An effort to make the shareholder structures of joint stock companies transparent has encouraged the former Justice Minister, Jiří Pospíail, to draft an Act on Increasing Transparency of Joint Stock Companies and on Amendment to Certain Acts,1 which entails much expected limitations on bearer shares. The aim of the Act, whose draft was approved by the government on 30 May 2012 and will be discussed by the Chamber of Deputies on its upcoming session in September, is to make it possible to identify a shareholder at any moment, and thus eliminate the risks of a non-transparent and corrupt environment and money laundering through anonymous joint stock companies.

The draft Act allows for the cancellation of the circulation of physical bearer shares. Physical bearer shares, which will not be immobilized, will change ex lege to physical registered shares. It will be possible to avoid such a change only by (i) the book-entering of shares, i.e., by changing their form through registration with the Central Securities Depository, or (ii) a socalled immobilization, i.e., depositing with a securities broker providing securities custody services.

If one such change is not made by 1 January 2014, the form of anonymous bearer shares will be changed ex lege to the form of registered shares. Shareholders will then be obliged to submit the shares of a company for the purpose of designating a change of their form, or exchanging for new shares, and provide necessary data for registration in a list of shareholders, which will be newly available not only to other shareholders of the company, but also to the persons specified in the Act on Business Activities on Capital Market under its terms and conditions for the provision of data by persons keeping records of investment tools.2

The essential elements of a list of shareholders will be newly supplemented with details about a shareholder's bank account to which all payments will be transferred by wire to the credit of the shareholder by the company. The bank account will have to be opened with an entity authorized to provide banking services in a country that is a member of the Organisation for Economic Cooperation and Development (OECD), in a European Union Member State, or in another country that is a contracting party to the Agreement on European Economic Area. However, details about shareholders' bank accounts, given their privacy, will not be provided to other shareholders of the company, but only to the relevant public authorities. At the same time, shareholders of book-entered and immobilized shares will have to open an asset account in which the shares held by them will be registered.

If the draft Act is adopted in the submitted wording, bearer shares will only exist in a book-entered or immobilized form from 1 January 2014, whereas both these forms include the possibility of identifying a shareholder, either through the Central Securities Depository or a bank providing securities custody services. Information about shareholders will then be able to be used by criminal investigators as well as other supervisory and administrative authorities, subsidy providers and the like. It will then be possible to transfer bearer shares only through registration in the records of investment tools.

Footnotes

1 The draft Act on Increasing Transparency of Legal Persons and on Amendment to Certain Acts, ref. no. 294/12, http://eklep.vlada.cz/eklep/page.jsf?pid=RACK8QPH6AUG .

2 Cf. Section 115 (1) of Act No. 256/2004 Sb., on Business Activities on Capital Market, as amended.

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