Law concerning the compulsory deposit and immobilisation of shares and units in bearer form

Luxembourg law imposes the compulsory deposit and immobilization of shares and units in bearer form and provides transitory provisions in order to designate a depositary and to proceed to the deposit.

The law of 28 July 2014 concerning the compulsory deposit and immobilisation of shares and units in bearer form has been published in the Mémorial A, Recueil de Législation on 14 August 2014 (the “Law”). The Law will enter into force on 18 August 2014. The Law follows the recommendations of the Financial Action Task Force (FATF) and the Global Forum on Transparency and Exchange of Information for Tax Purposes relating to the identification of holders of bearer shares and bearer units and adopts the compulsory deposit and immobilisation of bearer shares and units with a depositary allowing identification of the holders thereof. 

1. SCOPE 

The Law applies to Luxembourg law commercial companies (under the form of sociétés anonymes and sociétés en commandite par actions) that have issued or intend to issue bearer shares or units, including investment companies in risk capital (SICAR), investment companies with variable capital (SICAV), investment companies with fixed capital (SICAF) and specialised investment funds (FIS). It further applies to contractual type vehicles issuing bearer units such as mutual investment funds (FCP) or mutual securitisation vehicles. No exemption is provided for listed companies which thus equally need to comply with all requirements of the Law. 

2. COMPULSORY DEPOSIT AND IMMOBILISATION

Bearer shares or units, whether already in issue or to be issued in the future, need to be deposited with a professional depositary appointed by the issuer. 

3. DEPOSITARY 

The depositary cannot be a shareholder of the issuer and must be chosen amongst the following Luxembourg established professionals listed in the Law (who are all subject to fight against money laundering and financing of terrorism legislations):

• credit institutions,
• private portfolio managers,
• distributors of units/shares in UCIs,
• specialised professionals of the financial sector (PSF) approved as Family Office, as corporate domiciliation agent, as professional providing company formation and management services, as registrar agent or as professional custodian of financial instruments,
• lawyers (lists I and IV),
• notaries,
• statutory auditors (réviseurs d’entreprises) and approved statuary auditors (réviseurs d’entreprises agréés), and
• charted accountants (experts-comptables).

4. REGISTER OF BEARER SHARES AND UNITS 

The depositary shall keep a register of the shares or units which are deposited. Such register shall contain all information necessary to identify the holder of the shares or units. 

The register shall in particular contain the identification of each holder and the number of shares or units held, the date of the deposit, any transfers of shares or units with the date of such transfers and the conversion into registered shares or units, where relevant. 

A shareholder is only allowed to consult the entries in the register which concern its own shares or units. 

5. OWNERSHIP

The ownership of a bearer share or unit results from the inscription of the shareholder in the register of bearer shares or units. The mere possession of such bearer share or unit no longer proves title thereto. The depositary holds the deposited shares or units on behalf of the shareholder who remains the owner of the shares or units. 

6. TRANSFER OF BEARER SHARES OR UNITS 

In order for a transfer of bearer shares or units to be valid vis-à-vis the company and third parties a notice of transfer must be inscribed in the register of bearer shares or units. The depositary may for such purpose accept any document or notification evidencing the transfer of ownership. 

7. SHAREHOLDER RIGHTS 

Rights relating to bearer shares or units can only be exercised if the bearer shares or units have been deposited with the depositary and the required information inscribed into the register as described under item 4 above. 

8. PLEDGE 

The Law amends the law of 5 August 2005 on Financial Collateral Arrangements, specifying that, in case shares or units in bearer form are pledged, the transfer of possession of such shares or units will be ensured by an inscription of the pledge in the share or units register held by the depositary. 

9. LIABILITY OF THE MANAGEMENT BODIES

New sanctions have been introduced by the Law. Members of the management bodies of companies may incur a fine of up to 125,000 euros if they wilfully: 

(i) do not maintain a register of registered shares or units at the registered office of the company, 

(ii) do not designate a depositary, 

(iii) do not deposit the bearer shares or units with such depositary in accordance with legal provisions, or 

(iv) recognise rights to shareholders whose bearer shares or units have not been deposited with the depositary and regarding which the required information have not been inscribed into the bearer share or units register. 

10. TRANSITORY PROVISIONS

Companies which issued bearer shares or units before the entry into force of the Law must designate a depositary within 6 months of the entering into force of the Law. 

The bearer shares or units of the companies concerned must be deposited with the designated depositary within 18 months of the entering into force of the Law. All bearer shares or units not deposited within 18 months after the entering into force of the Law shall be cancelled and a corresponding reduction of share capital must be decided. Cancellation shall be carried out at a value determined on the basis of a recent balance sheet. 

Voting and financial rights attached to bearer shares or units which have not been deposited within 6 months after the entry into force of the Law will automatically be suspended, respectively deferred, starting at the end of the 6-months period until their deposit. 

In case of a suspension of voting rights, such shares or units will not be counted for the calculation of the quorum and majorities during general meetings. Holders of such shares or units are not admitted to general meetings.

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The Law is currently only available in French (click here to consult the Law).