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By virtue of Act No. XVIII of 2025, the Companies (Amendment) Act, 2025 introduced several amendments to the Companies Act (Chapter 386 of the Laws of Malta) (the "Act"). A number of these amendments have already come into force pursuant to the commencement notice published under Legal Notice 174 of 2025, although not all amendments have yet taken effect.
Among the amendments to the Act, those relating to the pledge of securities are particularly significant.
What is a Share Pledge?
A share pledge is a form of security predominantly used in corporate financing transactions. Accordingly, the existence of a robust pledge framework is of cardinal importance in all major financial jurisdictions.
A typical pledge of shares involves a pledgor (a shareholder of a company) granting security over shares held in that company (by that shareholder) in favour of a pledgee (the lender or security holder).
For example, in a straightforward financing scenario, the pledgor (borrower) obtains a loan from the pledgee (lender) and pledges shares in a company as security. The pledged shares serve as continuing security in favour of the pledgee for the repayment of the loan, interest, and related costs under the loan agreement. To perfect the security, a notice of the pledge (in the form of the statutory Form T(2) is required to be submitted with the Malta Business Registry (the "MBR") within 14 days of the pledge's constitution.
Enforcement of a Share Pledge
In the event of a default on the loan, the pledgee may obtain payment from the pledged shares (through sale, disposal, appropriation, or otherwise) with preference over other creditors under the Civil Code (Chapter 16 of the Laws of Malta) (the "Code"), by virtue of the special privilege granted under article 2009(a). The pledgee also enjoys a right of retention over the pledged shares until all secured obligations have been fully and irrevocably performed.
While the enforcement of the pledge does not require a court decision or order, unless the Financial Collateral Arrangements Regulations (Subsidiary Legislation 459.01) are applicable to the pledge, the enforcement requires the service of a notice of default by judicial act by the pledgee to the pledgor, declaring that an event of default has occurred.
Key Amendments to Article 122 of the Companies Act
A) Notice of Pledge (Clause 122(2))
In addition to the obligation of the pledgor or pledgee to deliver a notice of pledge to the MBR within fourteen (14) days of granting the pledge (Form T2), it will now also be necessary to file with the MBR a document detailing the contract from which the pledge arises, within the same 14-day period.
It remains unclear in what form this document will need to be submitted or whether a specific statutory form will be introduced. This amendment has not yet come into force and will commence on a date to be announced by the Minister responsible for the registration of commercial partnerships through the Government Gazette.
B) Pledgee's Authority (Clause 122(17))
This new provision, which is already in force, expressly recognises that, for enforcement purposes, a pledgee (or its representative) may act in the name of the pledgor where the pledge agreement so provides and where the that the pledgee is authorised to so act, irrevocably and by way of security, in accordance with article 1887 of the Code. This codifies existing market practice, where pledgees are typically appointed as the pledgor's attorney by way of an irrevocable mandate granted by way of security to exercise rights under the pledge and give full effect to the security. The effect of this change is to strengthen and clarify the legal framework behind the existing market practice, providing statutory confirmation that pledgees may act on behalf of pledgors when enforcing rights.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.
