Dematerialization of shares in joint stock companies and partnerships limited by shares in Poland and the Covid–19 Pandemic

Robert LewandowskiPartner, DLP Dr Lewandowski & Partners

On 30th September 2019 the Polish Legislature introduced a new bill containing significant changes to the Polish Commercial Companies Code with respect to regulation of private joint stock companies and partnerships limited by shares [1] which impose upon these entities the obligation to undertake a dematerialisation of their shares, to limit the rights of shareholders to remain anonymous and to standardize the manner and course of selling different classes of shares.

In simple terms, this dematerialisation means a process of converting shares in the form of a document into the format of digital records within a shareholders register which will be established under a new bill in the future. The shareholders record will be maintained by external institutions such as a brokerage house, banks or the National Depository of Securities and contains information about the entity, shares and shareholders. Any entries upon the shareholders register will be made at the request of the entity or a person showing legal interests in doing this. However, the operator of the shareholders record will not be obliged to assess the submitted documents with respect to their veracity and legality. Every shareholder (including pledgees) will receive a personal registration certificate indicating the scope of rights and powers resulting from his/her shares. The costs of maintaining such a shareholders register will be borne by the entity for which the register will be provided and the amount of these costs will depend on the number of shareholders and intensity of share trading .[2]

Due to the introduction of this shareholders register , the identity of a holder of registered shares and bearer shares will remain exposed to the entity and to other shareholders who would easily be able to establish the circle of shareholders and their shares resulting in the limitation of the present principal of anonymity of shareholders (in particular with regard to those of bearer shares). However, it should be stressed that the shareholders register will not be publicly accessible.

The dematerialization of shares in joint stock companies and partnerships limited by shares will also have an impact on the nature of the sale of different kind of shares. Currently, the sale of bearer shares requires a transfer of the ownership on the share certificate to the buyer and for the valid transfer of registered shares to another beneficiary plus an additional written note on the share certificate or any other document is needed. Under the new regulations on dematerialization the trading of shares will look different and the share deal subject to the bearer or registered shares will be completed upon the entry of a certain notification onto the shareholders register.

The Polish legislator has anticipated that the entire process of share dematerialization shall be completed by 1st January 2021, however, due to the outbreak of the covid – 19 pandemic the deadline for conversion of shares in paper format has been prolonged until 1st March 2021 in accordance with Anti-Crisis Shield Legislation. This means that after this deadline physical share certificates shall be deemed invalid and any trading in shares in private joint stock companies and partnerships limited by shares in a traditional way will be barred.

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[1] Partnerships limited by shares (Pol. “spółka komandytowo -akcyjna”) are not a company under Polish law, however such a partnership is permitted to issue shares similar to a private joint stock company.

[1] It is expected that these costs will be in the region of PLN 5000 (€ 1150) per annum