2. května 2014

Listinné akcie na doručitele

Texts published by the media concerning the issue of unregistered stock.

Core information about bearer stock

Bearer Stock in the World – a comparison with the Czech Republic

Core information about bearer stock

What is bearer stock?
Bearer stocks do not carry the name of their owner and the owner's name is not entered in any public stock register. Bearer shares are also called bearer stock and both names are identical. The term: anonymous stock is synonymous to terminology used above.

What is a book share?
A book share is stock registered on the securities account. Securities accounts are managed by depositories, which are usually banks, stockbrokers or investment companies (mutual funds). The owner of the account registering book shares is always traceable.

What is the problem with bearer stocks?
The problem with bearer stocks is in their very existence. Bearer shares cannot be registered in any database, which would make it possible to trace the holder. Besides, bearer shares can be transferred only by handing over from one person to another. They cannot be transferred by entries in the records, which would enable tracing their holders similarly to book shares.

Public Contracts
Current regulations concerning public contracts do not require contenders for public contracts to inform the principal about their complete ownership structure down to the natural persons as the end-beneficiaries of the profits of the company, competing for such contract. Likewise, current legal arrangements—permitting the existence of companies trading with bearer stock—it is not possible in any way to objectively ascertain which natural person is the actual end-owner of a company awarded a public contract and possessing bearer stock.

Tax Evasion
Bearer shares are the breeding ground for tax evasion. It is virtually impossible for the fiscal authorities to track down the failure to state incomes due to the sale of paper bearer shares in tax returns.

What is the government's position on the problem of paper bearer shares?
Anonymous paper shares in general
The 2001 act on business corporations envisaged the cancellation of paper bearer shares and compulsory booking of all stocks. Nevertheless, the government abandoned the plan and said that "the effort to prevent the placement of financial means within 'anonymous' structures is  faulty as it prevents investment in anything of value, the owner of which is not readily recognizable. Moreover, booking a share does not solve the problem of tracking down the holder, but it further complicates the process—multi-degree registration records only first or second-line holders and not potential real owners." Furthermore, "The concept of bearer stock and its transferability remain unchanged. As against the original intention, there shall not be introduced the rule that bearer shares can be issued only in the form of book shares. The reasons for the amendment are manifold. One is to defeat the plan, adopted in 2001. Another, more substantive reason dwells in the nature of a joint stock company as a private venture, enabling shareholders to retain their anonymity—a private company without an influence on the capital market may represent its ownership structure in any way. The last reason is the plan's ambition to create a competitive regulation, which would hold its own in comparison with foreign countries. Whereas the reasons for introducing a regulation based on transparency and the effort to prevent money laundering are certainly legitimate, they cannot be a matter of private regulation."

Is this assertion substantiated?
Not at all. Paper bearer shares are very risky: they are easily counterfeited, destroyed or lost. These shares are usually kept in banker's or notarial custody, which does not come "cheap". Besides that, transfers of paper shares are costly, dangerous and protracted, as against the transfers of book shares. The existence of paper bearer shares in no way helps to increase the competitive strength of the companies that hold them. In actual fact, most of the foreign companies that held paper shares in the past have since then converted them to book shares in order to boost their competitive strength.

Some countries, which have adopted the book share model, such as Switzerland or the United States, have done so for the sake of reducing risks and transfer costs, associated with paper shares. Transfers of book shares "from account to account" are faster, safer and less costly than transfers of paper shares, where documents must be physically transferred. In other states, e.g. in France, which abolished paper shares in 1984 and permitted solely the existence of book shares, the main reason was to increase the efficiency of collecting tax on shares transfer.

Last but not least it should be noted that the end-holder of book shares is always traceable. Book shares can exist only on a depository account (e.g. bank, stockbroker or investment company). A securities account must be always managed on behalf of a definite person, usually the holder of book shares registered on this account. The fact that securities accounts can be kept on multistage records changes nothing vis-à-vis their holder's traceability.

Public Contracts
The government's draft amendment to legislation concerning this issue represents a minor shift towards tackling the problem of opacity of the ownership structures of companies competing for public contracts. The amendment stipulates that any bid for a public contract must come complete with an updated list of holders of the shares the nominal value of which exceeds 10 percent of corporate stock in case the contractor is a joint stock company.

Will this help solve the problem of nontransparent public contracts?
This amendment solves little from the angle of preventing corruption, conflict of interests and preventing the abuse of public contracts for money-laundering operations.

First, if a company bidding for a public contract holds paper bearer shares, it will not be possible to check in any way if the shareholders cited in the required list, which must be part of the bid, are actual owners of the company vying for a public contract.

