If member shares are held in a PEA it can be more complicated to close

Facts

Wishing to close her PEA, in January 2026, Mrs X made a request to her bank to that effect. Her advisor informed her that her request could not be completed before June, without clearly explaining the reasons behind this delay.

Dissatisfied with the situation, Mrs X contacted me to obtain the immediate closure of her plan.

Investigation

I contacted bank Y, which informed me that Mrs X's PEA exclusively held member shares. These shares can only be sold once a year and the request to do so must be made before 31 May. Thus, as the redemption request was submitted in January, Mrs X was informed that her PEA could not be closed until June.

However, bank Y explained to me that, under its articles of incorporation, when a PEA is closed, an exception allows member shares to be redeemed, i.e. under a redemption procedure that derogates from the normal one and timetable.

Mrs X’s advisor had not offered her this option, which is regrettable. Moreover, it could no longer be offered at the time of bank Y's response, at the end of April 2026, as its general meeting was soon to be held. All transactions involving member shares are blocked in the days preceding this meeting, so that the number of members and the amount of the share capital is stable. Subsequently, it is necessary to wait for the interest decided on at this meeting to be distributed.

Finally, the institution expressed its regrets regarding the handling of Mrs X's request and stated that it had ‘reminded the branch concerned of the procedures’.

Recommendation

I first reminded Mrs X that member shares are unlisted securities. The terms for their resale are stipulated in mutual institutions’ articles of incorporation. These set out a procedure which, except in exceptional circumstances, can only be implemented once a year.

I explained to Mrs X that, in her case and given the time of year, it was now appropriate to follow the standard annual procedure for redeeming member shares. This did require her to wait until the end of the annual redemption period, which meant a few more weeks, but it guaranteed that she would be paid the interest arising from her shareholding before the closure of her PEA.

Lesson to be learned

The member shares of mutual institutions are unlisted, fixed-value shares, which allow their holders to take part in the general meetings of these institutions and are remunerated in the form of interest, set annually at the general meeting. Although eligible for the PEA, they cannot be transferred from one institution to another. Consequently, they must be resold in the event of switching bank or closing the PEA, under the conditions stipulated by the articles of incorporation, which may not be uniform across all institutions.

However, I observe, from many cases submitted to me, that awareness and understanding of this particular regime governing mutual company member shares is often poor among the retail investors who hold them, sometimes due to a lack of sufficient explanations from the institutions.

Also, in order to facilitate the processing of their closure or transfer request, it is important that retail investors who hold member shares in their PEA consult the provisions of the articles of incorporation applicable to redeeming the shares or ask their branch for information on this point. This will allow them to find out the procedure to follow and its timetable, the deadlines to be met and, where applicable, the situations allowing for exemptions from the normal exit procedure.

At institutions, it is advisors’ responsibility to provide clear and accurate information about the terms of member share redemption to clients who are considering transferring or closing their PEA, including about any possibilities for sale under an exemption that may have been provided for in such cases. Institutions must therefore ensure that their client-facing staff are aware of and understand the applicable rules.