formation and replenishment of the authorized capital of issuers, as well as to cover losses associated with their economic activities, is not allowed. Bonds of all kinds are bought by citizens solely at the expense of personal funds. Enterprises buy bonds at the expense of funds coming into their disposal after paying taxes and interest for a bank loan. The yield on the bonds of the targeted loans is not paid, their owner is given the right to purchase the relevant goods and services for which loans have been issued. For corporate bonds, incomes are paid at the expense of funds left after settlements with the budget and payment of other mandatory payments. In the event that the issuer fails to fulfill its obligations to pay income, fails to provide the right to purchase the relevant goods or services on interest-free bonds or repays the amount in the bond within the specified period, the relevant amounts are forcibly retained in court. Funds received from the implementation of domestic republican or local loans are channeled to the republican and local budgets, to extra-budgetary funds of local councils of people's deputies, respectively.

Treasury obligations are a type of bearer securities that are placed exclusively on a voluntary basis among the population. They testify that their owners make money to the budget and give them the right to receive financial income.

Such types of treasury bonds are issued:

• Long-term (from 5 to 10 years);

• medium-term (from 1 to 5 years);

• Short-term (up to 1 year).

The decision to issue long- and medium-term commitments is made by the Ministry of Finance of Ukraine. Funds from the implementation of treasury obligations are used to cover current expenditures of the republican budget.

Savings certificates - a written certificate of the bank on the deposit of funds, confirming the right of the depositor to receive the deposit and interest on it after the deadline. Savings certificates are issued urgent (for a certain contractual interest and for a certain period) or on demand, nominal and bearer. Nominal certificates are not subject to circulation, and their sale to other persons is invalid. Savings certificates income is paid upon presentation of them for payment to the bank that issued these certificates. In the event that the holder of the certificate requires the return of the deposited funds under the express certificate earlier than the period stipulated therein, an undercharge is paid to him, the level of which is determined on the contractual terms when making a deposit.

Bill - a security, which indicates an unconditional monetary obligation of the drawer to pay after the time limit a certain amount of money to the owner of the bill (bill holder).

A simple bill contains such requisites:

• name of "bill of exchange";

• a simple and unconfirmed obligation to pay a certain amount;

• indication of the due date;

• indication of the month in which the payment is to be made;

• the name of the person to whom or at whose order the payment has to be made;

• date and place of issue of a bill;

• signature of the drawer.

The bill of exchange must contain a simple and unconcerted offer to pay a certain amount, as well as the name of the person who must pay. A simple bill is paid by the debtor.

The bill of exchange (draft) is issued by the creditor (drawer) and represents an order to the debtor to pay the specified amount of money to the third person - the remittee within the specified period. That the order of the drawer was valid, the debtor confirms his consent to payment in the form of an acceptance.

A commercial bill is issued for real commodity coverage. There is a so-called scheme of domiciliation of bills (the only scheme in Ukraine today that is used by Privatbank, Eximbank, etc.):

1. The enterprise enters into an agreement with the bank on organizing a bill of exchange circulation.

2. The customer advances to his payer (debtor) the condition to issue current payments for the delivered products with a bill, an approved bank. Aval is a bill guarantee, by which the bank undertakes an obligation to the owner of a bill to pay a bill (payment is not made by the bank itself).

3. The bank enters into an agreement with the debtor on the domiciliation of bills, which is the basis for transferring funds not to the settlement account of the client's enterprise, but to the off-balance sheet 911 bank account.

4. The client informs the bank about the necessary payments to its creditors.

5. Money from the debtor goes to the bank.

6. On behalf of the debtor, the bank prepares bills of exchange for the client, according to which the customer is the first billholder, and the debtor is the drawer.

7. The client draws up in the bank:

• an act of acceptance and transfer of bills to accept bills from the debtor;

• an act of acceptance and transfer of bills to transfer bills to creditors, transactions are carried out through endorsement (transfer inscription);

• the act of transferring a bill to a bank in payment of a fee under a treaty on bill circulation.

8. The client transfers to its creditors bills of exchange in payment for the delivered products.

9. The creditors of the client can in turn transfer these bills to their creditors.

10. The bank will redeem the outstanding bills to the drawer.

Privatization papers are a special type of government securities, which testify to the right of the owner to free of charge part of the property of state enterprises, the state fund, the land fund in the process of privatization.

In Ukraine, two types of privatization papers were used: privatization property and compensation certificates.

The circulation of these securities in 1998-1999. Gave investors the opportunity to purchase shares not for cash, but for privatization papers. Foreign investors were not restricted in the right to purchase shares of privatized enterprises, although in accordance with the current legislation of Ukraine, non-residents could not directly accumulate and invest privatization papers. However, there were legal schemes for the participation of foreign investors in the privatization of Ukrainian enterprises through certificate auctions for privatization property and compensation certificates. A foreign investor through an authorized commercial bank converted foreign currency into a national one and invested it in a trust company that through an intermediary acquired shares of a privatized enterprise in the name of a foreign investor and placed them in the depository of a commercial bank that issued a depositary receipt to a foreign investor. The banks Ukraine, Privatbank, Aval worked most actively with compensation certificates. At the present time, with the end of the certificate privatization, these papers do not address or are mentioned in the new version of the Law of Ukraine "On Securities and Stock Exchange".