Second, the owners of a company possessing paper bearer shares will not be prevented—once their firm wins a public contract—from transferring their shares, and thus also control, to other entities. Such entities will not appear on the list of shareholders, since the government draft does not require that the winning company update the list of its owners so as to always reflect the real situation. Consequently, it will not be possible to check if the winning company, which has acquired a public contract and began to receive state payments for the services rendered, has not been acquired by a natural person and ultimate beneficiary of public funds, if that person is suspected of engaging in money-laundering operations.

Third, in view of the fact that the shareholders of very many companies are other legal entities, the list that must be enclosed to a bid for public contract will provide no hints as to who actually controls the ownership structure of the public contract bidder and who is the ultimate beneficiary of public money. Information disclosing who is the "shareholder's shareholder"—notably what natural person is at the end of the ownership chain of the company, vying for a public contract, is not a part of the list of owners to be presented.

Tax Evasion
According to readily accessible information, the government has not yet started to solve the problem of tax evasion due to the impossibility of checking the veracity of statements on incomes from the transfer of listed shares.
What is the significance of introducing the same legal environment, regarding listed bearer shares, as in Austria and Germany, announced by Prime Minister Petr Nečas at the Tenth Zlatá Koruna Forum on 14 June? Are there listed bearer shares in other countries?

Source: The information above was borrowed from the PhD thesis of  Mgr. Ondřej Vondráček, Ph.D., LL.M., "Constructive Possession of Securities" with the author's kind permission, and was  updated with latest data. The Anticorruption Endowment supported publishing the thesis in a book form.

Bearer Stock in the World – a comparison with the Czech Republic

Bearer shares exist in many countries. They can take the form of written documents or book shares. Book shares are registered on the securities account. This account is usually managed by a bank as a money account. Bank records always make it possible to track down book shares and their ultimate holders. The veracity of data on book shares is also easy to verify: banks managing securities accounts are governed by strict standards of client identification in order to help prevent money-laundering operations and the funding of terrorism.

By contrast, anonymous paper shares (paper bearer stock) and their holders cannot be tracked down even with the help of regulations against money laundering and financing terrorism. These shares and their holders are not recorded in any registers. Data on real holders of anonymous paper shares can be retrieved only if the owners are legally bound to disclose to the company their identity and the number of shares they hold. However, such information is difficult to verify reliably and independently.

1. Microsurgical view of shareholder traceability abroad

Finding ultimate shareholders and checking their ownership conditions depends on two specific factors: how many companies with paper bearer (holder) shares there are in the country and whether there are efficient mechanisms in place for the identification of company shareholders. Shareholders are most easily traceable in the countries where there exist only book (constructive) shares and efficient mechanisms of tracing ultimate shareholders.

Country/Factor France UK Belgium Austria Germany Czech Republic
Can there be paper bearer shares? NO YES NO** YES / (NO)* YES YES
Number of companies with untraceable owners (companies with paper bearer shares) none --- none** 1,650 (end of 2010) / (None, see note *) --- 12,188 (end  2010) (ČEKIA agency )
Mechanisms enable society to track down shareholders YES strong YES, strong
(legal duty, offenders prosecuted)
(under debate)
NO, but see note * YES, weak (optional, fines for default) NO
Traceability of actual company owners Very high High Medium. Traceability under  money-laundering rules
Medium, some company owners not traceable / (High, see note *) Medium, some company owners not traceable Low, most company owners untraceable

* Situation if Austrian government passes amendment to shareholder act (Draft  246/ME XXIV. GP)
** Fully applicable since 1 January 2014. From 1 January 2008 companies to issue only registered stocks or book (constructive) shares. By 31 December 2013 all companies with extant paper bearer (owner) shares must transfer them to registered stock or book (constructive) shares.

Detailed information per country listed below, including legal provisions

Country Situation
France Description
United Kingdom Description
Belgium Description
Austria Description
Germany Description


However, traceability of ultimate shareholders and verification of their ownership conditions does not mean that information about the holders of any shares whatsoever is public, such as in the case of data from the Land Register. No country, listed in the table above, allows free circulation of data pertaining to shareholding. Traceability rather means that in case of need, dictated by public interest, such as struggle against corruption, money laundering or funding of terrorism, public authorities may, in defined instances, reliably and efficiently track down the ultimate owners of companies.

2. Where does the Czech Republic stand comparison with other countries?

The institute of book shares is known in the Czech Republic, similarly to many other countries. These shares, and their holders, can be always tracked down. In the Czech Republic, similarly as in many other countries, certain companies are required to hold only traceable shares. They are mostly financial institutions, such as banks, insurance companies, investment companies etc.

