In Malta’s thriving corporate landscape, effective succession planning and asset management are essential for business owners, families, and investors. One powerful yet often misunderstood tool is usufruct, a civil law concept that allows one party (the usufructuary) to use and enjoy the benefits of an asset while another (the bare owner) retains underlying ownership. When applied to company shares, usufruct can split rights in ways that support family business transitions, estate planning, or strategic holdings.
Until recently, Maltese company law offered no specific guidance on how shareholder rights such as voting, attending meetings, and receiving dividends were divided in usufruct scenarios. This created uncertainty and potential disputes. The Companies (Amendment) Act, 2025 (Act XVIII of 2025) changed that by introducing Article 117A into the Companies Act (Chapter 386 of the Laws of Malta). Effective from August 2025, this provision brings welcome clarity and flexibility.
What Is Usufruct and How Does It Apply to Shares?
Under the Maltese Civil Code, usufruct is a real right granting the usufructuary the ability to use the asset and enjoy its profits or income, while preserving its substance. The bare owner holds naked ownership and cannot act in ways that prejudice the usufructuary’s rights.
Shares in a Maltese company are unique assets because they bundle multiple rights: economic benefits (dividends), participation (attendance at general meetings), and control (voting). Before Article 117A, the law was silent on how these rights were allocated between the usufructuary and the bare owner, leaving practitioners to rely on general civil-law principles and ad hoc agreements. This often led to ambiguity, especially in family companies or inheritance structures.
The New Rule: Article 117A Explained
Article 117A now provides a clear default framework:
“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.”
In simple terms:
– Dividends: Automatically go to the usufructuary (the profits or income of the shares).
– Attendance at general meetings: The usufructuary has the right to attend.
– Voting rights: Stay with the bare owner by default, regardless of the decision being voted on.
– Flexibility: Parties can override the default by expressly granting voting rights in the notarised public deed establishing the usufruct or by updating the company’s Memorandum and Articles of Association (M&A).
This default position aligns voting control with the bare owner while ensuring the usufructuary enjoys the economic benefits, a balanced approach that many other jurisdictions (such as France) have long adopted.
Importantly, the bare owner’s voting power is not unlimited. The Civil Code still prohibits any exercise of rights that prejudices the usufructuary’s enjoyment (for example, approving actions that unfairly reduce dividends or devalue the shares).
Why This Matters: Key Benefits and Practical Implications
1. Enhanced Succession Planning
Article 117A makes usufruct an even more attractive tool for family businesses. Parents or founders can transfer the economic benefits of shares to the next generation (via usufruct) while retaining voting control to steer the company. This staged transfer supports smooth succession without immediate loss of influence.
2. Greater Certainty and Reduced Disputes
The previous legal vacuum often sparked disagreements. The new rule eliminates guesswork and encourages precise drafting, protecting all parties and making structures more enforceable.
3. Customisation Opportunities
Need the usufructuary to have voting rights on specific matters? Simply include clear wording in the public deed or M&A. This modular approach gives unparalleled tailoring for trusts, lifetime gifts, or corporate restructuring.
4. Compliance and Administration
The bare owner typically remains the registered shareholder, but the company must recognise the usufructuary’s attendance and dividend rights. Professional company secretarial support ensures registers, meeting notices, and dividend payments are handled correctly.
How to Implement Usufruct Over Shares in Malta
Setting up a usufruct structure is straightforward with expert guidance:
– Execute a public deed before a notary, clearly stating the terms (including any voting rights).
– If desired, amend the company’s M&A via shareholder resolution.
– Notify the company and update internal records.
– Coordinate with your corporate service provider for seamless integration with the Malta Business Registry filings.
Note that pre-existing usufructs may require review and possible amendments to align with the new default rules.
Malta’s Corporate Edge
The introduction of Article 117A reflects Malta’s ongoing commitment to modernising its company law, making it more attractive for international investors and local entrepreneurs alike. By providing legal certainty around usufruct on shares, Malta reinforces its position as a sophisticated, business-friendly jurisdiction in the Mediterranean.
At Papilio Services, we specialise in helping clients navigate these changes. Whether you are planning family succession, restructuring shareholdings, or exploring usufruct as part of a broader wealth strategy, our seasoned expert team of corporate lawyers delivers tailored, compliant solutions.
Contact us today for a confidential consultation. We’ll guide you through Article 117A and design the optimal structure for your needs, ensuring clarity, control, and peace of mind.
