The transfer of company shares is among the circumstances subject to registration in the Commercial Register and the Register of Non-Profit Legal Entities (“CRRNPLE”). The names of the shareholders or the sole owner of the capital, as well as the exact number of shares they hold, if specified, are reflected in the company’s file after each share transfer.
The general case stated above is the scenario that occurs practically in 99% of cases. However, it is possible for a subsequent transfer of company shares to take place before the previous transfer has been registered in the CRRNPLE. How should the registration officer at the Registry Agency proceed in such a case, and would they be obligated to register the latest transfer of shares? The answer to this question is provided by a Ruling of the Supreme Court of Cassation (SCC) dated May 31, 2023, issued in Interpretative Case No. 1/2020.
Different Interpretations by the Courts
The reason for bringing this question before the SCC was the existence of inconsistent case law. Before the interpretative decision was issued, two opposing views had been expressed:
- The registration officer must enter such a change if the submitted documents clearly and continuously establish the chain of transfers;
- The registration officer should not enter the change, as they can only consider circumstances that have already been entered in the company’s file.
In its decision, the SCC supports the first view for the reasons outlined below.
Justification
First, the SCC considers the specifics of which circumstances are subject to registration. This is an important detail, as the law must explicitly specify which circumstances require registration, while all others, by contrast, do not.
The Commercial Act (“CA”) outlines which circumstances must be reflected in a company’s file. These include details contained in the company’s articles of association, such as the names of the shareholders or the sole owner of the capital. However, there is no requirement to register the exact number of shares held. The technical infrastructure of the CRRNPLE allows for the exact number to be entered, but this is an option, not an obligation for the applicant. From this, an important conclusion can be drawn: only transfers that result in a person/entity ceasing to be a shareholder or in a new shareholder being admitted are subject to registration. Transfers of shares between existing shareholders only change the proportion of shares between them, which is not a circumstance that necessitates registration.
Next, the SCC addresses the exact moment at which the transfer of shares takes on so-called constitutive effect—meaning, the point at which the person/entity receiving the shares becomes the owner of the transferred company shares.
The answer to this question is again found in the CA. The key moment is when the decision to admit a new shareholder is made. This is when the admission of the new shareholder takes effect with regard to the existing partners and the company itself. Article 140, paragraph 4 of the CA states that the admission and exclusion of a shareholder take effect upon its registration in the CRRNPLE. However, the SCC clarifies that this effect applies only to third parties. Due to the public nature of the Commercial Register, third parties are made aware of these changes only from the moment of registration, as they generally do not have prior knowledge of transactions and decisions of this nature. If the acquirer of company shares were considered the owner only after the change is registered in the CRRNPLE, this would result in an unjustified delay in their ability to exercise their shareholder rights.
Finally, the SCC examines the nature of the review that the registration officer must conduct. The officer must verify, based on the documents submitted, whether the circumstance for registration actually exists. From this reasoning, the opposite scenario—requiring the previous transfer to be entered first—should not be registered, as that circumstance has already changed and no longer reflects objective reality. The function of documenting the prior transfer is relevant only for “closing the chain” and proving the sequence of company share transfers up to the final acquirer.
Clarification
The SCC emphasizes that the above does not mean companies are free to choose which transfers to register and when. The obligation to register exists, and failure to comply is grounds for administrative penalties.
