Law No. 75 “Prohibiting To Bearer and To Order Shares”
The Lebanese parliament approved Law No.75 (“Law No. 75”) dated 27 October 2016 which was published in the Official Gazette on 03 November 2016 (the “Enforcement Date”). Law No. 75 prohibits all Lebanese joint stock companies (the “Company (ies)”) from issuing any to bearer or to order shares (the “Prohibited Shares”).
In line with the above, all Companies having Prohibited Shares are under the obligation to substitute the Prohibited Shares with nominal shares within a period of One (1) year as of the Enforcement Date. Accordingly, the Companies are required to perform the following:
- Amend the articles of incorporation to reflect the change of type of shares no later than the date of the first general assembly following the Enforcement Date ;
- Inform the holders of the Prohibited Shares (the “Holder(s)”) of such Law, through the Official Gazette, Three (3) local newspapers and the Company’s website, if any; and
- Obtain from any Holder the name of the person to hold the newly issued nominal shares.
In case the Company fails to abide by the above, it shall then be subject to a penalty amounting to Fifty Percent (50%) of its corporate capital.
The legal consequences are not limited to the above. In fact, if the Company distributes any of its dividends to the Holders, it shall be subject to a penalty amounting to Twenty Percent (20%) of its corporate capital with respect to each distribution, and any resolution rendered by the shareholders of the Company amongst whom are Holders, shall be deemed illegal.
However, it should be noted that the Company is not the only entity bearing liability from Law No. 75. In fact, Holders who do not abide by said law shall be restricted from exercising all their rights as shareholders of the Company including the participation in its management.
In addition to the One (1) year granted by Law No. 75 mentioned above, the legislator granted the Company an additional One (1) year to meet the requirements. Failure of the Company to comply within a period of Two (2) year as of Enforcement Date shall entail the transfer of the Prohibited Shares the Lebanese State.