Central securities depository

What it means

A central securities depository keeps the register of book-entry securities and their owners and settles trades in them. In Slovakia this role belongs to the Central Securities Depository of the Slovak Republic.

The depository maintains issuer and owner accounts, partly through its members such as banks and investment firms. A share or bond is transferred by an entry on the owner's account, not by handing over a document.

It also assigns ISIN identification codes and provides services to issuers, such as a list of shareholders before a general meeting. It is supervised by the National Bank of Slovakia.

How it works in practice

A joint-stock company with book-entry shares deals with the depository when issuing shares, increasing capital, paying dividends or changing details, and pays fees under its price list.

A shareholder can request an account statement from the depository or a member to prove share ownership, for example in an inheritance, sale or when pledging the shares.

In an off-exchange share transfer, such as the sale of a company, the transfer agreement is accompanied by an instruction to register the transfer with the depository. The buyer becomes a shareholder vis-a-vis the company only once it is recorded.

What to watch out for

Companies with book-entry shares must keep up with fees and duties to the depository even when dormant. Non-payment can cause problems with later changes or liquidation.

Owner data at the depository and in the register of beneficial owners must be consistent. Discrepancies in AML checks or public procurement cause needless complications.