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Bearer shares at the NV a thing of the past?

Bearer shares at the NV a thing of the past?

The Netherlands has two types of capital companies: the NV (public limited company) and the BV (private limited company). One major difference between the two company forms has to with the shares. The introduction of the flex BV (Flex Private Limited Company) has diminished the differences in this area. The ‘tackling’ of bearer shares could cause the NV and BV to grow closer to each other as far as shares are concerned.

Share characteristics
The NV is characterised by openness: the shares are in principle freely marketable and not registered (hence its status as a ‘public company’). The shares of a BV are in principle not freely marketable and are indeed registered (hence the ‘private’ nature of the BV). With the introduction of the flex BV, it has also become possible to stipulate that the shares in the BV are indeed freely marketable: share transfer restrictions are no longer mandatory in the company’s articles of association.

Freely marketable shares
Because the shares in the NV are, in principle, always freely marketable, entrepreneurs who want to have the company listed on a stock market will usually opt for the NV as the company’s form. The distinction between the NV and the BV in terms of the free marketability of shares has been largely eliminated with the introduction of the flex BV. The important difference remains that shares in a BV do not include any bearer shares, which can be privately transferred.

Bearer shares
At the moment of writing, the NV allows the possibility of both registered shares and bearer shares. A restriction on bearer shares seems to be imminent, however, as evidenced by the letter from State Secretary Eric Wiebes in the context of preventing money laundering and terrorism financing.

The state secretary writes:

‘[…] Dutch public companies (hereafter: NVs) can issue bearer shares. Bearer shares of unlisted NVs are not registered and are freely marketable by private instrument. Shareholders remaining anonymous can result in abuse, tax evasion and money laundering.[…]’

and also:

‘[…] The result for which the government is aiming is to have bearer shares that currently can still be kept at home in tangible form only available in book-entry form in future. […].’

Three measures are aimed at achieving this:

  1. It will be mandatory for bearer shares to be put in the custody of an intermediary or central institute.
  2. Bearer shares will only be able to be transferred in book-entry form.
  3. The rights of holders of bearer shares will be suspended as long as the requirements of registering these and putting them into custody are not satisfied.

The Global Forum of the Organisation for Economic Cooperation and Development (OECD) also seems to find the potential anonymity allowed by the current form of bearer shares in the Netherlands to be undesirable. Page 24 of the ‘peer review report‘ from 2013 states:

‘52. Public limited liability companies (‘NV’s’, added by author) are allowed to issue bearer shares (‘toonderaandelen’, added by author). Some bearer shares are in circulation at present, but there are insufficient mechanisms in place to ensure the availability of information on the owners of bearer shares.’

The aforementioned letter from the state secretary also states that the government will put a draft online for consultation at the beginning of 2017 and hopes to present a legislative proposal to the Lower House of Parliament in the second half of 2017. It therefore looks as if bearer shares in their current form will soon be a thing of the past. I am not entirely convinced that this will actually be achieved. Nonetheless, we will keep you abreast of the developments.

By Christiaan van der Meer

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