The end of bearer shares in Bulgaria

Joint-stock companies and general partnerships limited by shares are banned from issuing bearer shares

Recent amendments to the Commerce Act as of 23 October 2018 abolish bearer shares as an important step towards implementing the Directive on prevention of the use of financial system for the purposes of money laundering and terrorist financing.

Since bearer shares are transferred by simple delivery, no data on the subsequent shareholder needed ‒ until now ‒ to be entered in the Commercial register. This posed obstacles to identifying the real holder of the shares, thus enabling companies to benefit from bearer shares for the purposes of concealing actual company owners, money laundering or tax evasion.

Companies issuing bearer shares now have a nine-month statutory term at their disposal to swap bearer shares for registered ones and to start keeping a shareholder register. Additionally, interim certificates received by shareholders against contributions for subscription of bearer shares, will be exchanged for registered shares only. Otherwise, bearer shares will be cancelled and destroyed and a shareholder whose shares or substitute certificates have been cancelled will be entitled to claim from the company the amount of contributions paid within six months from becoming aware of the cancellation. Creditors holding a pledge of bearer shares or of a substitute interim certificate must also swap them for registered ones within the same timeframe.

Finally, yet importantly, companies are required to amend their statutes accordingly and to duly file the changes for entry in the Commercial register. Сompanies that fail to observe the new rules could be at risk of being dissolved by a court ruling upon an action brought by the Public Prosecutor.

To this end, the Registry Agency is expected to prepare a list of companies that fail to comply with the new requirements within the prescribed term and to forward the collated information to the Prosecutor’s Office.

Source: Act amending the Commerce Act (Promulgated in the State Gazette issue No 88 of 23.10.2018), Directive (EU) 2015/849 of 20 May 2015 on the prevention of the use of the financial system for the purposes of money laundering or terrorist financing, amending Regulation (EU) No 648/2012 of the European Parliament and of the Council, and repealing Directive 2005/60/EC of the European Parliament and of the Council and Commission Directive 2006/70/EC.

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