Stocks as a concept may be viewed in different aspects. They are part of the fixed capital and their total nominal value equals the one of the capital. They are also title of participation in a Joint-Stock Company (JSCo.) – as expressing the membership rights. The Commerce Act defines stocks as securities certifying that their holders participate in the capital with the face value indicated thereon. Stocks may be subject to transfer.
JSCo. can issue various types of stocks. Grouping of stocks is done on the basis of different classification criteria. The following groups of stocks are of most practical significance with regard to their transferring: vinculated stocks (depending on whether or not the transferring of stocks is restricted); physical and book-entry-form stocks (depending on whether or not the stocks are materialized on paper). Making a distinction between registered and bearer stocks (depending on how the holder of the stocks establishes its ownership) has no longer any practical significance because amendments to the Commerce Act from the end of 2018 provided for complete prohibition on bearer stocks and elimination of the possibility of issuing such stocks1.
Acquisition of stocks may be: primary (upon taking over or subscribing for, e.g. upon the initial registration of a JSCo. in the Commercial Register or upon increasing the capital of the company) or derivative (in the event of succession). The latter may be universal or singular. Singular succession would be the case where stocks are being subject to transfer. Transfer of stocks may be carried into effect by means of any translative transaction – sale, exchange, donation, etc.
Generally, the holding in a joint-stock company is freely transferable (unlike the transfer of shares in the case of an LLC). Since it is materialized in stocks, its transferring may be carried out through the transferring of the stocks.
Registered stocks are assigned by endorsement – unilateral statement of the holder of the security. The endorsement doesn’t exclude a contract being entered into (the endorsement will be carried out in performance of the respective contractual obligation); moreover, in practice such contract is always needed – following from the judicial practice which does not recognize the endorsement as having any independent translative effect but rather a secondary function (it always serves a particular causal transaction for the transfer of the stocks).
Transfer of book-entry-form stocks is effected through cession (through notarized written contract for transfer of book-entry-form stocks).
Before being repealed the provision of Art. 185, par. 1 of the Commerce Act stated that bearer stocks are transferred by delivery – upon handover the acquirer becomes owner and entitled to exercise the rights pertaining to the stocks.
This article is not aimed at being exhaustive and covering all possible aspects and specifics, including such in connection with initial public offerings, trading on regulated markets, etc. – for such discussion, please post your questions and comments by using the web form at the end of the page.
Transfer of stocks is not subject to entry into the Commercial Register – stockholders are not specified by name in the Commercial Register (unlike shareholders in limited liability companies) and their names are not displayed in the company’s file2. An exception to that rule exists with regard to single-person joint-stock companies – the sole capital owner needs to be registered by name in the Commercial Register.
When JSCo. becomes a single-person one as a result of all stocks having been acquired by only one person (i.e., it was not initially registered as a single-person JSCo.), a standard form A5 application needs to be filed with the following documents enclosed thereto:
Documents relating to the acquisition (contract, interim certificate, endorsement, etc.);
Extract from the book of stockholders;
Minutes with resolutions of the sole capital owner;
Declaration on the truthfulness of the stated for registration circumstances and acceptance of the submitted for announcement acts;
Document for paid state fee (15 Levs).
The application should be submitted electronically (via the Internet) – by being signed with an electronic signature; it should be submitted by the Executive Director (the representative) but a lawyer may be authorized for such purposes as well (the power of attorney should be explicit but does not require any notarization of the signature). Information about attorney fees may be found on page Fees.
The Commerce Act requires that the transfer is recorded in the book of stockholders. Pursuant to Art. 179, par. 1 of the Commerce Act: “The joint-stock company shall keep a stockholders’ register in which the names and addresses, personal numbers/personal numbers of non-resident persons or unified identification codes of the holders of registered stocks shall be recorded and the type, face value and issue price, quantity and serial numbers of the stocks shall be indicated.”
Any transfer transaction which has not been recorded in the book of stockholders will not be binding on the JSCo. Such transfer will be legally valid by itself even without being recorded but the acquirer will not be able to exercise his/her stockholder rights towards the company. In such situations the transaction will be deemed relatively invalid. The executive body of the JSCo. should undertake, at the request of the acquirer, any actions necessary for effecting the registration – by performing formal check on the regularity of the transfer.
In the case of book-entry-form stocks the book of stockholders should be kept by the Central Depository which, respectively, will be empowered to register transactions relating to such stocks. Disposition of book-entry-form stocks takes effect as from the registration of the transaction at the Central Depository (pursuant to Art. 127, par. 1 of the Public Offering of Securities Act).
1 The article has been updated on 21.01.2019 in connection with amendments to the Commerce Act which you may find more information about in News article The possibility of issuing bearer stocks will no longer be available.
2 By virtue of the new MAMLA joint-stock companies are now required to declare their beneficial owners in the Commercial Register – for more related information, please read News article New law puts companies under the obligation to declare their beneficial owners.