Mandatory Switch To Registered Shares For Non-Listed Companies

FATF Initiative and Austrian Implementation

Under a proposed amendment to the Austrian Stock Corporation Act (AktG), stock corporations (AG) whose shares are not traded on a stock exchange will no longer be able to issue bearer shares. It will be mandatory for closely held AG's to issue registered shares and to keep an up-to-date share ledger. The companies will in addition be required to keep on record bank account details of each shareholder as well as information on the ultimate beneficial owner of the shares concerned. All financial transactions between the company and the shareholder will need to be made via the account on record.

The proposed new rules are the result of a report by the Financial Action Task Force (FATF), which are intended to inter alia increase the transparency of ownership structures of closely held corporations. This should reduce the risk that ownership in such companies is used for money laundering purposes.

The Austrian reaction to this report has been a so-called "transparency initiative". The initiative was approved at government level in early 2010 and entered the legislative process still during 2010. While the new law was initially intended to enter into force in January 2011, delays at the parliamentary level have meant that the new rules will not become law before July 2011.

Mandatory Switch – Transition Period

Under the current provisions of the AktG, stock corporations are generally free to choose whether they want to issue registered or bearer shares. If only interim certificates are issued, these must be registered in the name of their respective holder.

The proposed new rules are further evidence for the increasingly visibly split of the Austrian company law into regulations applicable only to...