Collas Crill Explains…Taking Security Over Shares In A Guernsey Company – Corporate/Commercial Law | #corporatesecurity | #businesssecurity | #

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This is part of a series of guides in which we examine areas
of Guernsey law that frequently arise in practice. Further guides
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Where a Guernsey company borrows money or participates in a
group financing, the lender’s security package will frequently
involve taking security over the Guernsey company’s shares.

This guide looks at the key things you need to know about taking
security over the shares in a Guernsey company.

Words in bold text are defined at the end of this guide.

Preliminary steps

A security taker should take the following
preliminary steps before taking security over the secured

  • Inspect the
    issuer’s register of shareholders to make
    • the security giver
      is the registered holder of the secured
    • there is no evidence of any existing
      security interest over the secured shares;
    • the secured shares
      are fully paid.

If the issuer has any nominee shareholders then
the declaration(s) of trust will also need to be reviewed.

  • Review the M&A
    (including any amending resolutions and any shareholders’
    agreement that may be in place) to determine whether there are any
    provisions that will adversely impact on its security interest over
    the secured shares (e.g. any prohibition on the
    creation of security, pre-emption rights, restrictions on transfer
    of shares etc) that need to be amended or disapplied.
  • Agree a form of security notice and
    security acknowledgement.
  • Carry out:
    • a search at the Guernsey Companies
      Registry; and
    • a litigation search at the Greffe
      (being the registry office of the Guernsey courts),

against the issuer and the security
if it is a Guernsey company, to make sure there is
no evidence the issuer or the security
is insolvent or subject to any insolvency or similar

Security basics

The Law sets out a statutory framework for
creating security interests over Guernsey intangible movable
assets, like the secured shares.

Under the Law, a security interest is any
interest in the secured shares created under a
security agreement which secures the payment or performance of an

A security interest over the secured shares may
only be created by a security agreement between the
security giver and security
. Under the Law, such security
agreement must specify events of default.

Under the Law, security may be granted over the
secured shares by:

  • Possession. The
    security taker (or a person on its behalf) taking
    physical possession of the share certificate(s) for the
    secured shares or
  • Assignment. The
    security giver assigning its rights and title to
    the secured shares to the security

In practice, a security taker will take both
forms of security. It will usually allow the security
to continue to exercise voting rights and collect
dividends unless an event of default has occurred.


A security interest over secured shares created by possession
and/or assignment requires possession and notice to be given to the
issuer (See Security deliverables below). Failure
to obtain possession or to serve notice will render the relevant
security interest ineffective.

Security deliverables

The security giver will normally be required by
the security agreement to deliver the following documents to the
security taker:

  • the original share certificate(s) for
    the secured shares;
  • share transfer form(s) for the
    secured shares signed
    in blank;
  • a special resolution signed by the
    security giver (in its
    capacity as shareholder of the issuer) making any changes to
    the M&A required
    by the security taker;
  • a certified copy of the issuer’s register of
    shareholders which has a note of the security interest created over
    the secured shares in
    favour of the security

In addition the security giver will be required

  • give a notice to the
    issuer advising the issuer that
    it has created a security interest over the secured
    ; and
  • ensure the issuer gives an
    acknowledgement to the security
    acknowledging the notice from the security giver.


There is no public register of security interests in


Subject to any agreement of a secured party for the postponement
of its rights, priority between security interests in the same
secured shares is determined by the order of creation of those
security interests.



The Law provides the security taker with a power of sale and

If a security interest over secured shares
becomes enforceable, the security taker may use
its power of sale under the Law to sell the
secured shares in order to satisfy the secured
obligations set out in the security agreement. A power of
application must be exercised on the same basis.


The Law allows the security
to enforce its security interest if:

  • an event of default under the
    security agreement occurs; and
  • it gives a notice to the security giver specifying the
    event of default.

There is no specified timeframe under the Law in which notice
needs to be given prior to an enforcement.


On enforcing its security interest in secured
, the security taker must take all
reasonable steps to ensure the sale of the secured
is made:

  • within a reasonable time period;
  • for a price corresponding to the
    value on the open market at the time of the sale or, where there is
    no open market value, the best price reasonably obtainable.

Insolvency of security giver

The Law states that the power of the
security taker to sell or otherwise act in
relation to secured shares is not affected by:

  • the security giver
    becoming insolvent or being subject to an administration order;
  • its property becoming subject to
    insolvency or similar proceedings in Guernsey or elsewhere.

Terms used

issuer means the company which issued the
secured shares.

Law means The Security Interests (Guernsey)
Law, 1993.

M&A means the issuer’s
memorandum and articles of incorporation.

security giver means the person who creates a
security interest over the secured shares (i.e.
the shareholder of the issuer).

secured shares means the shares in the issuer
in certificated form over which the security giver
creates a security interest.

security taker means the person in whose favour
a security interest is created over the secured

About Collas Crill

We are a leading offshore law firm. We are easy to do business
with and give practical advice to overcome tough challenges.
Through our network of offices, we practise British Virgin Islands,
Cayman Islands, Guernsey and Jersey law.

About this guide

This guide gives a general overview of this topic. It is not
legal advice and you may not rely on it. If you would like legal
advice on this topic, please get in touch with one of the authors
or your usual Collas Crill contacts.

Originally published July 15, 2020.

The content of this article is intended to provide a general
guide to the subject matter. Specialist advice should be sought
about your specific circumstances.

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