Bearer shares conversion act entered into force on 1 July

On 1 July 2019, the "Act on the conversion of bearer shares" (hereinafter: the "Act") entered into force. The Act enables the identification of all holders of bearer shares issued by Dutch NVs and companies established in the Caribbean part of the Netherlands (Bonaire, Statia and Saba).

The purpose of the Act is to prevent tax evasion, money laundering and terrorist financing. With the introduction of the Act, the legislator is following the recommendations of, among others, the Financial Action Task Force.

Consequences of the Act for Dutch NVs

Abolition of physical bearer shares

By introducing the Act, the legislator has put an end to the possibility for holders of bearer shares to transfer these shares anonymously. Physical bearer shares are abolished. From now on, bearer shares can only be traded through a securities account with an intermediary (such as a bank) and therefore only by book-entry. An anonymous transfer of bearer shares is no longer possible as the holders can be identified at all times via their securities account.

The conversion of bearer shares

In view of the foregoing, bearer shares must be deposited with an intermediary. If this is not desirable, the NV must convert the bearer shares into registered shares before 1 January 2020. If the articles of association do not provide for the possibility of converting shares, an amendment of the articles of association will be necessary.

If the bearer shares have not been converted into registered shares by 1 January 2020, they will become registered shares by operation of law.

Once the bearer shares have become registered shares (as a result of an amendment to the articles of association or by operation of law), the shareholders will not be able to exercise the rights attached to the share until they have handed over their physical bearer certificates to the NV. After having submitted their physical bearer certificate, the shareholders will receive registered shares in exchange. Shareholders may exchange physical bearer shares for registered shares until 31 December 2020.

Acquisition of shares free of charge by the company

If the physical bearer certificates are not submitted on time, the company will acquire the shares for no consideration. However, the Act provides that the shareholder is entitled to a replacement registered share, which right expires on 1 January 2026. Until 2 January 2026, the NV may therefore not dispose of or cancel the bearer shares it has acquired.

Consequences of the Act for companies incorporated in the Caribbean part of the Netherlands

In the Caribbean part of the Netherlands it is not possible to transfer bearer shares by book-entry. The legislator has therefore chosen to abolish bearer shares in the Caribbean Netherlands entirely.

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