Bearer Shares in Liechtenstein - a brief Introduction to the Regulatory Landscape

Josef Bergt
2023

In the context of the Liechtenstein Persons and Companies Act (“PGR”), companies limited by shares, partnerships limited by shares (Art 368 PGR), and European companies (SE) that issue bearer shares are required to appoint a custodian with whom the bearer shares are to be deposited. The custodian is appointed by the board of directors, or in the absence of a quorum, by the Princely Court of Justice in special non-contentious proceedings. Listed companies, undertakings for collective investment in transferable securities, investment funds, and investment companies are exempt from this requirement. The custodian's role and function must be recorded in the Commercial Register.

Only individuals who are either subject to the Due Diligence Act or who have their registered domicile or place of residence in Liechtenstein and have an account in the name of the shareholder in Liechtenstein or in another EEA member state, can be appointed as custodians. This does not apply in case of commercially operative companies (Art. 326b(3) PGR). If the representative office of the company is subject to the supervision of the Liechtenstein Financial Market Authority (FMA), it may be appointed as the custodian.

The custodian is required to maintain a register, which can be electronic, provided it can be made readable at any time. The register must include the last name, first name, date of birth, nationality and place of residence or company name and registered domicile of the shareholder, the date of the deposition, the bank account details of the shareholder in Liechtenstein or another EEA member state, and if applicable, the pledging of the bearer share. Only parties who are recorded in the register are considered to be shareholders vis-à-vis the company. The register must be held for safekeeping at the registered domicile of the company.

The custodian may release the bearer shares only in the event of the ending of his function as custodian, to his successor, in the event of the conversion of the bearer shares into registered shares pursuant to the articles, to the company, or in the event of the retraction, withdrawal or amortization of bearer shares, to the company.

Shareholder rights stemming from the bearer share can only be exercised if the bearer share is deposited with the custodian and all details of the bearer shareholder are registered.

In terms of voting rights at the general meeting, these can be exercised either by the shareholder himself (or a third party authorized by him) or by the custodian (or a third party authorized by him). If the custodian is to exercise the voting rights, he must request voting instructions from the shareholder before each general meeting. In the absence of timely instructions, the custodian shall exercise the voting rights in accordance with a general instruction from the bearer shareholder; if no such instruction is received, the custodian shall follow the motions of the board of directors.

The custodian must demonstrate his entitlement to exercise voting rights through a written declaration that cites his function as a custodian, the number, the par value and the category of the represented bearer shares, and information about whether the representation results from a special, a general, or no instruction. If a public deed is to be prepared about the resolution of the general meeting, then the declaration of the custodian and, in the absence of instructions from the shareholder, the motions of the board of directors shall be attached to the document in writing.

If a shareholder intends to transfer bearer shares, he must notify the custodian. The notification must contain the last name and first name, date of birth, nationality and place of residence or company name and registered domicile of the acquiring party of the bearer share. The transfer of bearer shares becomes effective upon the entry of the acquiring party in the register.

Within the context of its annual audit and review obligations, the auditor that must be appointed for the company must examine and confirm that the custodian has adhered to the obligations. If the auditor ascertains that these obligations have been adhered to, this shall be confirmed in the audit report. If the auditor finds deficiencies, however, it must immediately file a complaint to the Office of Justice. The Office of Justice shall then order the custodian to rectify the deficiency within a specific deadline. If the deficiency is not remedied within the set deadline, the Office of Justice shall notify the Princely Court of Justice.

Source: Factsheet AJU/ h70.033e.02

Executive Summary:

• Companies limited by shares, partnerships limited by shares, and European companies (SE) that issue bearer shares are required to appoint a custodian with whom the bearer shares are to be deposited.
• Only individuals who are either subject to the Due Diligence Act or who have their registered domicile or place of residence in Liechtenstein and hold an account in the name of the shareholder in Liechtenstein or in another EEA member state, can be appointed as custodians.
• The custodian is required to maintain a register, which can be electronic, provided it can be made readable at any time.
• The custodian may release the bearer shares only in the event of the ending of his function as custodian, to his successor, in the event of the conversion of the bearer shares into registered shares pursuant to the articles, to the company, or in the event of the retraction, withdrawal or amortization of bearer shares, to the company.
• Shareholder rights stemming from the bearer share can only be exercised if the bearer share is deposited with the custodian and all details of the bearer shareholder are registered.
• Voting rights at the general meeting can be exercised either by the shareholder himself (or a third party authorized by him) or by the custodian (or a third party authorized by him).
• If a shareholder intends to transfer bearer shares, they must notify the custodian. The transfer of bearer shares becomes effective upon the entry of the acquiring party in the register.
• The auditor that must be appointed for the company must examine and confirm that the custodian has adhered to the obligations. If the auditor finds deficiencies, it must immediately file a complaint to the Office of Justice.