Bill for Amendment of the Commercial Act Provides for Bearer Shares to be Replaced by Registered Shares
05 October 2017
The proposed amendments to the Commercial Act (CA) eliminate the possibility for joint-stock companies and companies limited by shares to issue bearer shares henceforth, while those already issued would be replaced by registered shares. The recommendations of the Global Forum on Transparency and Exchange of Information for Tax Purposes of the Organisation for Economic Co-operation and Development (OECD) are thus implemented. The recommendations were put forward after it had been concluded that Bulgarian legislation lacks an effective mechanism for identifying the owners of bearer shares which is not in compliance with the international standard on transparency and exchange of information for tax purposes.
The proposed Bill also introduces the requirement of Directive 2015/849 of the European Parliament and of the Council of 20 May 2015 on the prevention of the use of the financial system for the purposes of money laundering or terrorist financing, taking into account that bearer shares may be used in order to conceal the beneficial owner (shareholder) in a company, including for the purposes of money laundering and tax evasion.
Pursuant to the Bill, within a nine-month period as of the entry into force of the amendments, the companies that have issued bearer shares shall be required to:
- amend their statutes accordingly;
- replace the bearer shares with registered ones;
- start keeping shareholders books;
- apply the changes for registration and present the amended statutes for publication in the Commercial Register.
A failure to comply with this obligation shall be grounds for termination of the company. Within two months after the expiry of the deadline for registration of the changes, the Registry Agency shall draw up a list of the companies that have not aligned their business activities with the law or have received a refusal for registration of the applied changes. The list shall be sent to the Prosecutor’s Office in order to take actions for filing a claim under Art. 252, Para 1, item 4 of the CA.
Shareholders, for their part, shall be obliged to submit any bearer shares they own for replacement within the said nine-month time limit. Otherwise, the company would cancel them and offer for sale new shares substituting the cancelled ones. A shareholder whose shares have been canceled would have the right to claim to receive from the company the equivalent of the contributions made under such shares within a six-month period after becoming aware of it but no later than 5 years from the cancellation date. The same obligation is also provided for creditors with a pledge on bearer shares.
There is an ongoing public consultation on the proposed amendments and the Ministry of Justice called on the parties concerned to submit their comments by November 3, 2017.