Anti-corruption coalition pushes bearer shares bill through Czech parliament

By bne IntelliNews February 20, 2013

bne -

Convening an "anti-corruption coalition" capable of pushing the legislation through at last, the Czech parliament passed a bill introducing regulation of anonymous "bearer" shares on February 19, pushing aside attempts to scupper it from a group of MPs from the ruling Civic Democrats (ODS) party.

Halting the use of the anonymous ownership shares has been discussed for years. The new legislation will force companies to enter bearer shares into a central depository or deposit them as bearer shares in paper form in a bank. That should allow authorities to trace ultimate beneficiaries when needed - for instance when investigating companies applying for public procurement contracts. Should companies fail to follow the new regulations, bearer shares will be converted into registered shares.

The bill was supported by 160 of the 162 deputies present in the 200-seat chamber, CTK reports. The coalition government led by ODS has a majority of just 105, including several independents, and 18 MPs from ODS voted against the bill, which will now pass to the senate for approval.

As bne previously reported, a group of deputies from senior coalition partner ODS blocked a vote on the bill on February 13, with budget committee chairman Pavel Suchanek seeking an amendment excusing existing bearer shares from the regulation. Such a change would clearly make the bill toothless, and the government swiftly pulled the vote.

Martin Fadrny from Environmental Law Service suggested to Radio Praha at the time that he wouldn't be surprised to see a coalition formed to prevent the legislation making it through parliament. "We will see whether a big pro-corruption coalition will form now. We have seen this situation happen before in other deliberations, when left and right-wing MPs found reasons not to support anti-corruption legislation."

However, led by Prime Minister Petr Necas, the government and opposition Social Democrats (CSSD) was able to put an anti-corruption coalition together to push the legislation through. It has been suggested for years that it's almost impossible to push through such a bill in a parliament filled with MPs who potentially benefit from non-transparent public contracts.

The ODS leadership voiced support for the government's version ahead of the vote, which was finally supported by a majority of party deputies. Necas said he is convinced that the government's bill is a step in the right direction, although he admitted it is far from the perfect solution. "I think this path, which enables the preservation of this type of shares but clearly says where the information on them is deposited, and which also enables access to it by the authorised institutions in case a suspicion of crime emerged, is an appropriate compromise," the PM told CTK.

However, the CSSD - which has also managed to allow the Czech Republic to remain one of only three states in the world (the tiny Pacific islands of Marshall and Nauru being the others) to continue using bearer shares during its stints in power - complains that it does not do enough to uncover the identity of company owners should they really want to remain anonymous. "If the owner wants to stay anonymous, he will found a firm in the Cayman Islands and the Czech law will not apply to him," said CSSD deputy Jan Chvojka.

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