The dematerialization of shares, the process of converting physical share certificates into electronic form, has become a standard practice in modern securities markets. This transition enhances efficiency, reduces costs, and mitigates risks associated with physical certificates. In Europe, the legal framework supporting this transition varies across countries but generally aligns with EU directives and regulations. This blog post explores the legal basis for the dematerialization of shares in 20 European countries, highlighting the harmonization efforts within the European Union and specific national legislations.
1. European Union (EU)
The EU has played a significant role in harmonizing the dematerialization process across member states. The key legislation includes:
- Central Securities Depositories Regulation (CSDR) (EU Regulation No 909/2014): Establishes common requirements for central securities depositories (CSDs) across the EU to promote a safe and efficient securities settlement system.
- Second Markets in Financial Instruments Directive (MiFID II) (Directive 2014/65/EU): Regulates trading venues and investment firms, indirectly impacting the handling of dematerialized securities.
2. Austria
In Austria, the dematerialization of shares is governed by:
- Austrian Stock Corporation Act (AktG): Allows for the issuance of electronic shares registered in a central securities depository.
- Securities Deposit Act (DepotG): Regulates the custody and administration of securities in dematerialized form.
3. Belgium
Belgium’s legal framework includes:
- Belgian Company Code: Permits the issuance of dematerialized shares.
- Royal Decree No. 62 on the Depository Receipt System: Provides the basis for the operation of the securities settlement system.
4. France
In France, the key legislations are:
- Commercial Code (Code de Commerce): Governs the issuance and transfer of dematerialized shares.
- Monetary and Financial Code (Code Monétaire et Financier): Regulates financial markets and securities, including dematerialized instruments.
5. Germany
Germany’s framework includes:
- German Stock Corporation Act (Aktiengesetz – AktG): Allows for the issuance of electronic shares.
- Securities Trading Act (Wertpapierhandelsgesetz – WpHG): Regulates securities trading and settlement.
6. Italy
In Italy, the legal basis is found in:
- Italian Civil Code: Provides general provisions for the issuance of dematerialized shares.
- Consolidated Law on Finance (Testo Unico della Finanza – TUF): Specifies regulations for securities markets and dematerialized securities.
7. Netherlands
The Netherlands has implemented:
- Dutch Civil Code (Burgerlijk Wetboek): Allows for the issuance and transfer of dematerialized shares.
- Act on the Supervision of the Securities Trade 1995 (Wet toezicht effectenverkeer 1995): Regulates securities trading and dematerialization.
8. Spain
Spain’s legal framework includes:
- Spanish Companies Act (Ley de Sociedades de Capital): Governs the issuance of shares, including dematerialized forms.
- Securities Market Law (Ley del Mercado de Valores): Regulates securities markets and dematerialized securities.
9. Portugal
In Portugal, dematerialization is governed by:
- Portuguese Securities Code (Código dos Valores Mobiliários): Provides comprehensive regulations for the issuance and transfer of dematerialized securities.
- Commercial Companies Code (Código das Sociedades Comerciais): Governs company operations, including share issuance.
10. Greece
Greece’s legal basis includes:
- Hellenic Company Law (Law 2190/1920): Allows for the issuance of dematerialized shares.
- Securities Law (Law 2396/1996): Regulates the dematerialization and trading of securities.
11. Ireland
In Ireland, the legal framework consists of:
- Companies Act 2014: Permits the issuance and transfer of dematerialized shares.
- Central Securities Depositories (CSD) Regulations: Govern the settlement and registration of dematerialized securities.
12. Denmark
Denmark’s legal basis includes:
- Danish Companies Act (Selskabsloven): Allows for the issuance of dematerialized shares.
- Securities Trading Act (Værdipapirhandelsloven): Regulates the trading and settlement of securities.
13. Finland
In Finland, the key legislations are:
- Finnish Companies Act (Osakeyhtiölaki): Permits the issuance and registration of dematerialized shares.
- Securities Markets Act (Arvopaperimarkkinalaki): Regulates securities trading and dematerialization.
14. Sweden
Sweden’s legal framework includes:
- Swedish Companies Act (Aktiebolagslagen): Allows for the issuance of dematerialized shares.
- Securities Market Act (Värdepappersmarknadslagen): Regulates securities markets, including dematerialized securities.
15. Norway
Although not an EU member, Norway follows:
- Norwegian Public Limited Liability Companies Act: Permits the issuance of dematerialized shares.
- Securities Trading Act (Verdipapirhandelloven): Governs the trading and registration of securities.
16. Switzerland
Switzerland, also outside the EU, has:
- Swiss Code of Obligations: Governs the issuance and transfer of dematerialized shares.
- Financial Market Infrastructure Act (FMIA): Regulates securities trading and settlement.
17. Poland
Poland’s legal basis includes:
- Polish Commercial Companies Code: Allows for the issuance of dematerialized shares.
- Act on Trading in Financial Instruments: Regulates securities markets and dematerialization.
18. Czech Republic
In the Czech Republic, the key legislations are:
- Business Corporations Act (Zákon o obchodních korporacích): Permits the issuance and registration of dematerialized shares.
- Capital Market Undertakings Act (Zákon o podnikání na kapitálovém trhu): Regulates securities trading and dematerialization.
19. Hungary
Hungary’s legal framework includes:
- Hungarian Civil Code: Allows for the issuance of dematerialized shares.
- Act on the Capital Market: Regulates the trading and settlement of securities.
20. Romania
Romania’s legal basis consists of:
- Romanian Company Law (Law No. 31/1990): Governs the issuance of shares, including dematerialized forms.
- Capital Market Law (Law No. 297/2004): Regulates securities markets and dematerialization.
Harmonization Efforts and Future Outlook
The harmonization of securities markets within the EU has significantly influenced national legislations, ensuring a more uniform approach to the dematerialization of shares. Key EU regulations like the CSDR and MiFID II have established a cohesive framework, promoting transparency, efficiency, and investor protection across member states.
However, each country retains specific provisions and procedures aligned with its legal traditions and market practices. As technology evolves and the push for digitalization continues, further harmonization and updates to national legislations are expected to accommodate new financial instruments and trading platforms.
Conclusion
The dematerialization of shares is a critical component of modern securities markets, enhancing efficiency and security. Across Europe, the legal basis for this process is well-established, supported by both national laws and overarching EU regulations. This alignment fosters a robust and integrated market environment, facilitating cross-border investment and economic growth.
References
- European Commission. (2014). Regulation (EU) No 909/2014 on improving securities settlement in the European Union and on central securities depositories. Official Journal of the European Union.
- European Parliament and Council. (2014). Directive 2014/65/EU on markets in financial instruments (MiFID II). Official Journal of the European Union.
- National legislations: Various country-specific legal documents and codes (as referenced in respective sections).
This comprehensive overview provides insights into the legal frameworks supporting the dematerialization of shares in 20 European countries, reflecting the significant role of EU regulations in harmonizing these processes across member states.