According to the latest changes to the Polish Commercial Code, shares in joint stock companies were supposed to be dematerialized (change of the form of shares from physical certificates to electronic records). Share documents (both the bearer share certificates and registered shares certificates) were supposed to be delivered to the company and their binding force expired by operation of law on 1 March 2021. The aim of the new regulation was to make it easier for shareholders to deal with their shares and to eliminate the bearer shares from the market. As of 1 March 2021, the entries in the electronic register of shareholders became legally binding and the physical share documents were retired. In accordance with the new provisions, until 1 March 2026, the physical share documents will remain valid as evidence, but only to the extent that the shareholder demonstrates to the company that he or she is entitled to share rights. As from 1 March 2021, the electronic register of shareholders is the primary source of information on the rights of participation in the company.
Draconic fines can be imposed on directors and officers if they fail to comply with new regulations. The company's failure to fulfill its new obligations, in particular a failure to conclude an agreement on keeping the register of shareholders or a failure to call on shareholders to submit share documents, is subject to a fine of up to PLN 20,000. Also, allowing the company to issue documents for shares or other titles of participation in income or assets distribution is punishable by a fine, restriction of liberty or imprisonment for up to 6 months. The corresponding liability is borne by persons authorized to manage the affairs and represent the company.
Despite tough sanctions which can be imposed on directors, many joint stock companies in Poland have not complied with the new rules on dematerialization. There is still time to remedy the problem but quick actions are needed. In a nutshell this is what needs to be done:
- Company website
Each joint-stock company and limited joint-stock partnership is obliged to have a website
The website of a joint-stock company and a limited joint-stock partnership should contain basic company data. According to the law, companies should also publish on these websites, in places designated for communication with shareholders, announcements from companies required by law or their statutes.
In addition, the website address of a joint-stock company and a limited joint-stock partnership should be disclosed in the National Court Register.
Importantly, the law also obliges joint-stock companies and limited joint-stock partnerships, to:
- adopt resolutions of the General Meeting of Shareholders on the selection of the entity keeping the register of shareholders,
- sign an agreement to keep the register of shareholders,
- make the first (out of the five obligatory) shareholders' calls for the delivery of share documents held.
- Register of shareholders
The maintenance of the electronic register of shareholders should be entrusted to qualified entities, i.e. entities authorized to maintain securities accounts in accordance with the regulations on trading in financial instruments. The company should conclude an agreement with the selected entity to keep the register of shareholders. Typically, the electronic register of shareholders are run by brokerage houses.
- Delivery of share documents to the brokerage house
The shareholders should deliver their share documents to the brokerage house without delay. The brokerage house will make entries into the electronic register of shareholders and will issue a receipt to each shareholders. The electronic register of shareholders will be available to the company and to each of the shareholders.