By an act dated 21 December 2013, the legislator introduced a number of amendments to the act of 14 December 2005 on the abolition of bearer securities. These amendments prepare the further steps in the dematerialisation process and eliminate a number of specific shortcomings and difficulties in the application of certain provisions. Meanwhile, we are still awaiting the publication of a royal decree that will specify the procedure to be followed for the mandatory sale of securities for which no rightful owners have come forward as of 1 January 2015.
Pursuant to the act of 14 December 2005 on the abolition of bearer securities (hereinafter the "act of 14 December 2005"), bearer securities were required to be converted by their owners into dematerialised securities or registered securities by 31 December 2013 at the latest. With effect from 1 January 2014, bearer securities that have not been converted on the initiative of their owners will, automatically and by force of law, be converted into dematerialised securities or registered securities and recorded in the name of the issuer in the securities account or the register of shares of the issuer respectively. If the rightful owners have not come forward by 1 January 2015, the issuer must sell these securities on a regulated market (if the securities are admitted for trading on a regulated market), or through a public auction (if the securities are not admitted for trading on a regulated market).
The Government is in the process of finalising a royal decree with more detailed provisions on the sale of securities that have not been claimed by their rightful owners. During the preparation of the royal decree, it became clear that the act of 14 December 2005 still contained certain shortcomings and ambiguities. Therefore, the legislator further clarified and amended the act of 14 December 2005 by means of the act of 21 December 2013.
Simplification of the publication obligations in relation to the sale of securities not claimed by their rightful owners
The first amendment concerns the abolition of the obligation to announce the mandatory sale of securities that have not been claimed by their rightful owners by 1 January 2015 in one Dutch-language and one French-language national newspaper. It now suffices for the issuer to announce such sale in advance (i) in the Official Gazette and (ii) on the website of the market operator which operates the regulated market (listed securities) or the public auction platform (non-listed securities) on which the securities will be sold. Taking into account the additional costs that publication of notice of the sale in two national newspapers would entail, the legislator deemed this obligation excessive.
Securities converted automatically by operation of law and registered in the name of the issuer: protection in case of opposition to bearer securities and attachment
In addition, the legislator introduced an amendment to the provisions relating to the opposition that can be asserted in the event that the bearer securities are stolen, destroyed or lost (act of 24 July 1921 on the non-voluntary dispossession of bearer securities). Bearer securities against which opposition was filed under the act of 24 July 1921 prior to 1 January 2014 (as of that date opposition is no longer possible in view of the fact that all bearer securities should have been converted into dematerialised securities or registered securities by 31 December 2013 at the latest) are also subject to automatic conversion by operation of law. To preserve the rights of the affected owners under this specific opposition procedure, and to avoid these securities becoming commingled with other similar securities automatically converted by operation of law, these securities must be registered in the name of the issuer as a separate entry in the share register, as from 1 January 2014 until the opposition procedure has ended. This makes it easy to distinguish these securities from other similar securities that have also been automatically converted by operation of law.
Furthermore, a new paragraph has been added to article 9 of the act of 14 December 2005 in order to protect securities which are converted by operation of law and registered in the name of the issuer in the securities account or share register, against any attachment, sequestration or other measure by the creditors of the issuer, or by any other third party, aimed at blocking the securities. Such protection is justified in view of the fact that the issuer does not own these securities which have been converted by operation of law, but only holds them on behalf of the still unknown rightful owner.
Relaxation of the provisions concerning the purchase of own bearer securities converted by operation of law and registered in the name of the issuer
The conditions applicable to the purchase by the issuer itself of securities that are offered for sale have been relaxed. The purchase by the issuer of its own shares or profit sharing certificates remains subject to the conditions set out in article 620 of the Companies Code. However, the act of 21 December 2013 provides that the issuer can deviate from the condition that the total nominal amount (or, in the absence of a nominal amount, the total par value) of all purchased shares or profit sharing certificates may not exceed 20% of the subscribed share capital. This will allow issuers to group their shares more easily and to avoid (in the event that there were no buyers during the public sale) these securities needing to be transferred to the Deposit and Consignments Fund ("Deposito- en Consignatiekas"/"Caisse des Dépôts et Consignations"). Note that the issuer may continue purchasing its own shares without complying with the conditions of article 620 of the Companies Code, provided that the purchase takes place with a view to immediately annulling these shares in the framework of a capital decrease by the issuer.
