Luxembourg Reforms Its Bearer Shares Regime

On 16 July 2014, Luxembourg adopted the law concerning the compulsory deposit and immobilization of shares and units in bearer form (hereafter the "Law"), which aims to adapt Luxembourg law to the requirements of the Financial Action Task Force (on Money Laundering) (the "FATF") and the Global Forum on Transparency and Exchange of Information for Tax Purposes (the "World Forum") in relation to the identification of the holders of bearer shares and bearer units.

From a situation which may give rise to tax issues...

Before the adoption of the Law, bearer shares had a certain particularity. In fact, ownership of such shares, and exercising the social rights related to them, stemmed from the mere physical possession of a title which represented the relevant shares. This resulted in the fact that the entity issuing the bearer shares did not know the identity of the owner of the issued titles. This presented a number of taxation issues, inter alia, regarding the 'fight' against illegal behavior.

... towards a situation of increased transparency

Nevertheless, as of the issuance of the Law, bearer shares issued by a public limited liability company, by a corporate partnership limited by shares or by a management company of undertaking for collective investment (UCI) constituted as common fund, need to be deposited with a depository chosen by the management body of the issuing company, from among the following list of professionals to whom anti-money laundering obligations apply: credit institutions; asset managers; distributors of UCI shares/units; specialized professionals of the financial sector accredited as family office, as domiciliary agent, as professional performing services of incorporation or management of companies, as registrar agent, or as professional depositary of financial instruments; lawyers (list I and IV); notaries; statutory auditors and approved statutory auditors; and chartered accountants.

The depository has to maintain a register of bearer shares that contains information on the holder of the bearer shares and the shares themselves, i.e. the identity of the shareholder, the deposit date of the shares, their eventual transfer date or their possible conversion into registered securities. This register is not freely accessible. The holder of bearer shares may only consult the share register entries that relate to his own shares.

Among the major impacts of the Law, it should be noted that ownership of the shares by the...