Monday, July 15, 2013

Bearer shares do exist in OECD member countries

Panama has been offering to amend its corporate legislation to the same degree of confidentiality as other OECD members.  As we see from the example of bearer shares in OECD member Greece, they can exist perfectly without the need of immobilization or restriction when issuers are non-listed corporations.  Bearer instruments also exist for business entities in Wyoming (U.S.) and England.
The level playing field is more levelled in some places...

What types of non-listed shares do Greek société anonymes have?

Greek codified company statute 2190/1920 provides for two basic forms of non-listed shares in Greek société anonymes: (i) bearer shares and (ii) registered shares. When purchasing non-listed shares, the buyer should request a copy of the company’s Articles of Association (AoA), which stipulate the type, number and nominal value of the shares that have been issued by the company. Registered shares are issued in the name of a particular shareholder. In this case, the transfer of the particular shares requires that the name of the shareholder be prescribed on the share certificate itself. In the case of bearer shares, the name of the owner of the shares is by definition not stipulated on the share certificate itself.

Are companies obligated to issue share certificates verifying ownership of shares?

Companies are obligated to issue share certificates for bearer non-listed shares. If the company has registered non-listed shares, the AoA may preclude or limit its obligations to issue share certificates. In this case, the AoA determine the manner in which the shareholder’s capacity is proven in order for the rights deriving from the shares to be exercised. In the case the AoA do not contain a relevant provision, as well as in any other case in which share certificates are not issued, the proof of the shareholder’s capacity takes place on the basis of the data contained in the shareholder’s book or any temporary certificates issued and, if necessary, the documents in the possession of the shareholder.
The above share certificates may embody one or more non-listed shares. In the latter case, the certificates become less marketable. Shareholders are allowed to ask that existing share certificates be replaced by others embodying fewer shares if this is permitted in the AoA. Instead of share certificates, temporary share certificates may be used for a predefined period of time until the share certificates are issued. If this is the case, the transfer of shares is effected by virtue of the transfer of these temporary share certificates.

How are bearer non-listed shares transferred?

Transfer of bearer non-listed shares is effected by virtue of an agreement concluded between the seller and the buyer regarding the transfer of the seller’s shares and the delivery of the share certificates or the temporary share certificates from the seller to the buyer that embody the said shares. Possession of the share certificates is sufficient evidence for the holder to prove that he/she is the owner of the shares, such evidence being able to be brought forth both before the company as well as before third parties. As concerns the company, the holder of the share certificates is entitled to exercise the shareholders’ rights attached to the certificates. The exercise of these rights does not require registration in the books of shares or notification to the company.  The burden of proof that the holder of the share certificates is not the owner lies with the company. As concerns third parties, the presumption of possession means that it is possible for a bona fide third party to validly acquire ownership from a person not legally possessing the shares, if the third party did not have the knowledge of the fact that the seller did not have ownership of the share certificates.

By Konstantinos Thomopoulos

See also OECD Report Towards a Level Playing Field shares

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