Ensuring Prudent Governance: Prohibition on Issuing or Transferring Shares in Namibia’s Virtual Assets Act 10 of 2023

Namibia’s Virtual Assets Act 10 of 2023 introduces a robust framework for the governance of virtual asset service providers, particularly in the issuance and transfer of shares. Section 15 of the Act lays down clear guidelines, highlighting the importance of regulatory oversight to maintain the integrity and stability of the virtual asset sector.

Prior Approval Mandate: Safeguarding Control and Influence

Regulatory Authority Approval:

Under Section 15(1), a crucial stipulation is that license holders must seek prior written approval from the Regulatory Authority before issuing or transferring shares, legal interest, or beneficial interest in the license holder. This requirement ensures that changes in ownership are subject to regulatory scrutiny, preventing undue influence or control.

Exemptions for Minor Holdings:

However, Section 15(2) provides exemptions for the issuance or transfer of less than five percent of shares, legal interest, or beneficial interest. This exemption is conditional and does not apply if the transfer results in the transferee holding more than 25 percent or if there is a change in effective control.

Reporting Requirement for Minor Holdings:

License holders must, under Section 15(3), inform the Regulatory Authority in writing when shares, legal interest, or beneficial interest of less than five percent are issued or transferred, ensuring transparency even for minor changes in ownership.

Application Process and Regulatory Discretion:

Structured Application Process:

Any application for the issuance or transfer of shares, legal interest, or beneficial interest, as outlined in Section 15(4), must adhere to a structured process. The application must be made in the form and manner determined by the Regulatory Authority, accompanied by necessary information, documents, and an application fee as per the rules.

Approval or Refusal:

Section 15(5) empowers the Regulatory Authority to either grant or refuse the application, with the decision communicated in writing along with the reasons for the decision. This ensures transparency and accountability in the regulatory process.

Criteria for Approval:

The Regulatory Authority may grant approval if satisfied, as per Section 15(6), that the transferee’s likely influence aligns with prudent business conduct, the transferee is a fit and proper person to hold a significant interest, and the approval is in the public interest.

Legal Consequences for Non-Compliance:

Enforcement Measures:

Non-compliance with the provisions outlined in Section 15(1) and (3) carries severe consequences. Section 15(7) stipulates that a license holder contravening or failing to comply with these subsections commits an offense, liable to a fine not exceeding N$10,000,000 or imprisonment for up to 10 years, or both.

Conclusion: Balancing Innovation with Prudent Governance

Namibia’s Virtual Assets Act 10 of 2023, through Section 15, strikes a balance between fostering innovation in the virtual asset sector and ensuring prudent governance. By subjecting changes in ownership to regulatory approval, the Act aims to mitigate risks associated with undue influence and control, fostering a resilient and responsible virtual asset ecosystem in Namibia.

The stringent yet flexible provisions underscore Namibia’s commitment to promoting a thriving virtual asset sector underpinned by regulatory oversight and ethical business conduct.