Furthermore, companies in the Czech Republic, similarly as in some other countries, are required to regularly update the Business Register on their significant owners (possessing shares of 20 percent and over). Information about significant owners should be enclosed to financial statements the firms are expected to file with the collection of documents within the Business Register. However, such information does not disclose anything about the actual ultimate owner of the company.

3. Where does the Czech Republic lag behind?

The Czech Republic trails comparable countries especially on the enforcement of the companies' duty to disclose their significant owners. How many Czech companies do regularly update the Business Register with complete financial statements, including data on persons holding 20% plus shares?

Furthermore, unlike in many other countries, there is a plethora, in the Czech Republic, of joint stock companies possessing nontransparent anonymous paper shares, which is the breeding ground for corruption and money laundering. In comparison with Austria, a country with about the same population, the Czech Republic has seven times more of nontransparent joint stock companies. At the end of 2010, Austria reported 1,650 joint stock companies with paper bearer (holder) shares, as against the Czech Republic's 12,188 companies with nontransparent anonymous stock, 53 percent of all Czech joint stock companies, according to the ČEKIA agency.

http://www.cekia.cz/cz/archiv-tiskovych-zprav/198-tz101216 (in Czech)

4. Why are there so many nontransparent businesses in the Czech Republic, unlike in other countries?

The reason why there are so many nontransparent joint stock ventures in the Czech Republic is dual. Firstly, paper shares in most of the advanced countries were converted in the past years to book shares to avoid the soaring costs of transfers and to achieve greater security and better options of faster transactions (***). However, the trend in the Czech Republic was reversed: book shares were transformed into paper shares, because the booking was provided by the state-run Securities Centre until 2010 in an inadequate, long-drawn-out and bureaucratic manner, charging steep fees. Paradoxically, unlike in all the other advanced economies, the modern system of book shares yielded in the Czech Republic to the outmoded practice of paper securities.

Secondly, although share booking has been enabled since 2010 in the Czech Republic due to a sophisticated system, operated by a private central depository, many out-of-the-stock-market companies still regard it as too costly and unduly complicated. For reasons defying sober judgement, the Czech Republic does not permit the parallel existence of constructive shares. Brokering shares means depositing (immobilizing) paper shares in banks. The banks will convert such securities into an electronic form and deposit them onto securities accounts. Such shares are then transferred "account to account" similarly as cashless transfers. This alternative system of constructive shares is less costly, enables the same level of shareholder traceability as the book share system, and has been successfully applied by many countries (see the situation regarding shares in selected countries in the table above).

(***) Unlike paper  shares, the book shares cannot be doctored, lost, destroyed or stolen. Transferring them does not require physical transfer of written documents from one place to another and recording legally required data to be written into the documents. Book shares can be transferred cashless from account to account, just like ordinary money.

5. How to resolve the anonymous paper share quandary in the Czech Republic?
  • Incorporate book shares in the current central depository system, or
  • Convert paper shares to the addressee into constructive shares (deposit paper shares in the bank and transfer them onto a securities account so they can be transferred from account to account)
6. Would the introduction of the same legal environment as in Austria and Germany—as noted by Prime Minister Nečas at June's Tenth Zlatá Koruna Forum—help resolve the problem with anonymous paper shares?

Prime Minister Nečas told the Tenth Zlatá Koruna Forum that his cabinet was intent on creating the same legal environment for paper shares in his country as that in Austria and Germany (***).

It would be amply sufficient for the Czech government to table a solution, similar to that presented by the Austrian government to parliament on 15 June 2011. The Austrian cabinet has proposed complete abolition of paper shares addressed to the bearer (holder) and converting them to either nominal shares or book (constructive) shares.

The Chairman of the Board of Trustees of the Anticorruption Endowment (NFPK), Karel Janeček, therefore sent a letter of greetings to Prime Minister Nečas, on 13 July 2011, in which he welcomed an important step towards combating corruption and improving the transparency of the business environment of the Czech Republic.

  • PhD thesis of Mgr. Ondřej Vondráček, Ph.D., LL.M:  "Constructive Possession of Securities", Faculty of Law, Charles University in Prague, 2010. The Anticorruption Endowment supported the publication of this PhD thesis in book form.
  • Papers by Mgr. Ondřej Vondráček, Ph.D., LL.M, written in the course of his doctoral studies at the Faculty of Law of Charles University in Prague (updated).
  • European Commission – Legal Certainty Group. EU Clearing and Settlement Questionnaire), MARKT/G2/MNCT D(2005), 24 April 2006
  • ECB Market Analysis of Shareholder Transparency Regimes in Europe, 11 February 2011