The government is planning to abolish bearer shares issued by public limited companies (known as sociedades anónimas, or SA, in Portuguese), so as to be in line with the requirements of the Global Forum on Transparency and Exchange of Information for Tax Purposes, as part of its efforts to crack down on money laundering and terrorist financing.
A press conference about the issue, co-hosted by Law Reform and International Law Bureau (DSRJDI) Deputy Director Chou Kam Chon, DSRJDI official Lam Wai Lon, Finance Services Bureau (DSF) Deputy Director Stephen Iong Kong Leong and DSF official Kuok Iat Hoi, was held Thursday on the DSRJDI premises in Nape.
According to an investment education website, a “bearer share” is “an equity security that is wholly owned by whoever holds the physical stock certificate. The issuing firm neither registers the owner of the stock, nor does it track transfers of ownership. The company disperses dividends to bearer shares when a physical coupon is presented to the firm”.
The Global Forum, of which Macau is a member, was created in the early 2000s and works under the Paris-based Organisation for Economic Co-operation and Development (OECD).
According to the government’s public consultation document, Macau has to implement a number of convention modes as required by the Global Forum as part of international efforts to crack down on money laundering and terrorist financing. The Global Forum carried out its first-stage and second-stage assessments in 2011 and last year on Macau concerning progress the city was making in implementing the conventions. Macau passed the two assessments.
According to the public consultation document, the Global Forum pointed out that as outsiders are not able to know the identities of the owners of bearer shares under any circumstances, this kind of shares foster money laundering and terrorist financing to be carried out more easily. The Global Forum required Macau to solve the issue before the third-stage assessment in 2016.
According to the Macau Commercial Code, public limited companies are allowed to issue either registered shares or bearer shares, Chou said, adding that the government is proposing the abolition of bearer shares so as to be in line with international norms.
According to Iong, as of August this year there were 125 public limited companies allowed to issue bearer shares in Macau.
Iong said that more and more countries or regions have abolished bearer shares. “Bearer shares are such that no one knows who owns them [issued by a company], it makes it easy for someone to launder money or finance terrorism. The transfer of ownership of bearer shares is easy as there is no registration. There is an international trend of higher transparency in which any owners of any shares [issued by a company] can be revealed.”
Iong admitted that Macau lags behind the rest of the world in cutting off possible illegal funding. He said therefore Macau had to “catch up” to ensure that the city will be able to pass the third-stage assessment.
Iong said that if Macau cannot pass the assessment, it would “affect the international image of Macau”.
The consultation will end on November 8.
Any amendment to the Commercial Code must be passed by the Legislative Assembly (AL).