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Macau: Eliminating bearer shares

Pedro CortésMarta Mourão
The Global Forum on Transparency and Exchange of Information for Tax Purposes (Forum) urges jurisdictions to adopt high standards of transparency and information exchange in tax matters. The Forum has raised two red flags in Macau, one of its members. The first one is related to bearer shares, which are adverse to fiscal transparency; and the second one is the lack of substance of the concept 'permanent activity' provided for in the Macau Commercial Code for those companies that have not been incorporated under the laws of Macau and do not have their main office in the region.

Given this assessment, to achieve a positive result arising in the third phase of the Forum's evaluation (which is of paramount importance for Macau's position in the external markets), the Macau Government, through the Law Reform and International Law Bureau and the Financial Services Bureau, prepared a document released for public consultation in October 2014.

The existing provisions of the Macau Commercial Code in relation to this matter state that 'instruments representing shares can be nominative or to bearer' (article 411) and 'bearer instruments are transferred by simple delivery' (article 424). The nature of these shares allows their owner to remain in total anonymity toward the other shareholders, the company and the public in general. Under the existing legal regime, it is not possible to identify the owners of this type of shares. This framework does not of course satisfy the international institutions that fight against tax evasion and combat money laundering and other economic crimes.

The Forum's report states 'Macau should ensure that robust mechanisms are in place to identify the owners of bearer shares or should abolish bearer shares'.

The Macau Government therefore proposes the elimination of bearer shares, following other jurisdictions including Malaysia, Singapore and Hong Kong. It concludes, in the document released for public consultation, that the removal of the bearer shares from the Macau legal system will not negatively affect the activity of the companies. It further emphasises that the gaming industry will not be affected by such a measure, taking into account that the existing legal regime already requires the total share capital of the concessionaire companies to be represented by nominative shares.

The results of the public consultation, open until November 8 2014, are not yet available. The decision to eliminate bearer shares seems to be another big step forward in the opening of Macau to the foreign markets with the offer of more transparency guarantees in line with international institution reccomendations.

Pedro Cortés and Marta Mourão

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