Starting point: FATF initiative
Transition period
Under a proposed amendment to the Stock Corporation Act, stock corporations whose shares are not traded on a stock exchange will no longer be able to issue bearer shares. It will be mandatory for such closely held stock corporations to issue registered shares and to keep an up-to-date share ledger. In addition, companies that have issued registered shares will be required to keep a record of the bank account details of each shareholder, as well as information on the ultimate beneficial owner of the shares concerned. All financial transactions between the company and its shareholder will need to be made via the account on record.
Starting point: FATF initiative
The proposed new rules are the result of a report by the Financial Action Task Force (FATF), and are intended, among other things, to increase the transparency of ownership structures of closely held corporations. This should reduce the risk that ownership in such companies is used for money laundering purposes.
The Austrian reaction to this report has been a so-called 'transparency initiative'. The initiative was approved at government level in early 2010 and entered the legislative process later that year. While the new law was initially intended to enter into force in January 2011, delays at the parliamentary level have meant that the rules will not become law before July 2011.
Under the current Stock Corporation act, stock corporations are generally free to choose whether to issue registered or bearer shares. Interim certificates must be issued to named holders.
The proposed new rules are further evidence for the increasingly visible split of Austrian company law into those regulations applicable only to listed companies and those for non-listed companies. While this distinction is valid - the requirements of a publicly owned and listed company are different in material respects from those of a closely held company - the current proposal will also mean an increase in the administrative burden for smaller stock corporations.
On a positive note, the information which a company must collect (and keep up to date) under the proposed new regime may be of value to the company from an investor relations perspective. Fur-thermore, companies will no longer need to issue public notices for their shareholders' meetings, instead being able to send invitations to the address of the shareholder on record. This should help to save on costs.
Under the proposal for the new law, existing companies with bearer shares must switch to the new system and, as a consequence, will need to amend their articles of association. Since the proposed new rules are still in the process of parliamentary review, it is not yet clear what transition periods will be provided for. The expectation is, however, that companies will have until 2013, perhaps even early 2014, before the new rules must be fully implemented.
For further information on this topic please contact Florian Kusznier at Schönherr Rechtsanwälte GmbH by telephone (+43 1 534 37 0), fax (+43 1 53 43 76100) or email ([email protected]).