The legislator also clarified that a rightful owner is entitled to assert its rights on its securities with the issuer until the date of the public sale that the issuer has to organise.
Moreover, a royal decree is currently being prepared which will specify the practical details of the sale (e.g. the contents of the prior announcement of the sale and the determination of the price), the subsequent transfer to the Deposit and Consignments Fund (of either the unsold securities or the proceeds of the sale) and the fine that is due if repayment is claimed after 31 December 2015.
Verification by the statutory auditor or an auditor, external accountant or external recognised bookkeeper
Another notable amendment consists of the introduction of mandatory verification of compliance by the issuer with the provisions of the act of 14 December 2005 concerning the announcement and organisation of the public sale and the subsequent transfer of the proceeds of the sale and/or the unsold securities to the Deposit and Consignments Fund. The issuer must have its statutory auditor (or, if there is no statutory auditor, an auditor, external accountant or recognised bookkeeper) confirm in writing that the issuer has complied with the applicable provisions. This written confirmation will need to be submitted by the issuer to the Deposit and Consignments Fund. Moreover, the issuer must state in the 2015 annual accounts whether or not this verification has taken place.
Role and liability of the Deposit and Consignments Fund
The legislator eliminated a few ambiguities concerning the role of the Deposit and Consignments Fund and limited its potential liability. For instance, it has been clarified that securities remaining unsold as at 30 November 2015, and consequently needing to be deposited with the Deposit and Consignments Fund by the issuer, will be registered in the securities register of the issuer in the name of the Deposit and Consignments Fund until the rightful owner has come forward. If the rightful owner demands repayment of the proceeds of the sale or, depending on the circumstances, the allocation of the securities themselves, the owner will need to present the underlying bearer security. If this is no longer possible (e.g. following a merger, demerger or acquisition), the owner will need to present written evidence (for which a standard form is being prepared), unless the issuer is willing to accept some other form of evidence – in which case the issuer will bear full liability for the reimbursement by the Deposit and Consignments Funds.
End date for the dematerialisation process
The act of 14 December 2005 did not specify an end date for the dematerialisation process, and this is something which the legislator is now seeking to resolve. If the rightful owner has not claimed repayment of the proceeds of the sale of the bearer securities from the Deposit and Consignments Fund by 31 December 2025, these proceeds will become the property of the Belgian State as of 1 January 2026. Unsold securities which have not yet been claimed by 31 December 2025 can be purchased by the issuer. Provided that the issuer announces its intention to do this by 31 December 2025 at the latest, the issuer will have to make an offer at a minimum price to be set by the Government (and notwithstanding the conditions for the purchase of own securities as provided in the act of 14 December 2005). This offer needs to be made within 15 days after being invited to do so by the Belgian State. If the issuer makes such an offer respecting the aforementioned conditions, the Belgian State has to accept that offer. The proceeds of the sale will be for the benefit of the Belgian State. If the issuer decides not to purchase the securities, these securities will be attributed to the Belgian State. The Belgian State may transfer these securities subject to compliance with any statutory or contractual limitations on the transferability of these securities.
Extension of the penal fine
The final amendment concerns the extension of the scope of application of the penal fine (between EUR 200 and EUR 100,000), which already applied to violation of the obligation to deposit unsold securities at the Deposit and Consignments Fund in conformity with article 11, but not to violation of the other obligations provided for in that article. The penalty is now extended to any violation of article 11 of the act of 14 December 2005. Consequently, an issuer can be subject to penal fines if it has not organised the public sale in accordance with the provisions of article 11.
By way of conclusion, it should be noted that the legislator did not clarify the tax treatment applicable to the recordation of securities that have been converted by operation of law when requested after 1 January 2014.