Companies Act (Cap. 386), article 122

122. (1) Securities may, unless otherwise provided in the memorandum or articles of the co mpany or under the conditions o f issue of those securities, be pledged by their holder in favour of any person as security for any obligation. The pledge of securities shall be constituted by means of an instrument in writing entered int o between the pledgor and the pledgee: Provided that in the case of a private company, securities may not be pledged unless the memorandum or articles of the company specifically so provide; and in relation to transfers o f shares by members of the company any restriction resulting from the memorandum or articles of the company shall, subject to the provisions of sub-article (10), be deemed not to apply to trans fers by the pledgee in terms of sub- article (6) or resulting from an y judicial sale. (2) Notice of the pledge shall be delivered by the pledgor or th e pledgee to the Registrar for reg istration within fourteen days of the granting of the pledge. The company whose securities have been pledged, shall also be notified of the pledge in writing within the said period and the company sha ll record that fact in the regis ter of holders of the resp ective securities. (3) The pledge of securities shall be effective in relation to a third party only after the registration by the Registrar of the notice referred to in sub-article (2). (4) Saving the provisions of sub-article (3), during the existence of a pledge of securities, any transfer or other assignment, made by the pledgor, whether by onerous or gratuitous title, of the pledged securi ties shall be null and void. (5) Notwithstanding the provisions of sub-article (4), any transfer or other assignment of securities made with the consen t of the pledgee shall be valid and th e securities to be transferred shall continue to be subject to the pledge. Cap. 16. (6) Without prejudice to the right of the pledgee to apply for the judicial sale of the securi ties and notwithstanding the provisions of the Civil Code or of the memorandum or articles of 78 CAP. 386.] COMP ANIES the company, in the event of a default under the agreement of pledge and upon giving notice by judicial act to the pledgor an d the company, the pledgee shall be entitled to - (i) dispose of the securities which are pledged in his favour; or (ii) appropriate and acquire the securities himself, in settlement of the debt due to him or of part thereof. (7) For the purposes of sub-article (6) the value of the securities may be established b y agreement between the pledgor and the pledgee after notice of default has been given by the pledgee to the pledgor in terms of the said sub-article (6), and no prior agreement ther eon shall be valid: Provided that, in case of disagr eement, the fair value for the sale or appropriation of the securities shall be determined by a certified public accountant appointed by the Civil Court, First Hall, on the application of the pledgee. ( 8 ) F o r t h e p u r p o s e s o f s u b - a r t i c l e ( 7 ) , t h e f a i r v a l u e o f t h e securities shall be that obtaining on the date of the notice re ferred to in sub-article (6). (9) The pledgee shall, in selling the securities in accordance with the provisions of sub-article (6), be obliged to seek the best price being not less than their fair value as determined in accordance with sub-article (7). In the event that a buyer cann ot be found for the securities at their fair value, the pledgee shall apply to the court for the securities to be sold at less than their fair value as aforesaid subject to su ch conditions as the court may deem fit. (10) In the case of a pledge of sh ares in a private company, the pledgee shall be obliged, prior to the exercise of the right gr anted by sub-article (6), to offer the shares to other shareholders o f the company in accordance with any pre -emption rights relating to t he transfer of shares as laid down in the memorandum or articles o f that company, and, failing such pre-emption rights, to all the other shareholders of the company in proportion to their holdings. In either case the shareholders sha ll be entitled to purchase the shares at the price determined in accor dance with sub-article (7). Suc h offer shall be kept open for at least ten working days. (11) In the case of a pledge of shares in a public company the memorandum or articles of which require any shareholder wishing to transfer shares in the company to offer them on a pre-emptiv e basis to other shareholders of the company, the pledgee shall accordingly be obliged, prior to the exercise of the right gran ted by sub-article (6), to offer the sha res to those shareholders, who shall be entitled to purchase the shar es at the price determined in accordance with sub-article (7). Such offer shall be kept open for at least ten working days. (12) (a) In the case of a pledge of securities in a company which are listed on a Maltese regulated market and in respect of which securities arrangements have been made for the maintenance by such Maltese regulated market of the COMP ANIES [CAP. 386. 