Prague - What do Nauru, Marshall Islands and the Czech Republic have in common? Unfortunately for the latter, it's not beautiful beaches. Instead, they are the only three countries in the world where the use of bearer shares is still legal.
According to the OECD Tax Cooperation 2010 report, the two tiny Micronesia island nations with five-digit population and the 10.5 million Central European republic are the only countries that are still resisting the global trend of abolishing bearer shares.
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Last year, Guatemala was one of the countries who joined the ownership transparency bandwagon. The decision to abolish bearer shares was linked to Guatemala's war on organized crime that plagues Central America.
"The Law aims to attack drug trafficking and regulates 'the obligations of legal entities or individuals engaged in a profession or activity that could be used for the transfer, use, concealment and movement of goods from criminal or illegal acts,'" reported the CentralAmericanData server, quoting from a government press release.
Anguilla, a Caribbean island-nation, introduced a less drastic measure the same year. It did not abolish bearer shares, only obliged their owners to register with state-appointed controllers.
According to the Čekia information agency, there are 12 thousand joint stock companies that use "bearer shares in paper form". They constitute more than 50 percent of all joint stock companies in the Czech Republic.
These corporations issue any number of shares that are distributed to the company's owners. They can change their owner freely, without any need to register these transactions.
The OECD report explains that Czech bearer share holders can maintain their anonymity as long as they wish, since they do not have to attend shareholder meetings if they choose so.
The Czech Republic is likely to keep the two the Micronesian states company also in the years to come, because the center-right coalition government of PM Petr Nečas is not planning any measure aimed at restricting or abolishing bearer shares. Even the government's anti-corruption strategy says nothing about the issue.
On the contrary, in its very first bill, the government allowed companies with bearer share ownership to compete for public sector contracts, without having to reveal their ownership structure.
Interior Minister Radek John explained that there is no need for denying bearer share firms access to public contracts, as they are "suppliers with legal ownership structure."
Osama Anonymous
Czech economist Tomáš Ježek says that the government's unwillingness to abolish or restrict bearer shares ridicules its proclaimed anti-corruption efforts.
"It (bearer shares) is something that has been outlawed by all decent countries a long time ago," said Ježek, adding that the existence of bearer shares in the Czech Republic enables politicians and officials to bypass conflict of interest laws (as they can anonymously own shares in companies that win public contracts) and criminals to engage in money laundering (billions can be transferred without any documentation).
"If Osama bin Laden were a shareholder, nobody would know," said Ježek, who served as a privatization minister in the 1990s.
In the Czech trade register there are hundreds of companies with initial investment equaling the minimal CZK 200,000 (EUR 4,000) sum which do not record any profit. However, their shares can be traded freely without any documentation - this can be used to legalize profits from organized crime, as was happening until recently in Guatemala.
Also, hundreds of companies with anonymous ownership structure win public contracts.
