Aside from the traditional or more recurrent financing instruments, the constitution of a usufruct over shares may be a desirable option for shareholders, as it may allow them to maximise their interests by sharing the risks associated with investment without ever actually transferring legal ownership of the shares to a different holder.
As defined in the relevant provisions of the Macau SAR Commercial Code, by constituting an usufruct, the title owner attributes to a third party, on a temporary basis, with or without consideration, the right to receive the dividends declared by the company throughout the duration of the usufruct, as well as both the exercise of the voting rights granted by the corresponding shares and the right to share in the liquidation of the company.
The temporary dissociation between the legal ownership and the beneficial ownership of the shares, the different commercial arrangements which may be agreed in respect of the constitution of the usufruct, its duration, the type or category of shares over which it is created and the conditions associated with their respective remission (i.e. their extinction), among others, often show that this (too frequently ignored) arrangement can be an excellent way for two investors to organise the apportionment of risk and reward to their corporate investment in an optimal manner.
The usufruct of shares further presents a significant advantage over other arrangements serving (at least partially) common objectives (for example, repos or reverse repos) in that it can keep the legal ownership of the shares unchanged, on the one hand and, on the other hand, its main effects are not dependent on the contractual efficacy of shareholders’ agreements, whilst still being binding on the company itself.