79 relevant register of holders thereof, the provisions of sub-articles (2) to (11) and (15) shall not apply for such quoted securities. The following provisions shall apply instead: (i) the pledgor or the pledgee shall deliver within fourteen days of the granting of the pledge of a quoted security a certified copy of the signed pledge agreement to the Maltese regulated market, which shall also be served with a notice of termination of the pledge by the pledgee within fourteen days of the termination of the pledge; (ii) the company whose listed securities have been pledged shall also be notified of the pledge or of its termination within the said periods and the company shall record that fact in the register of holders of the resp ective securities; (iii) such pledge of securities shall be effective in relation to a third party only from the date of delivery of the signed pledge agreement to the Maltese regulated market and any transfer or other assignment made therefrom by the pledgor, whether by onerous or gratuitous title, of the pledged securities shall be null and void; and Cap. 370. (iv) the pledgee shall, in the event of a default under the agreement of pledge and upon giving notice by judicial act to the pledgor, the Maltese regulated market and the company, have the securities sold through a person duly licensed under the Investment Services Act . (b) In the case of a pledge of securities in a public company which are listed on a regulated market other than a Maltese regulated market or on an equivalent market in a non-Member State or non-EEA State, the provisions of sub-articles (7) to (11) shall not apply and in the event of a default under the agreement of pledge, the pledgee shall, upon notice to the pledgor and the company in accordance with sub-article (6) have the securities sold through a person duly authorised for this purpose. (13) In the exercise of his rights under this article, the pledg ee shall only sell or appropriate s uch number of securities as are needed to raise sufficient proceeds to repay the debt due. All remaining shares shall be released to the pledgor. (14) It shall be lawful for the p arties to an agreement of pledg e of securities to agree on the person or persons who shall exerc ise all the rights belonging to the holder of securities including voting rights and the right to receive d ividends and inte rest payments : Provided that, should the agr eement between the parties not make provision for such matters, all rights pertaining to a hol der of securities shall, for the durati on of the pledge, be exercised by the 80 CAP. 386.] COMP ANIES pledgor until such time as he defaults under the agreement of pledge or until the pledgee enforces his security; and in any s uch case, upon giving notice by a judicial act to the pledgor and t he company, all the rights belonging to the pledgor shall immediat ely become exercisable by the pledgee: Provided further that, unless the pledgor and the pledgee have otherwise agreed in the ple dge agreement and notice thereo f has been given to the company, d ividends or interests payments due on securities which are pledged shall, during such time as the pledge is registered in the register of holders of the respecti ve securities, be paid by the company to the pledgee who shall appropriate any such amounts received to the interest due on the debt secured by the pledge, and, if there is an excess, to the capital. (15) Notice of termination of the pledge shall be delivered by the pledgee to the Registrar for registration within fourteen d ays of the termination of the pledge. The company, securities in which have been pledged, shall also be notified in writing of the termination of the pledge within the said period and the compan y shall record that fact in the register of holders of the respec tive securities. (16) Subject to the provisions of sub-articles (6) to (9) and (1 3), the terms and conditions of the pledge of a debenture warrant s hall be determined by agreement between the pledgor and the pledgee. The pledge f a debenture warrant shall be effective in relation to a third party from the date of de livery of the share warrant or debenture warrant to the pledgee. Cap. 16. (17) For the purposes of any enforcement in accordance with thi s article and of any provisions relating to the enforcement of ri ghts pertaining to the pledgee in acco rdance with this Act, it shall be permissible for a pledgee, or any person acting on its behalf, to exercise any such rights by acting on behalf of the pledgor as its mandatary, provided that the pledgee is authorised to so act, irrevocably and by way of security, in accordance with article 1887 of the Civil Code and that the right to act in such manner is clearly prescribed in the relevant agreement regulating the pledge of s ecurities in terms of this article and the Act. Register of members. Amended by: XXXI. 2017.77.