Extended time limits for mandatory dematerialisation of shares
The Act changing certain legislative acts in the area of protective actions in connection with the spread of SARS-CoV-2 – called Shield 3.0 – introduces new provisions on obligatory dematerialisation of shares in joint-stock companies and limited joint-stock partnerships.
Shield 3.0 provides that the maximum time limit for the first call on shareholders to submit share documents with the company has been extended from 30 June to 30 September 2020. The extension to 30 September 2020 has also been applied to the time limit for execution of an agreement with the entity selected by the general meeting of shareholders entitled to hold a register of shareholders or agreements for registration of shares with the depository for securities. Thus, it is until 30 September 2020 at the latest that the time limit has been extended, respectively for selection by the general meeting of shareholders of the entity to keep the register of shareholders or for adoption by the general meeting of shareholders of a resolution to register company shares with the depository for securities.
Shield 3.0 also provides that the legal effectiveness of the share documents issued by the company will expire by operation of law on 1 March 2021, and not on 1 January 2021- as has been planned. As a consequence, it is also till 1 March 2021 that the regulations on registered shares will apply accordingly to exercising and transferring rights in the bearer shares the documents of which have been submitted with the company.
Therefore, now the schedule of the process of mandatory dematerialisation of shares is as follows:
- Adoption by the general meeting of shareholders of a resolution on selection of an entity to keep the register of shareholders or on registration of shares with the depository for securities:
- by 30 September 2020
- Execution of agreement with the entity keeping the register of shareholders or execution of agreement for registration of shares in the depository for securities:
- by 30 September 2020
- 5 calls on shareholders to submit paper share documents with the company:
- the first call by 30 September 2020, 4 successive calls at the time spans not shorter than 2 weeks and not longer than a month.
- Shareholders’ submissions of paper share documents with the company:
- in principle by the end of February 2021
- End of effectiveness of paper share documents:
- as of 1 March 2021
The above-said changes were necessary since in the current situation, the preparation and carrying out of the process of dematerialisation of shares, and specifically the related necessity to hold the general meeting of shareholders and to adopt a resolution on selection of the dematerialisation regime (register/depository) by 30 June 2020 – would be difficult due to various reasons. The organisational or technical problems could also make it difficult to the shareholders to’ submit share documents with the company in response to the calls. The above-said solution is even more justified since the earlier-made amendments have extended the time limit for holding the companies’ ordinary general meetings of shareholders. And many entities have declared intention to select an entity to keep the register or to adopt a resolution on registration of shares with the depository for securities right at the ordinary meeting of shareholders. Upon introduction of these amendments, that solution will become operative again.