Dematerialization of shares mandatory for every Polish joint-stock company (S.A.) and limited joint-stock partnership (S.K.A.)
All Polish joint-stock companies (S.A.) and limited joint-stock companies (S.K.A.) are required to dematerialize shares. Dematerialization involves the complete destruction of shares in a documentary form. Instead, shares will be registered in an electronic system – a mandatory register of shareholders or a deposit of securities.
Although dematerialization is to take place on 1st January 2021, companies will already be subject to fines in 2020 if they fail to comply with a number of related obligations.
The most important thing is to choose the entity that will maintain records of the shares and make the first calls to submit shares. The deadline for undertaking such activities is 30th June 2020. The deadline for publicizing the website via which communications with shareholders will take place expires on 1st January 2020.
What are the changes?
The amendment to the Commercial Companies Code completely changes the legal regime for shares in S.A. and S.K.A companies. The changes consist not only in replacing physical share documents with an electronic record, but also in completely modifying the rules on:
➢ transferring and encumbering shares
➢ convening general meetings
➢ informing shareholders about the company’s operations and identifying shareholders.
Each of the above activities will involve the participation of the entity registering the shares. In practice, this means:
➢ greater formalization of S.A. and S.K.A. activities
➢ additional costs
➢ mandatory involvement of a third party in the company’s operations and in all transactions involving sales and encumbrances of shares
➢ transparency of shareholding for the company and other shareholders.
It will only be possible to terminate the contract by the entity that registers the shares due to serious reasons.
Conversely, the above-mentioned solutions will increase the security of lawfully trading shares. The entity which registers the shares will verify the transaction documents and any restrictions that apply to the transferability of shares.
The scope of application
The mandatory dematerialization of shares applies to all Polish joint-stock companies (S.A.) and limited joint-stock companies (S.K.A.). It will apply to both registered and bearer shares, including those issued before and after 1st January 2021.
Register of shareholders – choice from amongst brokerage houses, banks securities depositories
The register of shareholders will be accessible only by the company and its shareholders.
The register will be kept in electronic form by an entity authorized to keep securities accounts. In practice, this means a brokerage house or a bank conducting brokerage activities. Alternatively, the shares may be registered in a securities depository. The register will be able to have a decentralized form (which creates opportunities for blockchain solutions).
As a rule, the company’s general meeting will be entitled to choose the relevant entity.
How to prepare
1. Implement the actions envisaged in the legislation
Pursuant to the act, companies have until 1st January 2021 to finalize the mandatory dematerialization of their shares. The schedule of preparatory actions prior to that date includes:
➢ 1st January 2020 – the deadline for declaring the websites of the relevant S.A./ S.K.A. in the National Court Register
➢ 30th June 2020 – the deadline for formalizing the selection of an entity to record the shares, pursuant to a resolution of the company’s General Meeting of Shareholders.
➢ 30th June 2020 – the deadline for concluding a contract with the entity that will record the shares.
➢ 30th June 2020 – the deadline for the first call to submit share documents.
The relevant companies are required to summon shareholders to submit their share documents five times.
If persons representing the company fail to comply with any of the above obligations by 30th June 2020, this is punishable by a fine of up to PLN 20,000.
2. Amending the company’s articles of association
Secondly, since the legislation provides for a number of optional solutions, the company’s articles of association should be amended as appropriate. For example, the articles may be amended to state that dividends or other company benefits will be regulated and paid to shareholders by the entity registering the shares. However, a company may choose not to amend its articles of association in this way.
3. Ultimately … rethink your form of doing business
If a particular company’s characteristics (e.g. a small number of shareholders) leads it owners to conclude that these obligations will be an unnecessary regulatory burden, they may consider changing the company’s legal form prior to the above-mentioned date.
Such an analysis should especially take into account the fact that S.A. and S.K.A. companies no longer guarantee the same level of anonymity as in previous years. As of 13th October 2019, the real beneficiaries of such companies are required to be disclosed in a public, central register of current beneficiaries.
How can we help you?
➔ we help you to agree the legal aspects of a contract with a brokerage house or bank
➔ we advise on making calls for shares
➔ we help you to amend your company’s articles of association in line with the legislative requirements and possibilities
➔ we help you assess alternative legal forms of doing business.