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Registered shares for all non-listed stock corporations

Christian Temmel

The Austrian Stock Corporation Act (Aktiengesetz) provides for the creation of a stock corporation either by issuing registered shares or bearer shares, irrespective of any listing of such company.

On December 1 2009, the Financial Action Task Force (FATF), an inter-governmental body whose purpose is the development and promotion of national and international policies to combat money laundering and terrorist financing, published its report on Austria, which includes a recommendation regarding improved transparency for stock corporations which have issued bearer shares.

Holders of bearer shares are not required to be registered or disclosed, and this is seen by FATF as an obstacle to authorities' getting access to relevant ownership information. In order to effectively combat the threat of terrorism and money laundering, it has been decided to amend the legal regime.

The draft act on the amendment of the Act (which is scheduled to enter into force on May 1 2011) contains the following main changes:

All non-listed stock corporations must have registered shares (with an exemption for companies preparing for an IPO). As of May 1 2011, newly-founded (non-listed) stock corporations may only issue registered shares. For existing (non-listed) companies, a grace period (most likely until December 31 2012) for the conversion of bearer shares into registered shares will be granted. The issuance of registered shares includes the duty to have a share register.

The share register must include, among other things, the identity of a shareholder, and – in the case where the shares are held by a nominee – also the identity of the person on whose behalf the shares are held, as well as information on the bank account through which payments to a shareholder are made. All transactions in the shares must be made with the use of bank accounts in order to provide for traceable transparency.

For listed companies (and those intending an IPO), the proposed changes will have hardly any effect: they still have the right to choose between registered shares and bearer shares. "Listed companies" refers to companies the shares of which are traded on a regulated market (or at least have been admitted to trading).

The reason for excluding listed companies is that any shareholdings (and changes thereof) in listed companies exceeding certain thresholds are subject to disclosure under existing capital markets rules (in particular sections 91 and following of the Austrian Stock Exchange Act which reflect the disclosure rules of the European Transparency Directive).

Christian Temmel

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