First of all there is the registered security in the form of a registration of the owner of the security in the issuer’s register. Then there is the bearer security in the well known form of a “paper security” which does not mention the name of the owner but makes the person bearing it the true and incontestable owner.

The Belgian law of 14 December 2005 on the scrapping of bearer securities (“the law”) will gradually do away with this second category of securities.

You often read or hear that the new Belgian law is one which is introducing the dematerialisation of securities into Belgian legislation. But this is not strictly true. A law of 13 April 1995 already introduced the possibility for companies to create dematerialised securities in Belgium. There are also several legal stipulations on financial markets and transferable securities which already allow them to be registered in an account and transferred from one account to another by simple bank transfer. However, if dematerialisation has just been an option up to now, it is henceforth, in a way, compulsory.

Consequently there will now only be two forms of security available on the Belgian market, registered securities and dematerialised ones.

The securities affected

Three main categories of security are affected by the scrapping of bearer securities:

• all company securities (shares, founder’s shares, bonds, rights and certifcates);
• all securities issued by Belgian public issuers such as the State, regions,...;
• and all other securities “issued by a person under Belgian law and incorporating a financial debt to the issuer”. These are securities such as savings certificates, treasury and deposit certificates, property income certificates...

The dematerialised security and its handling

Belgian law defines the dematerialised security as a security “represented by a registration in an account in the name of the owner or holder”, the holder may of course be a foreign company, such as a foreign bank, holding securities on behalf of its clients.

The account is opened with an “approved bookkeeper”. Approved bookkeepers are designated by the Royal decree of 12 January 2006 and are mainly credit institutions under Belgian law, stock exchange companies under Belgian law and the National Bank of Belgium (BNB).

The approved bookkeepers themselves keep a global account with the organisation responsible for centralising the registrations (securities settlement institution). The securities settlement institutions designated by the above-mentioned royal executive decree are security clearing houses (CIK) and the BNB for bonds.

Dividends, interest and matured capital are paid by the issuer to the securities settlement institution who, in its turn pays them to the approved bookkeeper.

The dematerialised security may be used as security and transferred simply from account to account by bank transfer.

Advantages of dematerialised securities

The advantages of dematerialised securities are well known and cannot be denied. Dematerialisation contributes to the modernisation of the financial markets. It makes custody of the securities easier and speeds up and makes more flexible the transfer and clearing of such operations.

It offers the investor protection against numerous risks such as loss, theft, falsification or destruction. Thanks to his securities account he will also be automatically advised by his banker of events affecting the life of these securities or their issuer.

Towards total fiscal transparency of the citizen

However the main aim of the Belgian law is to scrap the anonymity linked to holding bearer shares and, in so doing, fight against tax fraud and international criminals involved in money laundering and terrorism.

To observers, this law is clearly part of the move to draw up a wealth register in Belgium. By taking data from registration, land register, VAT, excise and also the banks, notaries and other bodies, the Belgian State is seeking, in the long run, to know the most minute details of the financial situation of its taxpayers.