Due to provisions implementing the simple stock company into Polish law, and provisions on “dematerialisation of private joint-stock companies”, the Commercial Companies Code contains cryptic wording on the option of maintaining a shareholder register for these two types of companies, “in electronic form, as a dispersed and decentralised database”.

We have addressed the question of this option repeatedly because it is potentially an opening for “tokenisation” of shares. This means that in a simple stock company or joint-stock company, shares can be issued as blockchain tokens. Simple rewording of two identical provisions in the Commercial Companies Code could therefore connect the world of decentralised registers and shareholdings, the latter being a concept recognised in law, in both of these types of joint-stock companies.

It would be a slight overstatement to say that in this situation a share becomes a blockchain token. Regarding the question of share form, both in a simple stock company and a joint-stock company, when the new laws on these types of companies take effect, the Commercial Companies Code will only state that “shares are not in document form”. This means that they are not in conventional form (on paper), but does not necessarily mean that they are not a document in the meaning of the Civil Code (“data carrier the content of which can be viewed”). The Commercial Companies Code only states in a relatively liberal way the technology that can be used to maintain a shareholder register – it can be in electronic form, and this also means in dispersed form and in a decentralised database. In practice, meanwhile, addressing the issue of the form of a security being a share on the basis of legal literature could prove to be of secondary importance if this kind of tokenisation of shares becomes a fait accompli due to tokens being used in the technical form of a shareholder register.

Provisions on the form of a shareholder register and the option of it being maintained in dispersed form and as a decentralised database are worded in the same way for both a simple stock company and a joint-stock company. The list of entities entitled to maintain a register of that kind differs, however. In both cases, these are entities entitled to operate securities accounts under the Securities Act. In the case of the simple stock company, however, notaries with their practice in Poland will also be able to do this.

The main question that this raises is whether there is any reason to use a “dispersed and decentralised database” if the Commercial Companies Code states clearly that a shareholder register must be maintained by a specific entity. The Commercial Companies Code leaves no doubt as to the role of the entity that maintains the register. Regardless of the form of the register, this entity is required to ensure integrity of the data contained in the register, and that those data remain secure. Any joint-stock company, and simple stock company, will have an obligation to promptly conclude an agreement for operation of a shareholder register.

It is questionable therefore what is to be achieved by maintaining a shareholder register in dispersed and decentralised form, if, under the law, there clearly has to be a central entity responsible for maintaining it. Initiatives now emerging on the market, aimed at creating business products related to blockchain shareholder registers, will provide a range of answers to that question. The simplest solution would probably be to create a dispersed register, for example using existing blockchain infrastructure, while this would be a “permissioned” model, in which the entity maintaining the register would hold all of the authorisations necessary to meet legal requirements.

Alternatively, a shareholder register would be dispersed and decentralised not only because dispersed register technology controlled by the entity maintaining the register would be used, but also because of an arrangement between multiple entities of that kind using the same technological solution. The Commercial Companies Code does not rule out one technological solution being created and maintained for example by a group of notaries (in the case of a simple stock company) provided that each of them duly performs the relevant tasks required of entities that maintain shareholder registers. In this scenario, using blockchain or some other dispersed register might be much more sensible, because the dispersal and decentralisation would result from the servicing of a large number of companies, the technological characteristics of the system used, and also existence of many entities maintaining the appropriate shareholder registers. Formally, these would continue to be separate shareholder registers maintained for various companies. There is no question of a single shareholder register for multiple companies maintained by various entities. In this sense, the question in the heading is incorrectly formulated.

Naturally, this approach would still mean resolving a series of legal issues, not only closely connected to corporate law. As personal data are processed in a shareholder register, the solution adopted would have to comply with personal data regulations. In the case of data processing in dispersed registers, this is not always easy. The entities listed in the shareholder register would also have to be identifiable, and the register would obviously be open to the company and each shareholder. In this case, some form of division of an electronic identification system between individual entities maintaining the register could be considered, for example within a dispersed register as well (because blockchain presents interesting potential for creating electronic identification systems).

 We will probably see dispersed and decentralised database shareholder registers introduced for the first time when the simple stock company laws come into force in March 2020. At that time it will be seen whether the model of multiple entities maintaining shareholder registers sharing infrastructure is of interest to the market.

Jacek Czarnecki