Is the transfer of company shares in a private document valid?

Only the identity of the founding shareholders of a company and those who acquire shares in operations to increase the company’s capital are recorded in the commercial register. However, those who acquire shares later, whether by purchase, donation or inheritance, are not identified, and notaries merely inform the authorities of these transactions.

Section 16.1 of the Companies Act stipulates that the transfer must be recorded in a public document (notarial deed). For its part, Article 1.278 of the Civil Code stipulates that contracts are binding, irrespective of the form in which they are concluded, provided that the necessary requirements for their validity (consent, object and cause) are met.

Case law (STS 234/2011; STS258/2012) has ruled on this issue, arguing that the public deed is not an essential requirement for the validity of the sale, pointing out that it only serves as a means of proof against third parties. This means that in accordance with the principle of freedom of form of Art. 1278 of the Civil Code, the requirement of a public deed is not essential for the validity of the transfer of shares, but rather its value is evidential and for publicity purposes vis-à-vis third parties.

The absence of a notarial deed does not, therefore, render the purchase contract null and void, but it does provide less legal certainty in view of the public faith enjoyed by the notarial deed, the content of which is presumed to be true and complete – as opposed to other means of proof – and which serves as sufficient title to assert its effectiveness against third parties.

This means that a sale by private deed is only effective against third parties (seller and buyer). However, it does not produce effects aigainst the company if it is not notified to it and entered in the register of shareholders (art. 104 et seq. and 116 of the LSC), so that the company can consider the purchaser as a “non-member” and prevent him from voting at meetings or collecting dividends.

On the other hand, this means that a sale and purchase of shares in a private document is valid between the parties and before the company, if the company agrees to register the private document in the register of shareholders.

In conclusion, we can state that a transfer that is not recorded in a public deed is valid, but the most prudent approach is always to execute the corresponding deed, even if this is done at a later date, as the transfer will thus enjoy notarial authentication, its content will be presumed to be true and it will have effects against third parties.