Bearer Share Conversion Act for LLCs 

If you own an unlisted Limited Liability Company, the Bearer Share Conversion Act has important consequences for you. This new act requires that all shares in LLCs must be registered as of 1 January 2020, putting an end to bearer instruments.

The purpose of the act is to make transactions in financial markets more transparent and make tax evasion, money laundering, and financing terrorism more difficult. Shares can now only be traded through a securities account with a bank or investment firm and the identity of a shareholder is always known. 

Consequences for LLCs

Many unlisted LLCs mentioned “bearer shares” in their articles of association, but they should have had this changed by a notary before 31 December 2019. If you did not have this changed, any extant bearer shares were automatically converted to registered shares by operation of law. You can still amend your articles of association and file them with the Netherlands Chamber of Commerce KVK. This is mandatory when you amend your articles of association. 

The amendment applies to all LLCs in the Netherlands, Bonaire, Eustatius, and Saba (BES). 

Consequences for shareholders

Any bearer shares you own lost their value as of 1 January 2020, as you cannot exercise your voting rights, profit rights (or dividend rights), and pre-emptive rights on the issue of new shares until you have exchanged your bearer share for a registered share with the company. You could exchange your bearer share with the LLC until 1 January 2021, after which you could exercise your rights again. 

After 1 January 2021

Bearer shares that had not been surrendered by 1 January 2021 automatically became the property of the LLC. Until that date, shareholders had the right to redeem these shares for a registered share for another 5 years (before or no later than 1 January 2026). The right to receive a replacement registered share expires on 2 January 2026, after which anyone still holding a bearer share can no longer exchange it for a registered share. LLCs must notify their shareholders that "bearer shareholders" cannot exercise their rights and that the shares will eventually expire in their management reports. Since 1 January 2021, shareholders cannot retrospectively exercise unexercised rights, such as the right to dividends. 
LLCs may not sell or withdraw the automatically acquired shares in the meantime. 

Need support in fine-tuning your compliance processes?

Compliance is another word for abiding by the relevant laws and regulations and working according to rules and standards set by an organisation itself. KVK will help you support and set up compliance processes as a true partner. 

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