From 1 March 2021 shares of non-public joint-stock companies and limited joint-stock partnerships function only in the digital form. Dematerialisation of shares has become a reality and paper shares have lost their legal force. What does this mean for shareholders?
The process of gradual dematerialisation of shares began in 2020. It is a part of an amendment to the Commercial Companies Code. Initially, full dematerialisation was to take place on 1 January 2021, but the epidemic slightly postponed this moment in time.
On 1 March 2021, all bearer shares and registered shares of non-public joint-stock companies and limited joint-stock partnerships in the form of a paper document lost their legal force; only digital shares are valid and data about shareholders function only in the e-register.
From 1 March 2021 a shareholder entitled to exercise corporate rights in a non-public company is a person entered in the electronic register of shareholders. Individuals who failed to fulfill this obligation before the deadline formally do not have the right to the dividend and to vote at general meetings of shareholders. How to solve this problem?
The solution is to apply for entry in the e-register as soon as possible. Legal regulations provide for a transitional period for shareholders who did not submit share certificates within the required time limit. The transitional period will last for 5 years, namely until 28 February 2026, and during that period the shares retain their legal force in respect of the shareholder proving their shareholding rights.
However, the transitional period will end on 28 February 2026 and a shareholder who does not fulfill the obligation may be forced, among others, to bring an action with regard to determining the status of a shareholder, as only a court judgment will be the basis for entry in the e-register.
From 1 March the only valid entries are the ones in the e-register, i.e. the electronic register of shareholders, which has replaced the former share register.
This means that data about shareholders are now available electronically, but information included in the e-register may also be made available in hard copy. The e-register is public, namely the company and all shareholders have access to data, but such access to information may be subject to a fee.
Data kept in the register also include information about anonymous bearer shares and shareholders holding them, which is a kind of a novelty. Such information was not entered in share registers, which shows that along with dematerialisation those shares have ceased to ensure anonymity.
The e-register is kept by the entitled entity, i.e. a brokerage house, bank entitled to conduct brokerage activity and the Central Securities Depository of Poland.
What is important, the entity which keeps the e-register also issues the so-called registry certificates stating voting rights attached to shares. Purchase or sale of shares after dematerialisation, on the other hand, will formally take place only after the relevant changes to the e-register have been introduced. The entity keeping the e-register makes an entry within not more than a week following the notification.
A shareholder who fails to fulfill the obligation under the Act on Dematerialisation of Shares loses the rights arising from the held shares by the time of entry in the e-register. The situation looks different as regards management board members who may be subject to a fine of up to PLN 20 000 for failure to conclude an agreement for keeping the register or for untimely announcement of the five calls to deposit share certificates set by the act.
Dematerialisation is obligatory also for newly established companies and new share issues, which means that a new company has to conclude an agreement for keeping the e-register and its shares have to be entered in it.
It is worth to remember that in the case of new issues all shares of a given company should be catalogued in the same e-register and entry in it takes place after entry in the National Court Register concerning a share capital increase.
The legislator permitted for a possibility of a change of the entity keeping the e-register, but only for important reasons and subject to a 3-month notice period. Another condition is conclusion of the agreement for keeping the e-register with a new entitled entity.
TGC provides comprehensive support in respect of entry in the e-register of shareholders.