Mandatory Dematerialisation of Shares in Joint Stock Companies

Under the Act dated August 30, 2019 amending the Commercial Companies Code and certain other acts (Amending Act), regulations concerning the mandatory dematerialisation of shares in businesses operating in the form of joint stock companies (spółka akcyjna) or limited joint-stock partnerships (spółka komandytowo – akcyjna) (hereinafter referred to as companies regardless of their legal form) will come into force on 1 March 2021. 
 
Dematerialization of shares means that physical certificates will be retired from the market ( both the bearer share certificates and registered share certificates) and will be replaced by electronic records. The Amending Act will not affect public companies as their shares are already dematerialised in accordance with the Act dated July 29, 2005 on trading in financial instruments.
 
Non-public companies, i.e. those whose shares are not admitted to trading on a regulated market or multilateral trading facility within the territory of Poland, should dematerialise their shares by registering them with the Polish central securities depository operated by Krajowy Depozyt Papierów Wartościowych S.A. (KDPW) or a shareholder register operated by an organisation licensed to operate securities accounts (i.e. mainly brokerage houses).

The choice of the entity keeping the electronic shareholder register should have been made by the general meeting of the company by resolution, while the agreement with the keeper should have been signed by 30 September 2020. In case of new companies, established after 1 March 2021, the choice of the keeper is made by the founders upon incorporation, while the agreement with the keeper should be signed immediately after registering the company in the commercial register.
 
On 1 March 2021 all physical share documents expire, just as the books of shares no longer confirm who the shareholders are. Instead, as of 1 March, the shareholder registers are opened and entries in the shareholder register become effective, which means that now only those persons who are entered into the shareholder register are deemed to be shareholders.
 
Thus, if a shareholder is not entered in the register after this date, he will theoretically not be able to exercise his share rights. However, the Amending Act provides that the existing share documents will retain their evidentiary force to the extent of demonstrating the shareholder's share rights against the company for a period of five years, i.e. by 1 March 2026.

The shareholder register is open to the company and each of its shareholders. These entities may request a copy of the shareholder register in paper or electronic form from keeper of the register.