In a series of our previous articles, we were looked into stocks. We dealt, specifically, with their meaning and value and the rights and obligations arising from them. We dealt with their issue as well as with their specific categories: preference and redeemable.
However, the transfer of shares and its extremely important parameters are of particular interest. This article is about them.
Transfer of Shares Due to Succession in Title
The shares, first of all, can be transferred (either by full or only partial ownership) due to succession in title (art. 41 of Law 4548/2018). The concept of succession in title includes all cases of transfer, except that of hereditary succession, which we will approach later.
The Principle of the Free Transfer of Shares
The principle of free transfer of SA shares is of major importance (art. 41 §1 and Memorandum to the law 4548/2018 on this). Based on it, the SA’s shares are freely transferable: during its operation, during its liquidation stage, during its submission to collective proceedings. It is not possible, in principle, to place restrictions on their free transfer.
On the basis of this principle, shares are marketable. This is how the financing of the SA. The shares’ transfer can result to the disinvestment on the part of the existing shareholders – as the return of their contributions is, in the first place, prohibited.
The cause of the (inter vivos) transfer of the shares may take place in various ways. Indicative: due to sale, parental benefit or donation.
The principle of free transfer of shares is applied in the cases of: (a) restricted shares (art. 43) and (b) those for which there is an option to transfer or acquire them (art. 44). About them: our next article.
The Transfer of Shares by Registration in the Book of Shareholders
The transfer of the (nominal-always) shares, which are not kept in accounting form (: the intangible shares, about which see below) is done by entry in the (compulsorily kept – art. 40 §2, section a) shareholders’ book. This entry shall be dated and signed by the transferring shareholder and the transferee or their proxies. Given the insufficiently kept, over time and in most cases, shareholder books, exceptions from the obligation to sign were established, and rightly so, when: (a) the company receives a copy of the share transfer agreement with the signatures of the parties or is informed of its preparation in another way – provided for by the articles of association, (b) the shareholder book is maintained electronically by a central securities depository, credit institution or by an investment firm.
When the transfer takes place, a new title is issued. Alternatively, the SA shall note on the title already issued the completed transfer as well as the details of the acquirer (name/surname, address/headquarters, profession and nationality – Art. 41 §2 and 40 §2). All this, of course, as long as the statute does not limit or exclude the issuance of securities (art. 40 §4).
The above procedure for the transfer of shares regulates, in reality, the legalization of the acquiring shareholder vis-à-vis the SA. The person who is registered in the shareholders’ book exercises rights and assumes obligations arising from the shareholding relationship. The transfer agreement, however, between the parties (the transferor and the acquiring shareholder) is binding on the parties and is not affected by this registration.
Regarding the transfer between old and new shareholder, the rules on registered securities apply. Therefore, only the agreement between them and the delivery of the title of the share is sufficient for the transfer of the share relationship to take place. In fact, in the event that the shareholding relationship is not incorporated into a security, the transfer takes place by assignment (art. 455 et seq. Civil Code, art. 470 Civil Code). It is desirable, however, with regard to shares not listed on an organized market, that a written contract for each transfer always be in place.
The Transfer of Intangible Shares
Regarding the issue of shares, we have already referred to the intangible ones: the shares, i.e., issued and kept in accounting form compulsorily for the SAs listed (and potentially unlisted) on a regulated market. We pointed out, there, that the case of intangible shares should not be confused with the case of non-issue of equity securities.
In derogation of what was mentioned above, the transfer of shares kept in accounting form (:immaterial shares) is done through securities accounts (art. 41 §3). The latter are kept in a central securities depository or by an intermediary (law 4569/2018).
The registration of the transfer of intangible shares is a condition of its validity vis-à-vis the company and also, between the transferor and the acquirer (art. 13§1 Law 4569/2018). However, it should be noted that it is possible, under certain conditions, to transfer shares – that are kept in accounting form – of listed companies outside the stock market as well.
Transfer Due to (Quasi) Universal Succession in Title
Shares (as well as the share relationship, considering its property character) can be inherited. In this case, the provisions of inheritance law apply. At the time of induction of the inheritance (1710 Civil Code) the hereditary succession on the shares takes place automatically. However, the provision of article 42 of Law 4548/2018 (which constitutes the transfer to the national legal order of Regulation 909/2014/EU) is the one that regulates the issue of legalization of heirs and legatees vis-à-vis the SA.
