Draft law No. 246 on the use of a digital recording device on a shared registry for the stocks and shares of non-listed companies

Draft law no. 246 has been converted by the Government into Bill no. 1.039 on the use of a digital registration device on a shared register by public limited companies and private limited companies (The Government has 6 months (4 June 2020) to make known its intention to convert a parliamentary Draft law into a Bill or not).

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Draft law No. 246 aims to allow the dematerialisation of the issue and transfer of stocks (S.A.) and shares (S.A.R.L.), historically recorded on paper, by means of a “digital recording system on a (private) shared registry” guaranteeing “the availability, authentication, traceability, integrity, confidentiality and conservation of transactions”[1]. It also provides for the use of smart contracts.

It amends the provisions of the Commercial Code relating to sociétés anonymes (S.A., public limited companies) and sociétés à responsabilité limitée (S.A.R.L., limited liability companies), and is intended to be complementary to Draft Law No. 995 on blockchain technology, which focuses on Initial Coin Offerings.

The proposed system would ensure that entrepreneurs “have legal tools at least equivalent to those they use in other countries”, as in France.[2]

The concept of “digital recording system on a shared registry” covers the essential features of Blockchain technology, while being broader, which has the advantage of not limiting the application of the dematerialisation to this technology.

As a reminder, Blockchain technology allows the maintenance of a dematerialised and decentralised registry, shared among its users, which integrates the trace of all transactions carried out by them from the creation of the registry. With encryption processes, the Blockchain ensures the security and authentication of transactions. The registry set up shall be deemed difficult to falsify.

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NOTES:

[1] Article 1 of Draft Law No. 246.

[2] Commission for the Development of Digital Technology, Report on the draft law No. 246, 25/11/2019, p. 3.

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