ArticlesThe abolition of bearer shares

1. Preamble

Robert (Rob) Woodward and Carl Bernstein are, to my knowledge, amongst the most celebrated journalists of all time. And that seems fair: while those two young, at the time, journalists of Washington Post were researching a story, they revealed the, since then well-known worldwide, “Watergate” scandal. A scandal that led to President R. Nixon resigning in 1974. For their research they received the Pulitzer Prize.

“Follow the money” is probably the most famous quote of the 1976 movie “All the President’s Men”, a movie that was based on a book about the “Watergate” scandal (since the scandal essentially started when money was stolen from the slush fund of the Democratic Party), published under the same title, by the abovementioned journalists. Since then, this phrase has been used to locate and identify those who participate in illegal activities.

Over the course of time, money laundering has been getting harder and more dangerous. Not only the use of cash in (real) economy is getting more uncommon by the day, but so is the ability of one to hold high value assets without having them connected to their name.


2. The place of bearer shares in the international legal order

It has always been possible to issue securities for registered or bearer shares, in order to prove one’s ownership over a part of the share capital of an S.A.

The transfer of bearer shares has, of course, always been easier (without formalities, without fanfares, without taxes being imposed) and for that reason, for some people, preferable. But, because it is nearly impossible to identify their true owner, bearer shares were often used for not so honourable causes. This fact could not pass unnoticed by the jointly responsible international organizations (i.e. OCDE, Global Forum on Transparency, Financial Action Task Force) and, of course, without them taking any action.

The European Union has also (with the relatively recent Directive 2015/849) imposed on its member-states the obligation to integrate in their national legislations’, provisions that would support the global effort to fight money laundering. Our country has fulfilled its duty, with some delay, with Act 4557/2018.

It was only a matter of time for Greece to abolish bearer shares. Bearer shares were already “dead”. And their death certificate came in the new law of S.A.s (article 184, Act 4528/2018).

One could, reasonably, ask: since bearer shares were abolished, why do we keep the “A” in “S.A.” (Société Anonyme)? The answer is found in French law, the principals of which we have always followed in Greek corporate law. The name “anonyme” never had anything to do with bearer shares -it was always about the lack of responsibility the S.A.’s shareholders had towards the S.A.’s creditors.


3. The abolition (and replacement) of bearer shares

The provision of article 184, Act 4548/2018, as already mentioned, addresses matters regarding the abolition of bearer shares. Since the publishing of this Act (13-6-2018), it is no longer possible to issue bearer shares, while the existing bearer shares must, until 1-1-2020, all be registered (article 184, par. 1).

For the replacement of the share titles issued for bearer shares with share titles issued for registered ones, the provisions of the company’s statute must be followed. In case there are no such provisions, a specific procedure is provided by law (article 184, par 2).


4. First Step: The decision of the Board of Directors for the registration of bearer shares

The Board of Directors of the S.A. that has issued bearer shares, must (article 184 par. 3) decide on the procedure for the registration of the bearer shares, by 1-7-2019, at the latest. More precisely, its decision should address:

  1. how those who have rights on bearer shares (shareholders or other beneficiaries) will declare their rights to the company and register on the Shareholders Book, and
  2. how the new, registered share titles will be issued and distributed to the beneficiaries.

It is worth mentioning that after 1-1-2020, if not dully registered, the bearer shares will no longer incorporate any rights and they will not be transferable.

Until their registration, (article 184, par 3 in conjunction with article 50, par. 1), the bearer shares:

  1. incorporate no voting rights nor any rights to participate in general assemblies,
  2. are not counted in calculating quorum and majority,
  3. do not receive dividends payments, and
  4. do not give their holders a preferential right in case of an increase of the company’s share capital.

With the above-mentioned decision of the BoD of the S.A., the way of declaring the relevant rights is specified (article 184, par. 4), as is the way of issuing and distributing the new registered share titles to their beneficiaries (unless the company has already decided on not issuing share titles or issuing intangible shares).


5. Failing to declare a procedure for the registration of bearer shares

In case a BoD fails to fulfil its duties by the 31-12-2018, any third party has the right to appeal to the competent court and ask for it to be recognised as a beneficiary of bearer shares, its registration to the Shareholders Book and the issuing to tis name and delivery to it of registered share titles (article 184, par. 5).


6. Regulations for listed S.As

When dealing with listed S.A.s, the procedure of registering their shareholders is relevant to the procedure followed when their shareholders wish to participate in a general assembly. The Securities Exchange Commission may address and regulate specific issues that may arise regarding the registration (article 184, par. 6).


7. Other regulations

Until the completion of the registration procedure of the bearer shares and the delivery of the relevant titles to the beneficiaries, a set of regulations is in force (article 184, par. 7). The most important amonsgt them are:

  1. In case of a partial payment of the share capital, the shares must be registered until their payment in full.
  2. Up until their registration, the transfer of bearer shares takes place exclusively either by a notarial deed or by a private document of certain date (article 184, par. 7.c, in conjunction with article 54 par. 1, Act 4557/2018).
  3. In case an S.A. has not yet registered all its shareholders, its general assembly cannot make decisions without an actual meeting taking place (by Article 135).
  4. The rights of the minority shareholders holding bearer shares are somewhat limited and said shareholders cannot be members of shareholder groups.


8. In Conclusion

The registration of bearer shares is one of the most well-known provisions of the new law on S.A.s. Yet, it was not a choice originally made by the legislative drafting committee, nor was it a choice made by the Greek legislator itself: it has been a result of our country’s international obligations, as part of the (worldwide) effort to fight laundering money deriving from criminal activities.

The phrase “Follow the Money” from the movie “All the President’s Men” was attributed by the screenwriter William Goldman to Deep Throat, the informer who contributed to the revealing of the Watergate scandal. However, its value has been legendary and timeless, always linked to revealing those who try to launder money. So, it would not be possible for the international community to tolerate the ability to acquire and maintain significant assets, like bearer shares, without being able to identify their real owner. The one who wants to launder money, should not have the ability to acquire bearer shares: Setting insurmountable obstacles was essential. This was proven impossible without abolishing bearer shares altogether!

It is time for our country to, also, abolish the issuing of bearer shares. It is true that this specific provision of the newly introduced law has been widely known. So has the deadline set (1-1-2020) for the deprivation of all the rights that previously followed them, if the have not been registered until then.

However, the obligation of an S.A.’s BoD to make a decision regarding the procedure that should be followed in registering bearer shares (the “road map” if you will) until 1-7-2019 is less known.

Beware – do not rest!


Stavros Koumentakis
Senior Partner

P.S. A brief version of this article has been published in MAKEDONIA Newspaper (June, 23rd, 2019).

Stavros Koumentakis
Nikis Avenue & 1, Morgenthau st., 54622 Thessaloniki
(+30) 2310 27 80 84

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