The Russian State Duma passed in its final reading the law on the use of the convertible loan mechanism in structuring investment portfolios. The law will enter into force 10 days after its official publication.

A convertible loan is a type of investment whereby an investor company provides funds in the form of an ordinary loan, which can then be converted into a stake in the company.

"The idea is that an investor who channels funds to some project can get back the loan that he has provided and the interest from the borrower, or take an equity stake in the company. That is, when a certain event occurs, having invested its funds in some project, the investor may decide that the project will "fly" well, it can grow very strongly in its value, in capitalization, and, accordingly, it will be more beneficial for the investor not to get the debt back with interest, but just to participate in the capital of this organization," Anatoly Aksakov, head of the Committee on Financial Market, explained to Interfax.

According to him, a similar mechanism exists in international law - this is how 35% of the venture projects in the world are implemented.

The convertible loans will not be given to banks, non-credit financial institutions, defense industry companies, or companies with 25% of government-held shares.

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Author: Karina Kamalova