Mandatory recording of transfer restrictions in the share register


The Code for Companies and Associations includes the obligation to record the transfer restrictions arising out of the articles of association in the share register. This obligation must be complied with by the company’s governing body. It aims at informing the third party-transferees as fully as possible of the existing transfer restrictions. As the transfer of nominal shares only becomes opposable to the company and third parties after having been recorded in the share register, it is to be expected that third party-transferees will always consult the share register, at the latest when recording their transfer.

Transfer restrictions which are not deriving from the articles of association, but from a shareholders’ agreement for instance, only have to be recorded in the share register when one of the parties so requests.

How does it work in practice? In our opinion, it is not necessary to copy the entire clause related to the transfer restriction in the share register, but it shall be sufficient to refer to the type of transfer restriction, such as right of first refusal, tag along, etc.

The fulfilment or non-fulfilment of the obligation to record the transfer restrictions into the share register is not a prerequisite to make the transfer restriction enforceable against the company or third parties (see also blog “Opposability of statutory or conventional transfer restrictions”). The non-fulfilment of this obligation may however compromise the directors’ liability.

Pieter Van Braband and Anneleen Steeno, intui attorneys /