Definition of shares in a charge did not include rights under Shareholder Loan Agreement

In Fons HF (in liquidation) v Corporal Ltd & anr [2013] EWHC 1801 (Ch), the High Court ruled that the true construction of the standard definition of shares in a charge document did not extend to rights under a shareholder loan agreement.

Such agreements were neither ‘other securities’ nor ‘debentures’ within the definition. This decision emphasises the importance of precise drafting to ensure that charge documents clearly identify all of the property caught by them and highlights the pitfalls for a lending party if this is not the case.

The claimant Fons HF (Fons) purchased shares in the first defendant Corporal Ltd (Corporal). In October 2007 and February 2008 respectively, Fons provided funding to Corporal under two shareholder loan agreements (SLAs)…

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