Transferring shares in a Maltese Company is a fundamental corporate action that arises in many contexts, including changes in ownership, succession planning, investment exits and corporate restructurings. In Malta, such transfers are regulated both by statutory law and by the company’s own constitutional documents, requiring directors, company service providers, shareholders and advisers to be mindful of the applicable procedural and legal requirements. In particular, the Companies Act (Chapter 386 of the Laws of Malta) regulates share transfers in Malta, particularly under articles 117 to 127, and sets out what constitutes a share transfer and the manner in which such transfers must be effected and recognised by the Company.
What Is a Share Transfer?
A share transfer is the process by which ownership of shares in a company is moved from one person to another (commonly referred to as the transferor and the transferee respectively). Through a share transfer, the transferor relinquishes the rights attached to the shares, such as voting rights and entitlement to dividends, while the transferee assumes those rights and becomes a shareholder.Why Do Share Transfers Occur?
Share transfers most commonly occur where a shareholder intends to dispose of their shareholding, whether in whole or in part. This may be driven by commercial considerations such as an exit from an investment, a change in business strategy, internal restructuring or even succession planning, where a share transfer is triggered ‘causa mortis’. In each case, the transfer reflects a change in ownership that must be effected in line with the company’s governance framework and applicable law.When Does the Share Transfer Take Effect?
Under Maltese law, it is essential to distinguish between the execution of a share transfer agreement and the effectiveness of the share transfer vis à vis the company. Although a share transfer may be contractually binding between the transferor and the transferee upon execution of the relevant agreement, it only acquires legal effect at company level once the transferee is entered in the company’s register of members. Until such registration occurs, the transferor continues to be recognised as the shareholder for all corporate purposes, underscoring the central importance of proper registration in completing the share transfer process.What Documents Are Needed to Effect a Share Transfer?
To effect a share transfer, a number of key documents are required to ensure the transfer’s validity. Subject to any alternative stipulation in the articles of association specific to a company, the documents are generally:1. Instrument of Share Transfer: This must be formalised through a written document setting out the terms governing the transfer, clearly identifying the transferor and the transferee, specifying the shares being transferred, and outlining the consideration (if any) payable for the transfer. This document is commonly referred to as a Share Transfer Agreement.
2. Director’s (and, where applicable, Shareholders’) resolutions: In most cases, a board resolution is required to approve the registration of the share transfer and to authorise the update of the company’s register of members, provided that such approval is required under the company’s memorandum and articles of association. Depending on the provisions of the company’s M&A, a shareholders’ resolution or waivers of pre emption rights may also be required.
3. Update of the Register of Members: The Register of Members is the legal record of share ownership. A share transfer is only recognised by the Company once the transferee’s details and the relevant shares are entered into this register. Until this update is made, the transferor remains the legally recognised shareholder for all corporate purposes, regardless of any agreement signed between the parties.
4. Cancellation of old and Issuance of new Share Certificate/s: Once the transfer is registered, the company must cancel the share certificate previously issued to the transferor and retain it in its records, before issuing a new certificate in the name of the transferee. While the share certificate serves as evidence of ownership, legal title to the shares arises from the entry in the Register of Members, making these steps an essential part of properly completing the transfer process.
In addition to the contractual documentation, certain administrative filings must also be submitted to the Malta Business Registry, including:
1. Form T – Notice of Transfer of Shares; and
2. Form BO2 – Notice of Change in Beneficial Ownership; and
3. Due diligence on the transferee unless they are already known to the authority.
Are There Any Restrictions on Share Transfers?
Private companies are, by their nature, intended to maintain a controlled and closely held ownership structure. Maltese law therefore requires such companies to impose restrictions on the transfer of their shares. While the Companies Act does not prescribe a specific method by which these restrictions must be implemented, they are typically embedded in the company’s memorandum and articles of association. One of the most common mechanisms used to achieve this is the inclusion of pre emption rights in favour of existing shareholders, ensuring that shares are first offered internally before being transferred to third parties.By contrast, public companies are not subject to a statutory obligation to restrict the transfer of their shares, and any such restrictions, if adopted, are generally a matter of shareholder discretion and corporate policy.
The presence or absence of restrictions on share transfers dictates the applicable process and mechanics through which a transfer may be affected.
Share transfers are a core part of the corporate sector in Malta. While they may appear straightforward, legal and tax complexities, especially for private companies, demand careful attention to detail.