Some Politicians Prefer Bearer Shares

• Consultancy firm controlled by PD-L politicians Silvian Ionescu and Sulfina Barbu changes from Ltd. to bearer shares company

• Bearer shares are an efficient tool for keeping shareholders anonymous

Former Environment Minister Sulfina Barbu and former Environment Guard Commissioner Silvian Ionescu have recently decided to transform their consultancy firm KVB Economic from a limited liability company (Ltd. / S.R.L.) into a bearer shares company (S.A.). Over the past two years, the company controlled by the two PD-L politicians has been involved in two media scandals after a Bucharest-based newspaper revealed that this company had created the environmental report for the residential district which the controversial businessman Costica Costanda was planning to build in Bordei Park and that it was involved in a potential fraud of E.U. money.

The main advantage that bearer shares present over nominal shares is that ownership can be transferred rapidly, through a physical hand-over of the stock certificate. In other words, whoever holds the physical stock certificate at one given time owns the respective amount of shares. Gheorghe Piperea, a lawyer and a commercial law professor, explains that, generally speaking, bearer shares are an effective way of keeping shareholders anonymous, because the law does not force bearer share companies to keep records of changes of ownership between general shareholder meetings. "Only during a general shareholder meeting or upon the disbursement of dividends can they see who the shareholder is, because they make minutes of the meeting or receipts for the dividends," Piperea said.

KVB administrator Razvan Stan told BURSA that the reason why the shareholders had decided to transform the company from an Ltd. into a bearer shares company was definitely not to conceal the identity of the shareholders. "We registered the change into an S.A. with the Registry of Companies, so anyone who wishes to know who the shareholders are can ask the Registry of Companies for that information. As far as I know, those shareholders, who had a legal obligation to declare their holdings and interests, did so, which means that their statements, public statements, actually indicate their status as shareholders in this company," Stan said. However, Stan is overlooking the period between two consecutive general shareholder meetings, when the shares can change their owner at any time, which means that the Registry of Companies does not know who the owner is at the time of the query.

Stan also told BURSA that the choice for "bearer shares" had not come from the two politicians, but from the company"s lawyer, who was of the opinion that this was a simpler way to manage holdings. "Anyway, according to the General Shareholder Meeting, I, as the administrator, have an obligation to keep records of all the shares in a special registry at the company"s registered office, so there will always be a record of who owns what," Stan added.

In turn, lawyer Gheorghe Piperea pointed out that a change in the legal norms would make it harder and harder for someone to query the Registry of Companies to find out the identity of shareholders in a specific company, because such information was going to be defined as "private." "Only with the consent of the shareholders will such information be released. This means we will not know which Mr. Popescu is the actual shareholder, because the personal identity number will not be displayed anymore," Piperea explained.

Several hundred companies have been registered as bearer share companies in Romania. According to our information, increasingly numerous companies have decided to transform nominal shares into bearer shares in the last few years. Among them are the two law firms controlled by Dan Andronic, the former political consultant to the Tariceanu Government and PNL. One of the first companies to perform this change was one of the members of Tofan Group, in the 1990s. Current PD-L leader Theodor Stolojan was a consultant to that company.