When security is taken over shares in an English company it is important to check the articles of association of the company which has issued the shares. The articles are the rules that govern a company, and include things like the procedure for transferring shares.
This blog will look at two of the main restrictions contained within the articles of a private company that can impact on the enforcement of security:
- the directors’ discretion to refuse to register a transfer of shares; and
- a company’s lien over shares.
We will look whether these restrictions really can affect a lender’s ability to enforce its security and how these restrictions are removed.
I refuse!
On enforcement, a lender will want to be able to sell the shares and transfer legal ownership to a buyer. This is why lenders usually take a signed but blank stock transfer form so the transferee box can be completed with the buyer’s details. Many security documents also contain a power of attorney so that the lender can sign any necessary documentation on the shareholder’s behalf to complete the transfer of shares.