Finance Update — March 2014: share charge included security over shareholder loans

By Brian Cain

The Court of Appeal has held that the proper construction of a share charge meant the benefit of two unsecured shareholder loan agreements formed part of the security package created by the document.

F made two unsecured loans to C, one pursuant to a bilateral loan agreement and the other jointly with another lender. F subsequently granted a bank a legal charge over the shares it held in C. ‘Shares’ were defined as follows: ‘all shares, if any, specified in Schedule 1, and also all other stocks, shares, debentures, bonds, warrants, coupons or other securities now or in the future owned by the [F] in [C] from time to time or any in which it has an interest’.

The bank claimed that it had security not only over the particular shares F held in C but also over F’s interest in the two unsecured shareholder loans. At first instance, the High Court held that the two loans were not ‘debentures’ or ‘other securities’ for the purposes of the share security document…

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