Legislators suggest that the government extend the period for locally registered companies to convert their bearer shares to registered shares, as the city is looking to pass a bill that abolishes bearer shares in compliance with a review by the Organisation for Economic Co-operation and Development (OECD)’s Global Forum on Transparency and Exchange of Information for Tax Purposes.
The bill, which obtained its first approval by legislators on January 12, proposes a six-month period for the conversion of the existing bearer shares issued by local companies into registered shares.
But the first permanent committee of the Legislative Assembly suggested that the conversion period be stretched further, the committee’s president Kwan Tsui Hang told media after their meeting with the government yesterday. “The government reckons that as there is only a small number of companies here that issue bearer shares, six months should suffice as the conversion period,” Ms. Kwan said after the meeting, adding that the conversion period usually ranges from six months to two years in international cases.
Government representatives said that there are currently only 10 local companies that issue bearer shares. But the value of these shares and the type of these share issuing companies were not mentioned in the meeting, Ms. Kwan said.
“But we [the committee] think that as this bill involves the rights of asset ownership, the government could set a longer period [for conversion],” noted the sub-committee’s president.
She added that the government had no objection towards the legislators’ suggestion. The term of how long this conversion period should last for has yet to be agreed by the legislative meetings to follow.
According to the bill, the failure of the conversion of bearer shares into registered shares within the stipulated period would result in the annulment of the share owners’ rights.
“You cannot call a shareholders’ meeting or receive any dividends if your bearer shares conversion did not take place within the stipulated period – be it six months or a year,” Ms Kwan said.
“And within one year following this share conversion period, for cases of failure of conversion into registered shares, the owners [of bearer shares] can only exercise their shareholders’ rights by undergoing some court procedures,” the legislator added.
She also told media that within one year following the final approval of the bill, the bearer shares are not transferable – a direction that the sub-committee agreed to.
The draft bill is a response to a review of the Global Forum on Transparency and Exchange of Information for Tax Purposes conducted in September 2013. The organisation indicated that Macau lacked an effective scheme to obtain information about bearer shareholders.
The Legislative Assembly is to pass the bill soon as the forum is set to conduct a third phase review of Macau’s compliance with international standards on transparency of corporations’ ownership next year.
Bearer shares
Bearer shares are a type of freely transferable security of which any person who has them in their possession need not have names included on the shares. By contrast, registered shares or conventional shares are issued in the name of a particular investor and recorded in a share register.
In terms of change of ownership, bearer shares are easier to transfer as it only involves the handing over of the ownership certificates without further formalities.
