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Security Over Shares

Writer: Priyesh ModiPriyesh Modi

In South Africa, security over shares owned by a debtor pursuant to a lending transaction is taken by way of pledge and cession. Similar to security over receivables and cash in bank accounts, security over shares is created by the debtor agreeing to grant security over the shares in question in favour of the creditor. There are no other perfection requirements in respect of certificated shares, although it is fairly common -


(i) to have any original share certificates together with original, undated and blank share transfer forms delivered to the secured creditor, and


(ii) for any other shareholders to waive any pre-emptive rights they have in respect of the certificated shares at the time of creation of the security interest to facilitate enforcement if needed following the occurrence of an event of default.


While it is possible to take security pursuant to a lending transaction for most typical assets of a South African company, a comprehensive corporate security interest or register encompassing all assets is lacking.


 
 

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