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Donation through share register: valid or not?

Friday 18/10/2019
Schenking van aandelen door aanpassing van het aandelenregister

Can a donation of shares be proven by the fact that the share register has been updated? A lot has been written on this subject, but we now have an interesting judgement from the Court of Appeal of Antwerp.

In this case, it concerned an unmarried couple, in which the man initially owned all the shares of a private limited liability company (BVBA), in which the couple both worked.

In 2010, the man transferred one share of this BVBA to the woman; the only document that was drawn up to this end was an update of the share register.

A sale agreement was drawn up in 2011, in which the man sold a number of shares to the woman for a little less than €5,000. The share register was updated accordingly.

They subsequently split up, and the man wanted to recover all the transferred shares, claiming that both transfers of shares were donations. He petitioned the court to have the donations annulled.

The conventional view

Traditionally, it is held (at least in the Dutch-speaking part of the country) that a donation of registered shares can only be made via notarial deed of donation (Article 931 of the Civil Code).

Indeed, the notarial deed is the basic form for a donation. Of course the law provides for a few exceptions to this, namely the manual donation, the disguised donation and the indirect donation.  It is the latter exception which is important in this case.

In an indirect donation, the parties will establish the transfer of ownership of an asset via a legal act that is neutral in itself (it does not reveal whether it is a donation or an exchange, sale, etc.), after which the parties will subsequently confirm in writing that this transfer was a donation, if desired. In the case in question, the transfer of one share by mere registration in the share register can be regarded as an indirect donation. We will explore this form of donation in more detail below.

The indirect donation of registered shares - two interpretations

The central question is whether the change made to the share register constitutes in itself a transfer of ownership, or whether it merely constitutes the execution or confirmation of a previously effected transfer of these shares.

The first interpretation states that the registration itself is a transfer of ownership, and this is based on Article 504 of the (former!) Companies' Code, which states (translation):

 "Registered shares shall be transferred via a declaration of transfer, recorded in the share register of the shares in question and dated and signed by the transferor and the transferee or by their agents." For the BVBA, a similar provision was provided for in Article 250 of the Companies' Code.

As such, if the shares are 'transferred' via a declaration of transfer in the register, that register also provides title of ownership. According to this interpretation, the registration transfers ownership and therefore constitutes a valid donation.

However, the second interpretation states that Article 504 of the Companies' Code has (or rather had) an interpretation that does not correspond to the literal reading of its wording. This interpretation means that registration in the register is only proof of a transfer of shares that previously took place. And this transfer must in itself be effected with respect for the rules governing it. The transfer of ownership via a purchase-sale can be effected between the parties by mere consensus. The registration then acts as an element of opposability to the company and to third parties.

However, for a valid transfer by donation between the parties, a notarial deed of donation is required. Transfer by handover is not possible for intangible assets. This means that - in the second interpretation - the shares must be donated by notarial deed and that the share register is subsequently updated to bring it into line with the situation after donation.

This second interpretation is the conventional one in the Dutch-speaking part of the country.

Intermezzo – the new company law

The problem seems to rest - at least in part - on a certain interpretation of the Companies' Code (considered by some to be too broad), where the Code states that shares are "transferred" via registration in the register.

 The new Companies' Code removes any doubt: the shares must be transferred in accordance with the rules of ordinary law, and registration in the register is only for the sake of opposability.[1] Registration is not therefore a transfer of ownership.

This appears to uphold the second interpretation in any event!

The judgement of the Court of Appeal of Antwerp of 12 June 2019

The Court of Appeal had to rule on two transfers of shares: the transfer that was only apparent from the registration in the share register, and the transfer by sale agreement.

a) the transfer that was only apparent from the share register

The man claimed that this transfer had been a donation, which was invalid because the formal requirement of Article 931 of the Civil Code had not been respected. Indeed, no notarial deed had been drawn up for this donation. In the conventional view, it would have been considered that the register only implemented a transfer that had previously taken place, which should have been done by notarial deed if it was a donation. And since the parties confirmed that the share was transferred as a donation, and given that there was no notarial deed, it should have been possible to annul the donation.

However, in the present judgement, the Court took a different view. The Court started with a literal interpretation of Article 931 and stated that there was no question of a deed of donation as referred to in Article 931. Indeed, the Court held that a "deed" means that there should be a written agreement relating to the donation: if such an agreement existed, it must have taken the form of a notarial deed, on pain of invalidity. But the Court concluded that there was no such deed, so that there was no question of invalidity.

The Court subsequently referred to Article 938 of the Civil Code, which states (translation): "The reasonably accepted donation shall be effected by the mere consent of the parties; and the ownership of the donated assets shall be transferred to the donee, without anything else needing to be handed over". The Court interprets this as meaning that - once the parties have agreed on the purpose and terms - the donation is effected by mere consensus.

As such, according to the Court, the registration in the share register is merely a confirmation of a donation made by consensus, and the donation is declared valid.

A small remarkthis judgement will undoubtedly elicit a raft of comments. In this contribution, we will limit ourselves to observing that Article 938 of the Civil Code does indeed refer to consensus, but it also states that the donation is effected once it has been reasonably accepted. On the other hand, Article 932 of the Civil Code requires that the acceptance of the donation be recorded in an authentic deed. The fact that the Court of Appeal invoked Article 938 of the Civil Code and not Article 932 is surprising to say the least, as in this case it concerns intangible assets that cannot be transferred by handover..

b) the transfer that was apparent by the sale agreement

The Court found that, in the contract, the man had explicitly accepted that the shares were sold at a certain price. He therefore accepted both the qualification of the transaction (sale) and the price.

The Court acknowledged that, in reality, a disguised donation may have taken place, but demanded that the man provide proof of this. And according to the applicable law of evidence, this evidence can only be provided by confession, oath or a writ. There was no evidence of a counter-letter (which would show that it was in fact a donation).

And since the man could not present one, the transfer of shares continued to qualify as a sale. The Court therefore no longer had to rule on the validity of a donation.


The man had tripped himself up. By selling shares below the price, with a written sale agreement, he made it almost impossible for himself to claim that he had in fact made a donation. By simply registering a share in the name of the woman, he took a risk; in the traditional view, it would be assumed that no valid donation had been effected. That is why most advisors advise against this course of action.

The new company law seems to put this course of action even more at risk, as it explicitly refers to ordinary law for the transfer of shares and only attributes evidential value to the share register.

Fundamentally, anyone planning to make donations of shares should always seek specialist advice, so that appropriate measures can be proposed in the light of the circumstances.

[1] "Shares shall be transferred in accordance with the rules of ordinary law. A transfer of registered shares may be relied on against the company and third parties only by a declaration of transfer registered in the register of the shares in question and dated and signed by the transferor and the transferee or by their agents in the case of a transfer inter vivos, and by a member of the board of directors and the successors in title, or by their agents in the case of a transfer due to death".

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