Usufruct over shares – goodbye to voting rights

On July 11, the Maltese parliament enacted Act XVIII of 2025 – the Companies (Amendment) Act of 2025 (hereinafter referred to as the ‘Act’). 

Article 13 of the Act is very brief and to the point. It states as follows:

13. Immediately after article 117 of the principal Act, there shall be added the following new article:

117A. A usufructuary of shares in a company shall be entitled to attend any general meeting of the company and to receive dividends, but he shall not be entitled to vote at any meeting of the company unless the right to vote is specifically mentioned and provided for in the:

(a) public deed creating the right of usufruct; or

(b) memorandum and articles of association of a company.

This new article came into force by virtue of Legal Notice 174 of 2025 on August 7.

In terms of article 328 of the Civil Code: usufruct is the real right to enjoy things of which another has the ownership, subject to the obligation of preserving their substance with regard both to matter and to form.

Usufruct is created by means of a public deed, including wills. By and large, it has been fairly commonplace that, in the creation of a usufruct over shares, the notary drawing up the public deed, or the will, would simply state that a usufruct is being created without going into the specifics of what the usufructuary may, or may not, do.

Thus, you will come across a number of wills (particularly unica charta ones, that is, a joint will between husband and wife) where one spouse will leave the surviving spouse the usufruct over his entire estate and pass on the bare ownership unto the heirs. More often than not, this is the only information you will find as to what the usufructuary is entitled to do.

Similarly, over the past years, the government has given a concession for reduced stamp duty, decreasing the rate from five per cent to 1.5 per cent, for inter vivos transfers of family businesses to succeeding generations. In availing themselves of this concession, very often the transferor of the shares, reserved unto himself/herself, the usufruct over the shares which were donated to the descendants, who would have the bare ownership of the shares registered in their name.

In a number of cases, such deeds of donation merely stated that the donor of the shares was reserving the usufruct unto himself/herself.

This new legal position has created serious problems- Kris Borg

The interpretation given by lawyers, save for a few dissenting opinions when it suited one’s clients, was that a usufructuary of shares has a right to vote at general meetings of the company, provided that the content of article 328 is respected and that, hence, no vote is taken which would impinge on the rights of the bare owner. I for one have consistently adopted this interpretation and I am aware that this was the interpretation given by a number of other lawyers and is what actually inspired a number of persons to resort to creating a usufruct over their shares.

With the introduction of the new article 117A to the Act, the presumption is that the right to vote does not belong to the usufructuary anymore but this right has now been given to the bare owners, unless the right to vote is specifically mentioned and provided for in the: (a)  public deed creating the right of usufruct; or (b) memorandum and articles of association of the company.

This new legal position has created serious problems that may leave a number of usufructuaries living a reality they did not want or a reality that a testator did not intend or wish.

In the case of a usufruct created by a will, where the shares have already devolved as a result of the demise of the testator, most certainly nothing can be done, and if the testator wanted the person who was given the usufruct over his shares in a  company to exercise control over those shares, now that has been taken away in an irrevocable manner.

In other cases, the usufructuary is at the mercy of the bare owners of the shares to either amend the deed in virtue of which the usufruct was created or the memorandum and articles of the company, something which is certainly not desirable and possibly not easily attainable. 

Furthermore, while the usufructuary had an obligation to preserve the thing which is subject to the usufruct and had to exercise the vote with a high degree of discretion, the same obligation is not applicable on the bare owner, who may now very easily abuse of this new right given to him by means of this amendment to effectively neutralise the rights of the usufructuary.

In my opinion, this article should have been applicable only with regard to usufruct over shares created after the new legislation came into force and not also retrospectively, since,  from where I am standing, it is going directly against the intention of so many people who were under a totally different impression when they created a usufruct over shares that they held in companies registered in Malta.

Kris Borg is a lawyer and a lecturer in company law.