Shareholder – remember your rights

The dematerialisation of shares, introduced by the Act of 30 August 2019 amending the Commercial Companies Code and certain other acts, has significantly changed the rules governing joint-stock companies (S.A.), limited joint-stock partnerships (S.K.A.) and simple joint-stock companies (P.S.A.).

As of 1 January 2021, shares may exist exclusively as an entry in an electronic registration system, and paper share certificates have lost their character as documents of title.

Currently, the only source of shareholding rights in private companies is an entry in the shareholder register, maintained by an authorised entity, in practice most often an investment firm (brokerage house). A shareholder who is not entered in the register cannot exercise any rights arising from the shares.

From the share ledger to the shareholder register – a fundamental systemic change

Until the end of 2020, companies maintained a traditional share ledger, in which shareholder data was disclosed. This ledger, together with the circulation of paper share certificates, constituted the basis for the exercise of corporate rights.

The legislator abolished the share ledger, and its content was not automatically transferred to the Shareholder Register. The mere fact of being recorded in the former share ledger does not currently constitute any basis for exercising corporate rights.

An entry into the shareholder register may be made only on the basis of the submission of the paper share certificate to the company, or the presentation of a final court order declaring the share certificate void. The absence of either basis makes it impossible to register the shareholder in the register.

Status of paper shares after 1 January 2021

From 1 January 2021, paper share certificates:

• no longer confirm shareholder rights,
• do not entitle the holder to participate in the general meeting,
• do not entitle the holder to dividends,
• cannot constitute a basis for an effective transfer of shares.

They have retained only a transitional evidentiary function – they may be used solely to demonstrate to the company the right to be entered into the shareholder register.

The dematerialisation of shares introduced in 2021 provides for a 5-year transitional protection period for share certificates. Thus, until 1 March 2026, a share certificate retains evidentiary value, but only for the purpose of demonstrating to the company that shareholding rights belong to the shareholder.

Conditions for entry into the shareholder register

A company may apply for the registration of a shareholder in the register only if:

1. the shareholder has submitted the paper share certificate, or
2. has presented a final court order declaring the share certificate void.

Many shareholders today do not hold paper share certificates because they were, for example, lost or destroyed.

In such cases, it is necessary to obtain a final court order declaring the lost share certificate void.

Consequences of the lack of entry into the register and necessary actions

Failure to be entered in the shareholder register means the complete loss of the ability to exercise any shareholding rights. A person not entered in the shareholder register cannot participate in the general meeting or vote, has no right to dividends, cannot exercise individual control rights, and cannot effectively dispose of shares.

Therefore, every shareholder should immediately verify whether they appear in the shareholder register, determine the entity maintaining the shareholder register for a given company, and complete all formalities necessary to obtain registration, in particular by submitting share certificates or taking actions enabling their invalidation.

Summary

Dematerialisation of shares clearly establishes that the only basis for exercising shareholding rights is an entry in the shareholder register. Paper share certificates have retained only a transitional evidentiary character, which expires on 1 March 2026.

In case of doubts concerning the status of shares, lack of certificates or the need to prepare actions enabling registration, please contact us.

We provide legal assistance to both shareholders and companies in the full scope of the dematerialisation process.

Authors:

Zuzanna Bierut, Legal Assistant

Leszek Paterek, Attorney-at-law