Seychelles and Panama – Regulatory changes to bearer shares
In August 2013 Panama passed Law N° 47 of 2013 which introduced a custody regime for bearer shares. The Law will enter into force in two years’ time, in August 2015, when a three year transition period will commence during which bearer shares issued before August 2015 must be placed with an authorised custodian by August 2018, together with an affidavit sworn by the owner of the shares confirming his ownership, with specific identification information.
Bearer shares issued after August 2015 are subject to the same requirement that they are to be deposited with an authorised custodian with the owner’s identification affidavit within 20 days of the issuance of the shares.
When the shares are transferred the new owner must provide the custodian with an affidavit and the identification information.
Authorised custodians include Panamian licensed banks, trustees, securities depositaries, as well as certain foreign custodians which are registered with the Panamanian Banking Supervisory Authority.
The custodian is obliged to hold the bearer share certificates and related affidavits required under the Law in Panama or, if a foreign custodian is appointed, the bearer share are held by the issuing company’s registered agent in Panama with the foreign custodian required to provide the identification information to the agent.
Should bearer shares not be placed with a custodian the Law provides that the owner shall not be entitled to exercise voting and economic rights over the shares, in the case of shares issued before August 2015. For shares issued after this date the company will void the issue of the shares if a custodian is not appointed within the 20 day time limit referred to above.
The Law also provides that upon the request of the competent authority, a local custodian is required to provide the identification information of the owner to that authority.
The Seychelles is another jurisdiction that is currently in the process of taking steps against bearer shares as well as introducing further regulatory changes. In late November 2013 the jurisdiction’s parliament considered amendments to the International Business Companies Act 1994. The draft amendments, if approved, would fundamentally change the existing legislation.
The current regulations concerning the issuance and maintenance of bearer shares would be repealed and existing bearer shares would be cancelled in a short six month transitional period. Any bearer shares that were not cancelled by the end of the transitional period would automatically be rendered void.
Companies will be required to maintain a copy of the company’s share register at the offices of the registered agent.
The proposed amendments includes a new requirement that will oblige companies to provide their registered agent with a declaration by 31st December each year to confirm that:
accounting records are maintained by the company and those records are available from the registered agent, and
the share register is complete and accurate and is held by the registered agent
It is proposed to introduce financial penalties against the company should it fail to comply with these new requirements. The company would be subject to an immediate fine of US$100 with further penalties of US$25 a day if the default is not remedied. Similar penalties will be imposed on the company’s directors for permitting the breach of the regulations.
The penalties on the company and its directors will also be applied if a company fails to maintain accounting records in accordance with existing legislation.