2020 brings preparations for mandatory dematerialisation of shares – Milestone dates for shareholders and for companies
Beginning in January 2021, shares in joint stock companies may have dematerialised form only. Albeit the relevant amendments to the Commercial Companies and Partnerships Code won’t come into force for another year, the intervening period must be one of preparation. Seeing as one of the major issues will be comprised in the General Meeting’s choice of the entity operating the register, some of the deadlines loom already in the first half of 2020.
- Starting 1 January 2020 – companies should have a website for servicing General Meetings;
- By 30 June 2020 – the company should make the first call for return of share documents, to be preceded – for companies not listed on the stock exchange – by a General Meeting decision selecting the entity which will operate the shareholder register and by execution of a relevant agreement with that entity by the Management Board;
- 1 January 2021 – all documents representing shares in joint stock companies shall become invalid through operation of the law, and only persons named in the shareholder register or registered by the National Securities Deposit will be recognised as shareholders;
- 1 January 2026 – a key date for shareholders in that it will bring forfeiture of shareholder right protections for shareholders whose share documents have not been dematerialised, and shareholders will no longer be able to prove their status vis a vis the company using share documents.
We would also like to point out that, until 1 January 2021, exercise and transfer of rights arising from bearer shares whose documents have been deposited with the company shall be governed, mutatis mutandis, by the rules applicable to registered shares.
The calls to return documents
The first call to return share documents must be issued by the company by 30 June 2020, and such a call must go out on five separate occasions, at intervals not longer than one month and not shorter than two weeks. Under the amended laws, the means of issuing such calls shall be the same as used by the company to call its General Meetings. In other words, publicly listed companies will issue calls to return share documents by way of current statements, and privately held companies – by way of an announcement in Monitor Sądowy i Gospodarczy (or, where all the shares are registered, by registered post or courier).
Companies which do not issue calls to return share documents or do so in violation of art. 16 are liable to fines, as are individuals authorised to represent the company who fail to execute agreements for operation of the shareholders register or for registration of shares in the deposit within the relevant deadlines.
One of the consequences of dematerialisation is that the distinction between bearer shares and registered shares will lose its practical import. In the justification to the draft amendments, the legislature declares that the next step will be comprised in definitive abandonment of these two categories. Companies may consider keeping this in mind in connection with any imminent amendments to their articles, or with any future share issues.
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Preparations for mandatory dematerialisation, by companies and by shareholders, need not be complicated or costly. All in all, it also appears that the costs of registering shares in the deposit, and of maintaining the deposit, will be reasonable. While the various new duties adumbrated above can be avoided by the simple stratagem of transforming an existing joint stock company into a limited liability company, then, the expectation is that many joint stock companies will proceed to dematerialise all their shares.
In anticipation of the above, GESSEL has prepared relevant documents and procedures for our Clients, and we will be happy to assist with selection of an entity operating the securities deposit. We invite you to approach us with any questions !
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