Bill curbing anonymous shares faces legislative hurdle

The Czech Republic is one of three countries in the world that allows companies to issue anonymous bearer shares which has long been considered a major hurdle in the fight against corruption. Czech lawmakers have now moved to end the practice – but draft legislation that would reveal bearer shares’ owners was stalled in the lower house this week when it ran into subtle opposition by a group of Civic Democrat deputies.

Photo: Filip Jandourek / Archive of ČRo

According to the current laws, Czech companies can choose to issue shares to named shareholders or to anonymous owners. A recent survey has shown that more than half of joint-stock companies registered in the country are owned through bearer shares, which allow the owners of companies to remain anonymous.

In the past few years, a number of companies with anonymous shareholders, who were awarded major public tenders, have been involved in financial scandals – for example, Prague’s overpriced electronic ticketing system OpenCard, or the failed project of electronic patient cards IZIP.

Justice minister Pavel Blažek, photo: Filip Jandourek / Archive of ČRo

To end this practice, opposition MPs and the governing coalition were able to come together last year over a government proposal that should bring more transparency into company ownership by allowing police, attorneys or the bodies awarding public tenders to gain access to information about anonymous owners.

Although the proposal was, to a large extent, the brainchild of the former justice minister Jiří Pospíšil of the Civic Democrats, his successor in the post Pavel Blažek has supported it as well:

“The main goal of the law is to have full knowledge of where every single crown or euro from public funds is going and who is accountable for it.”

Pavel Suchánek, photo: Archive of the Chamber of Deputies of the Parliament of the Czech Republic

However, after rounds of debate in the lower house last week, the bill seems to have run aground. Surprisingly, the plan came under attack from the ranks of the leading coalition partner.

Influential Civic Democratic MP Pavel Suchánek tacked on an amendment that could potentially make the draft legislation completely ineffective. Mr Suchánek, whose personal financial affairs have come under some scrutiny in the past, proposed that the law should apply only to newly issued shares – allowing existing anonymous owners to remain nameless and out of reach of the law.

On Wednesday, the lower house decided to postpone further debate on the draft legislation. The official reason given was the absence of the justice minister, but the more likely explanation was that some in Mr Suchánek’s own party were outraged by what seemed like an overt attempt to jeopardize the bill.

Martin Fadrný, photo: Environmental Law Service

Martin Fadrný, an analyst from the watchdog Environmental Law Service, thinks the amendment may be used by politicians with lucrative connections to big business to sink the bill altogether:

“I read it as a way to complicate the legislative process and maybe to allow the bill not to be passed at all. 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.”

There is little chance that Mr Suchánek’s amendment will eventually be included in the bill. But it is not clear if it will be passed at all, once the lower house returns to a debate on the draft legislation. If it is scrapped as a whole, it will be a major blow to the government’s declared efforts to fight corruption in the country.