Inheritance With Registration in the Book of Shareholders
In order for the heir or legatee to be legitimized vis-à-vis the SA, it is required (art. 42) to be registered in the shareholders’ book mandatorily maintained by the SA. After the specific registration, the heir or legatee has the possibility to exercise their rights – assuming, of course, also any obligations – deriving from the shareholding relationship.
The registration takes place as soon as the documents proving the succession (e.g. inheritance certificate, court decision publishing a will, etc.) are presented to the issuing SA, or to the person who keeps the shareholders’ book.
Inheritance of Intangible Shares
Also in the case of intangible shares, the succession takes place at the time of induction of the inheritance. However, according to article 42 of Law 4548/2018, the successor (:heir) is legalized against the SA from the time of their registration in the register of the central securities depository or in the securities account of the registered intermediary.
In this case as well, the registration takes place as soon as the person with a legal interest presents the documents certifying the inheritance to the one who keeps the register or the securities account.
However, it is important to note that ” for securities held in a central securities depository or through an intermediary… law 5638/1932 may be applied proportionally, after a relevant agreement with the clients” (art. 13 §6 of Law 4569/2018). In the event, therefore, that a contractual term has been agreed on the basis of which, in the event of the death of a spouse in a joint account of intangible shares, the shares automatically pass to the surviving joint owners, then the aforementioned succession does not take place. We are talking, in this case, about the Joint Investment Account that provides its joint owners with the important benefits of depositing in a joint bank account.
Taxation of the Transfer of Shares
Taxation for the transfer of shares is regulated by articles 42 and 43 of the Civil Code (Law 4172/2013, as applicable after Law 4549/2018).
Specifically, any income resulting from the transfer of capital: (a) shares in a company not listed on a stock market, (b) shares or other securities not listed on a stock market (as long as the transferor participates in the company’s share capital with a percentage of at least 0, 5% and since the transferred shares have been acquired from 01.01.2009 onwards), is subject to personal income tax (art. 42 §1, par. a’ and b’ of the Tax Code).
As expressly defined, surplus value means the difference between the purchase price paid by the taxpayer and the sale price received (art. 42 §2 Income Tax Code).
Furthermore, the law determines the method of calculation of the purchase and sale price. It is noted, however, that if the acquisition price cannot be determined, it is considered zero.
Specifically:
(a) In the event that the transferred securities are listed on a stock market, the acquisition price and the sale price are determined by the transaction supporting documents, which are issued by the stockbroking company or the credit institution or “any entity that conducts transactions”.
(b) In the case of a transfer of unlisted securities, the sale price is determined based on the value of the equity of the company issuing the transferred securities at the time of the transfer or the price “or market value” stated in the transfer agreement, if this is higher.
(c) In addition, it is provided that the value on the basis of which the inheritance, gift or parental benefit tax was calculated or exempted from is to be taken as the acquisition price for securities acquired due to inheritance or charitable transfer (art. 42 §4 Income Tax Code).
The income obtained from capital gains from the transfer of shares is taxed at a rate of 15% (art. 43 of the Tax Code). A tax is imposed on the transfer of shares as a result of a parental benefit, as a gift or in the context of inheritance based on the respective scales that apply each time. Especially for parental benefit, there is a tax-free amount of €800,000 (art. 44§1 in fine, law 2961/2001) for all assets transferred as a parental benefit, while in terms of donation and inheritance, the value of the transferred assets is of paramount importance elements as well as the degree of kinship between transferor and acquirer.
Shares, as an asset, are freely transferable inter vivos by full or bare ownership only. The basis of transfer can be (more commonly) sale, parental benefit and donation. In any case, the optimal fiscal option should be carefully chosen. The shares, however, are also transferred mortis causa – in the context of inheritance. In order to be entitled to exercise their rights against the SA, the new owner needs to hand over their legalization documents. It is also necessary that they are registered in the book of shareholders of the issuing SA. We must, therefore, be particularly careful regarding the possession of the necessary, legalizing, documents as well as registration in the shareholders’ book. It should be noted, however, that the provisions on the free transfer of shares apply when there are no restrictions on the transfer of shares – when, i.e., the shares are not restricted. Regarding them, however, see our article to follow.-
Stavros Koumentakis
Managing Partner
P.S. A brief version of this article has been published in MAKEDONIA Newspaper (July 17th, 2022).
Disclaimer: the information provided in this article is not (and is not intended to) constitute legal advice. Legal advice can only be offered by a competent attorney and after the latter takes into consideration all the relevant to your case data that you will provide them with. See here for more details.