This case concerns the transfer of shares in a company. The plaintiffs were shareholders in the Company DIX Company Limited together with Marco Pisani, as indicated by the Memorandum and Articles of Association of the same company. The plaintiffs had reached an agreement with Pisani (today deceased) to transfer in their favour 1,500 shares that he held in the company – hence it was agreed that he transfer 500 shares to each of the three plaintiffs. It was further agreed, as revealed by a written agreement drawn up in February 2002, that the plaintiffs pay the deceased Lm2,100 in consideration of this transfer of shares.

It transpired that the defendant heirs of the deceased, Mary Pisani, as the wife of the deceased, together with Lucienne Farrugia and Kenneth Pisani, children of the deceased, refused to appear to sign the share transfer form in question. The defendants had formerly requested the plaintiffs through their lawyer to sign the form and to pass it on to them for signature. However, the defendants never signed the necessary documents despite the number of times they were called upon to appear by plaintiffs.

The plaintiffs requested the Court to:

1.Declare that Marco Pisani had indeed transferred the shares in question and was paid for the same shares by the plaintiffs;

2.Appoint a notary to be able to compile the necessary documentation and also appoint a curator for the absent defaulting defendants;

3. Authorise the plaintiffs to register, in accordance with the Companies Act, 1995 (Chapter 386 – Laws of Malta) this transfer of shares;

4. Order the Registrar of Companies to register the same transfer of shares.

Defendants pleaded that:

1. The deceased’s children were incorrectly sued;

2. Plaintiffs’ claims were null since the mandatory procedures established by both the Company’s Memorandum and Articles of Association and the Companies Act were not followed;

3. Without prejudice to the above pleas, plaintiffs’ requests should be denied on the basis that the writing produced as evidence of the agreement between plaintiffs and the deceased was a mere promise to transfer the shares (konvenju) and did not constitute a sale transfer agreement. The validity of the konvenju, in line with Article 1357 of the Civil Code (Chapter 16 – Laws of Malta) had expired.

4. The plaintiffs’ claims were unfounded both in fact and in law.

The Court took into account all the evidence compiled. It made note of the fact that the plaintiffs had actually paid the deceased in consideration of the shares and they were in possession of a receipt of payment. All that was left was the completion of the share transfer forms so as to make the transfer official. However, it so happened that very suddenly, Marco Pisani fell ill and died within a few days. His heirs requested the plaintiffs to reimburse them with the amount of money that the deceased had lent the company and also to clarify his exact shareholding in the company.

They claimed to be aware of the transfer of shares to the plaintiffs some time before his death and demanded an original copy of the receipt of payment. The defendants’ requests were both fulfilled. The reimbursement of the loan was confirmed by the bank and the receipt of the payment of the shares was authenticated and confirmed by a calligraphy expert. The lawyer told the plaintiffs that the defendants wished to conclude the transfer and hence demanded the required forms so as to complete the transfer. However, it so happened that the defendants changed their mind.

The Court heard evidence provided by a former shareholder of the company, Brian Avellino. It was after his transfer of shares that Marco Pisani got tempted to transfer his own shares. Pisani actually stated his interest in selling his shares at the same price that Mr Avellino’s shares were sold. The Court also heard the auditor of the company. Mr Pisani’s wife told the Court that she only heard of the transfer of shares for the first time from the defendants after her husband’s death. Her husband allegedly never mentioned the transfer although she had pleaded with him for a while to give up his shareholding in the company. She also admitted her suspicion that her husband’s signature on the document was not authentic.

The Court rejected the plea that the deceased’s children were improperly sued stating that they could be deemed proper defendants until it was established whether or not the shares were indeed transferred and hence, whether the shares belonged to them as heirs of Mr Pisani or to the company as a result of the disputed share transfer.

Regarding the defendants’ second plea relating to failure to follow mandatory procedures, the Court referred to Article 118 of the Companies Act which states:

118. (1) Notwithstanding any provisions contained in any other law, a transfer of shares in or debentures of a company may be made by private writing.

(2) It shall not be lawful for a company to register a transfer of shares in or debentures of the company unless a proper instrument of transfer or an authentic copy thereof has been delivered to the company:

Provided that, without prejudice to any obligation arising under the provisions of the Duty on Documents and Transfers Act, nothing in this article shall prejudice any power of the company to register as shareholder or debenture holder any person to whom the right to any shares in or debentures of the company has been transmitted causa mortis.

This makes it clear that:

1. A transfer of shares can be made by a private writing. This was respected by the parties to the case;

2. A transfer of shares cannot be registered without the production of the original formal document or an authentic copy thereof. This did not occur due to Mr Pisani’s death;

3. The Law does NOT state that there is no valid transfer of shares without the required forms. It states that a private writing is enough for the actual transfer while the forms are required for the registration of the transfer.

The Court rejected the plea that the agreement was a mere konvenju since there was absolutely no sign that the nature of the transaction was something other than a final transfer of ownership of the shares. The Court hence upheld the plaintiffs’ claims and declared that Marco Pisani had indeed validly transferred the shares to the defendants. The Court appointed a notary and a curator to finalise the sale by completing the mandatory documentation to allow the registration of the same transfer. This judgement could be the subject of an appeal.