Elgar Financial Law and Practice series
Chapter 9: EXTENT TO WHICH A COLLATERAL-PROVIDER MAY BE PERMITTED TO EXERCISE RIGHTS ATTACHING TO CHARGED SECURITIES, SUCH AS VOTING RIGHTS AND THE RIGHT TO RECEIVE INCOME, IF THE ‘POSSESSION’ OR ‘CONTROL’ TEST IS TO BE SATISFIED
Financial collateral in the form of shares or other securities or credit claims is classified under English law as personal property and a ‘chose in action’. Under Scots law, it is classified as incorporeal moveable property. Under both systems of law, securities and credit claims confer a bundle of rights and obligations upon the holder. Before taking a mortgage on securities or credit claims, it is necessary to see what these rights and obligations are because this may determine the value of the security and how the security should be taken, protected or enforced. The rights and obligations will be defined by the memorandum and articles of association, any shareholders’ agreement, the trust deed, credit agreement or other constitutive document setting out the terms upon which the shares or other securities are issued or the credit claims arise. The terms of issue may restrict the circumstances in which the financial collateral may be mortgaged or in which the financial collateral may be transferred if the mortgage is enforced. There may be requirements for consent, rights of pre-emption or first refusal on transfer or a liability to pay calls. The articles of association or shareholders’ agreement may oblige the holder to transfer or surrender the securities for a nominal or nil consideration if the holder becomes subject to an insolvency proceeding. The company, registrar or trustee may be required not to recognise equitable interests in the securities.
You are not authenticated to view the full text of this chapter or article.
Elgaronline requires a subscription or purchase to access the full text of books or journals. Please login through your library system or with your personal username and password on the homepage.
Non-subscribers can freely search the site, view abstracts/ extracts and download selected front matter and introductory chapters for personal use.
Your library may not have purchased all subject areas. If you are authenticated and think you should have access to this title, please contact your librarian.