Conversion of Bearer Securities to be Taxed at an Increased Rate of 2%

October 18, 2012

The Act of 14 December 2005 on the abolishment of bearer securities prescribes that they must be converted into registered or dematerialised securities before 31 December 2013.

In order to encourage investors to convert bearer securities before the 2013 deadline and inspired by the Federal Government’s attempt to meet budgetary objectives, a conversion tax was introduced by the Act of 28 December 2011 on the conversion of bearer securities in accordance with the Act of 14 December 2005.

Conversion taxes

Since 1 January 2012, conversion of bearer securities is taxed at a rate of 1%, to be increased to 2% for conversions taking place in 2013. Securities expiring before 1 January 2014 (i.e. mainly corporate bonds) are exempt from these conversion taxes.

The conversion tax is calculated on the date on which the securities are deposited by the entitled party on the following basis:

  1. for listed securities: on the last price preceding the deposit date;
  2. for non-listed securities representing receivables: on the principal amount of the receivable;
  3. for participations in open-end investment funds: on the last inventory preceding the deposit date; and
  4. for other securities: on the estimated book value of these securities (interests excluded).

These taxes must be paid (i) by the professional intermediary for securities to be dematerialised and (ii) by the issuing company for securities to be converted into registered form.

Conversion formalities

Conversion into registered securities is the simplest option. The entitled party requests the issuer to convert its bearer securities into registered form and delivers these securities to the issuer. Conversion is effective as from the date it is recorded in the relevant register (e.g.: share register, bond register,…), which must be done by the issuer within five working days following a valid request. The articles of association do not necessarily need to be changed, but it is advisable if they do not foresee that the securities are in registered form.

Conversion into dematerialised securities requires the articles of association of the issuer to explicitly mention its securities can be in dematerialised form, including the date from which the bearer securities registered on a securities account are considered to be dematerialised. In addition, the issuer must make arrangements with a depository participant (i.e. a certified account-holder (e.g. a bank) or a clearing institution). The conversion date and identity of the depository participant must be published in the Belgian Official Gazette, in two national newspapers and on the issuer’s website. Once these formalities have been complied with, bearer securities will automatically be dematerialised as of the conversion date or the registration on a securities account (if this is after conversion date).

Non compliance by year end 2013

Bearer securities that have not been converted by 31 December 2013 will be converted by law into dematerialised securities and must be registered by the issuer on a securities account in its own name. In the case that the issuer’s articles of association do not provide the required wording for issuing dematerialised securities and/or if the issuer did not make arrangements with a depository participant, these securities will be converted by law into registered form and are to be recorded by the issuer in the relevant register in its own name.

Such registration in the issuer’s name does not grant the issuer the capacity as owner. The rights attached to those securities are suspended until registration in the securities account or in the register in the name of the entitled party.

As from 2015, securities of which the entitled party remains unknown must be sold by the issuer. The consideration for these securities or the securities itself (if these have not been sold by 30 November 2015) will be deposited with the Official Receiver (Deposito- en Consignatiekas / Caisse des Dépôts et Consignations) and can be claimed back by the entitled party providing evidence of ownership. A fine of 10% of the consideration of these securities or their counter value per year (as from 31 December 2015) applies. In addition, the Official Receiver must communicate the identity of the entitled party to other government institutions.