Changes to the legal regime applicable to bearer shares issued by a Luxembourg vehicle

On 28 July 2014, Luxembourg adopted a new law aiming at ensuring the transparency of bearer shareholding in Luxembourg companies (the “Law”).

The Law was adopted in accordance with GAFI recommendations (measures to ensure availability of information on the identity of bearer shareholders) and FATCA requirements (measures to facilitate access to beneficial ownership and control information by financial institutions).


What entities are concerned?

The Law applies to bearer shares issued by Luxembourg vehicles such as SA, SCA, SICAV, SICAR, SIF, FCP (the “Issuer”). The Law also applies to listed companies as no exemption has been provided for by the Law.


What are the practical consequences?

Deposit mechanism
The management body of the Issuer shall appoint a depositary with whom the bearer shares shall be deposited.

Who can be appointed as a depositary?

The depositary should be appointed from among a list of professionals subject to KYC and AML obligations:

  • credit institutions
  • asset managers
  • distributors of UCI shares
  • certain other professionals of the financial sector (domiciliation agents, etc)
  • lawyers (admitted to list I and IV)
  • notaries
  • auditors, approved statutory auditors (réviseurs d’entreprises agréés)
  • chartered accountants

The depositary must be located in Luxembourg.

The depositary must not be a shareholder of the Issuer.

In case of a mutual fund (FCP), the custody of the assets shall lie with a depositary designated in the management regulations established by the relevant management company and published in Mémorial C, Recueil des Sociétés et Associations.

The appointment and removal of the depositary shall be filed by the Issuer with the Luxembourg register of commerce and companies and published in the Mémorial C, Recueil des Sociétés et Associations.

What are the depositary’s obligations?

The depositary must maintain a bearer shares register in Luxembourg which contains:

  • the designation of the shareholder and the number of bearer shares held by such shareholder
  • the date of deposit of the bearer shares
  • the transfers of the bearer shares (including the transfer date) or the conversion of the bearer shares into registered shares (including the conversion date, where applicable)

The depositary will record the transfer in the bearer shares register pursuant to a declaration of transfer establishing that the bearer shares have been transferred from the transferor to the transferee.

The depositary shall not return the bearer shares unless (i) the functions of the depositary cease (in such case it must return the bearer shares to the newly appointed depositary), (ii) the bearer shares are converted into registered shares, the bearer shares are repurchased by the Issuer or the bearer shares are cancelled following a share capital reduction (in such cases the bearer shares are returned to the Issuer).

The depositary incurs the same liability as the management board. In addition, the depositary may be fined between € 500 and € 25,000 in case it knowingly breaches its obligations.

Access to register
The competent authorities may have access to the register in accordance with the applicable legal provisions.
Each shareholder will solely have access to the entries related to him/her/it in the bearer shares register.

Proof of ownership
The ownership of bearer shares is established through the registration in the bearer shares register (and no longer through the possession of the bearer share certificate).

Pledges
Pledges on bearer shares shall be recorded in the margin of the bearer shares register held by the depositary.

Non-compliance with depositary obligations: consequences

  • Suspension of the rights attached to the bearer shares after expiration of the 6 month period following the entry into force of the Law to appoint the depositary and to deposit the bearer shares with the depositary: voting rights suspended and distribution deferred until deposit of the bearer shares
  • Cancellation of the bearer shares and subsequent share capital decrease within 18 months after the entry into force of the Law if all bearer shares are not deposited.

Management liability
The members of the management body of the Issuer may incur a fine between € 5,000 to € 125,000 if they knowingly breach their obligations to (i) hold a register of registered shares as prescribed by law, (ii) appoint a depositary, (iii) suspend the rights of the holders of bearer shares who do not comply with the provisions of the Law or (iv) cancel the bearer shares not deposited in accordance with the provisions of the Law.


What is the timing?
  • Transitional provisions for existing bearer shares: the depositary shall be appointed by the management body of the Issuer within 6 months of the entry into force of the Law and the bearer shares shall be deposited with the depositary within 18 months of the entry into force of the Law.
  • Newly created bearer shares as from the entry into force of the Law shall be immediately deposited upon issuance.

Timeline summary

Date of entry into force of the Law: 18th August 2014
Deadline to appoint a depositary: 18th February 2015
Suspension or deferral of rights attached to the bearer shares not deposited: 18th February 2015
Deadline for deposit of the bearer shares: 18th February 2016
Cancellation of all bearer shares not deposited: 18th February 2016
Please contact us should you require any further information.