Shareholders’ agreements vs Articles of Association: Which document prevails under Maltese law?

In modern corporate practice, particularly in privately held companies, it is common for shareholders to regulate their relationship through two distinct legal instruments: the Memorandum and Articles of Association and a shareholders’ agreement. While both documents play an important role in corporate governance, difficulties arise when their provisions are not aligned. This raises an important legal question under Maltese law: which document prevails in the event of a conflict?

The Memorandum and Articles of Association form the constitutional foundation of a Maltese company. Registered with the Malta Business Registry, these documents bind the company and its shareholders by operation of law. They establish the company’s legal identity, define its objects, determine the structure of its share capital, regulate its internal governance and set out the powers of its organs. Crucially, their public nature allows third parties to rely on them when dealing with the company, providing legal certainty and transparency.

By contrast, a shareholders’ agreement is a private contractual arrangement, typically entered into between some or all of the shareholders. It is not required to be registered with the Malta Business Registry and is governed by general principles of contract law. Shareholders’ agreements are frequently used to regulate issues such as voting arrangements, board composition, share transfer restrictions and exit mechanisms, allowing shareholders a level of flexibility and confidentiality that is not always possible through the Memorandum and Articles of Association.

Despite their practical importance, Maltese courts have consistently held that shareholders’ agreements are personal in nature and bind only their parties. A leading Maltese judgment on the matter is Joseph Vincent sive Jovan Mizzi et vs Mizzi Group Limited et.¹ In this case, the Court held that a shareholders’ agreement, even when valid as a contract, remains purely personal and binds only the individual shareholders who are parties to it. The Court further explained that such an agreement does not bind the company, particularly when the company itself is not a signatory to the agreement.

The Court further observed that a shareholders’ agreement may bind the shareholders inter se while remaining unenforceable against the company. In other words, the existence of such an agreement does not alter the powers conferred upon the company by its Memorandum and Articles of Association.

As held in English jurisprudence, a shareholders’ agreement “supplements the articles and binds the members to operate the articles in a particular way. This is a private contract that does not form part of the company`s constitution”.²

This distinction is critical. Allowing private shareholder arrangements to override publicly registered documents would undermine legal certainty and the reliance placed by third parties on documents registered on the public register system. For this reason, where a conflict arises, the Memorandum and Articles of Association prevail as a matter of company law.

The practical implication for shareholders is clear: while a shareholders’ agreement remains an important governance tool, it cannot be used as a substitute for properly drafted and updated constitutional documents. Where key governance provisions are intended to bind the company itself, they must be formally incorporated into the Memorandum and Articles of Association.

This article was first published in the ‘Sunday Times’ on 26/04/2026.

¹ Joseph Vincent sive Jovan Mizzi et vs Mizzi Group Limited et (181/2007/1) First Hall Civil Court, 7 March 2007.
² Greenwell v. Porter. (1901 G. 2482.) (1902) 1 Ch. 530.