Transfer of shares not fully paid up: can the transferor be held liable for calls made for the unpaid portion?

Shares that were not fully paid up at the time of issue can of course be transferred. But who is held liable for calls on these shares: the transferor or the transferee?

The (old) Belgian Company Code included complex regulations for public limited companies (‘NV’ / ‘SA’): both the transferor and the transferee could be held liable up to the amount of the unpaid portion for the payment of company debts incurred before the transfer became effective, i.e. before registration in the share register if the claim is made by the company, or before publication of the list of shareholders who have not paid up their shares in full, if the claim is made by third parties. In this case the transferor could, if necessary, seek recourse against the transferee or future transferee/s. For new debts, only the transferee would be held liable to pay up. There was no statutory regulation for private limited liability companies (‘BVBA’ / ‘SPRL’) under the (old) Company Code. According to the majority position in case law and legal doctrine, the transferee, and not the transferor, would, in principle, be obliged to pay up the shares in full from the date on which the transfer became effective, i.e. the registration date in the share register, both vis-à-vis the company and vis-à-vis third parties.

The new Belgian Company and Association Code eliminates the distinction between the two legal forms. The legislator now provides a clear and easily applicable answer to the question of liability for paying up the shares.

Both in a public limited company (‘NV’ / ‘SA’) and in a private limited liability company (‘BV’ / ‘SP’) governed by the Company and Association Code (either from 1 January 2020, or earlier, in the case of an opt-in), the transferor and the transferee shall be jointly and severally liable for the payment duty with respect to the transferred shares. Both the company and third parties, including e.g. the receiver, the liquidator or a third-party creditor through a so-called lateral claim, may invoke the principle of joint and several liability. Joint and several liability for the (full) payment applies regardless of whether the debts were incurred before or after the date on which the transfer became effective, as opposed to the provisions under the (old) Company Code.

Joint and several liability applies to anyone who, at any given time, held shares that were not fully paid up, i.e. also for each successive transferor and transferee. The company and third parties are therefore free to claim the full amount, either from any previous holder of the shares not fully paid up, or from the holder of the relevant shares at that time. Of course, they will target the most solvent party in that case. The statute of limitation period amounts to 5 years, which means that a transferor of shares that have not been fully paid up may be held liable for the payment for up to 5 years after the (opposability of the) transfer.

Anyone who is held liable but is no longer the holder of the shares for which payment in full is requested at that time may take action against the person who acquired the shares from him (unless expressly agreed otherwise, e.g. in the share transfer agreement), as well as against each of the successive purchasers if the shares have already been sold. It goes without saying that, in these circumstances, the transferor bears the risk of the untraceability or insolvency of the transferee/s. A transferor who wishes to avoid this risk should therefore pay up the shares in full before transferring them (which may result in an increase in the share price).

Kim Van Herck, intui attorneys