New rules for trading in shares after their dematerialisation

On March 1, 2021, the provisions on dematerialisation of shares entered into force, therefore the documentary form of shares ceased to exist and was replaced by an electronic form. We wrote about it in our previous articles:

https://www.dudkowiak.com/blog/?tag=mandatory-shares-dematerialization

One of the changes under this amendment was the transfer of the function of keeping newly created registers of shareholders to entities authorized to keep registers of shareholders, i.e. banks and brokerage houses. However, as practice shows, most of these entities turned out to be unprepared to amend the regulations in an appropriate manner (no clear procedures for keeping the register, no prepared declaration forms necessary to make entries in the register), and the requirements for sellers, buyers and the companies themselves when selling shares are so strict that at the moment it is very difficult to deal with the shares if the party or parties to the contract are foreign legal persons, which will undoubtedly affect the efficiency of the trading system for these securities.

Pursuant to Art. 328⁴ § 4 of the Commercial Companies Code, the person requesting the entry is required to submit to the entity keeping the register of shareholders the documents justifying the entry. In turn, § 5 of this article states that the entity keeping the register of shareholders examines the content and form of documents justifying the entry. However, this entity is not obliged to examine the legality and truthfulness of the documents justifying the entry, including the signatures of the seller of the shares or persons establishing a limited property right to the shares, unless they have reasonable doubts in this regard.

The practice of most banks and brokerage houses, hovewer, shows that these entities prefer to apply increased control standards to each transaction of sale of shares as if each of them raised reasonable doubts. As a result, the entities maintaining the register apply the following requirements to the parties to the transaction and the companies:

1. Concluding a sale in one of three forms:

• in writing, but signed in the presence of an employee of the entity maintaining the register of shareholders,
• in writing with signatures certified by a notary, and if the contract is signed before a foreign notary, legalization of the document and a sworn translation into Polish are also required,
• in electronic form, i.e. the contract should be signed with qualified electronic signatures by both parties,

2. In the event that the acquirer or seller is a foreign legal person or an entity without legal personality, but having legal capacity, the following should be presented:

• the original of an excerpt from a foreign commercial register with its legalization or an apostille with sworn translation into Polish,
• a document confirming the principles of representation in the company, most often it will be a copy of the company’s statute or articles of association, which should be certified by a notary public and translated by a sworn translator into Polish,

3. If the share sale agreement is signed by a proxy, the original power of attorney must also be submitted in writing with signatures, and if such a power of attorney has been granted abroad, it must be legalized and translated into Polish by a sworn translator,

4. In addition, each party will have to disclose its beneficial owners as well as submit a number of other declarations on the forms used by the entity maintaining the register of shareholders. It is impossible to list all these statements, because the requirements of each bank or brokerage house are different, but it can be indicated that these forms, as a rule, must also be signed in the presence of a notary public, and if this notary is a foreign notary, then also legalized and translated into Polish by a sworn translator.

The above requirements are just the tip of the iceberg, because each of the individual entities maintaining the shareholder register still has a lot of requirements, regulations, procedures or stages of control that cannot be classified, but which companies will still have to face in order to be entered in the register of shareholders.

As can be seen, compared to the legal status before the amendment, the number of documents necessary for the sale of shares in non-public companies has increased significantly, as has the time to prepare for such a transaction. If earlier it was enough to sign a share sale agreement in a written form to sell registered shares, now an entry in the register of shareholders is required for the effective purchase of shares in the company, which in turn results in the entire procedure of control by a bank or a brokerage house.

Therefore, the one-week time limit for entry in the register of shareholders indicated in the Commercial Companies Code is only a theory that has nothing to do with reality.

Feel free to contact the lawyers of our Law Firm in matters of keeping a register of shareholders. All applications should be sent to the following address: [email protected]