Czech Property & Rising Stocks: A Unique Revival

Since the end of August, when SZ Byznys published an article about “sleeping shares” from coupon privatization, something has moved in the Central Securities Depository (CDCP). Out of more than half a million unclassified accounts, over 4,400 people requested a statement of their assets.

“Roughly a fifth of them found out that there are actually some shares on their account,” says CDCP head Ondřej Dusílek in an interview.

According to him, due to the interest, the pace of account transfers to classified records has suddenly accelerated – i.e. to brokers and banks, through which the shares can be actively managed, or sold and monetized. “Previously, around two hundred accounts were moved per month, now it’s roughly double,” Dusílek adds.

At the end of the summer, around 529,000 accounts remained unclassified, of which about 130,000 contained listed shares with a market value of over 35 billion crowns. In more than 11,000 accounts, securities are held for deceased persons, and the value of these shares traded on the stock exchange exceeds 700 million crowns.

On the other hand, it should be added that despite the current increased interest, there are still hundreds of thousands of accounts whose owners have not yet responded. And a large number of them will probably remain inactive for a long time, if not forever.

According to the depository, large names such as ČEZ, Komerční banka and Philip Morris ČR appear most often among the forgotten shares, i.e. companies that were still in the original Securities Center and were never fully transferred to the current register.

“In many cases, these are shareholders who hold their shares for a long time and have no reason to move them. They will receive the dividend anyway, so they do not feel the need to change anything,” explains the head of the depository.

According to him, the comfort of collecting dividends even without active account management is one of the main obstacles why people do not transfer their accounts. “If they don’t trade shares, the system doesn’t limit them in any way,” he adds.

Paradoxically, it is precisely the regular payment of dividends that keeps many people feeling that there is nothing to worry about. “Companies such as ČEZ or Komerční banka pay dividends through their banks. People just need to come to a branch with their ID card, where they can pick up the money,” explains Dusílek.

But even if the shareholder does not come for the dividend, the money does not disappear. “In such a case, the company keeps them for several years as an unpaid dividend. After this period, it can deal with them according to its articles of association,” he explains.

Another large group consists of the aforementioned accounts of deceased owners. There, the heirs often do not know about the property at all. Today, the CDCP offers the possibility to verify the existence of the deceased’s account online, using the birth number and the inheritance number. If the system confirms that the account exists, the notary must reopen the inheritance and request a statement.

Dusílek warns that it will not continue without the intervention of the state. “I can imagine legislation that would set a clear deadline during which the owner or heir must come forward. After that, the property could, for example, be forfeited to the state,” he says. According to him, similar models worked, for example, with old passbooks.

The registry is now preparing negotiations with the Ministry of Finance. Thanks to temporary access to the registers of residents, the depository for the first time gained a more accurate overview of how many accounts actually belong to the deceased. “Now we finally have data we can rely on,” adds Dusílek.

So why doesn’t the depository send the account holders themselves? According to Dusílek, it would be too expensive and practically impractical. “It wouldn’t be possible by regular mail for privacy reasons, a registered letter would mean hundreds of thousands of shipments and huge costs,” he explains.

Cleaning accounts of worthless shares, i.e. those belonging to defunct or non-traded companies, is similarly complicated. People can donate them to the CDCP Endowment Fund, but the depository itself cannot deal with them in any way. “We do not have the right to alienate the securities or close the account until it is empty,” he explains.

In Slovakia, according to Dusílek, they introduced mandatory fixed fees for each account, even inactive ones, which also have units of securities with a zero value, thereby motivating people to get rid of their worthless shares. “But there, a significant part of the fees are never collected and it creates an accounting burden,” he says.

At the same time, he warns against dubious intermediaries who in the past tried to profit from this ignorance and promised to find stocks that people had already forgotten about. “We remember the Lost Billion case, where some people complained that they paid high fees and got nothing for it. Fortunately, we don’t see similar projects today,” he adds.

For the depository itself, hundreds of thousands of “dormant” accounts that are not managed by anyone represent an administrative burden and limitations when adjusting price lists. “Sending invoices for one crown, for example, for three pieces of worthless shares is absurd. The existence of unclassified accounts fundamentally limits us in standardizing the implementation of corporate actions, as is common in Western Europe,” adds Dusílek.

According to him, only a legal framework that would clearly establish what happens to inactive accounts could really solve the problem. Until then, the central depository can only rely on public information.