Lenders on acquisition finance and capital expenditure facilities often require security over shares. In this the second of a two-part series, we highlight the ancillary documentation that is beneficial to take when security over shares in a limited company is being taken: -

Ancillary Documentation

In addition to the share charge itself, it is prudent for the lenders to obtain ancillary documentation / support documentation. This documentation is sought to facilitate the enforcement process. A non-exhaustive list of ancillary requirements is set out below:

Share Certificates

The original physical share certificates for the shares being charged should be delivered evidencing title to the shares. There are instances where a physical share certificate will not have issued for example the Crest system but this would usually relate to shares in PLCs as opposed to private limited companies. This also prevents the shareholder pledging the shares as security to a third party. Where original certificates have been lost, replacement certificates should be issued and it is prudent to require a sworn affidavit setting out the circumstances of the loss of the original certificates and confirmation they have not been pledged to any third party. In addition to this an indemnity should be required from the shareholder that if the certificates are found they will be immediately forwarded to the lender.

Share Transfer Form and Shareholders’ Letter of Authority

An undated standard share transfer form signed by the shareholder should be handed over on completion listing all the shares subject of the share security. This is ordinarily held with the charge deed and only utilised in an enforcement scenario to facilitate the transfer of the shares to the Lender. Together with this, a signed undated letter of authority from the shareholder should also be furnished authorising the lender to date the share transfer form.

Letter of Irrevocable Proxy and Letter of Irrevocable Appointment

It is also wise to obtain a proxy letter from the shareholder appointing the lender to vote on behalf of them at company member’s meetings. The proxy appointment should be irrevocable and so the shareholder cannot withdraw this appointment should the lender enforce its security. Furthermore a letter appointing the lender or their representative to sign company resolutions should also be provided and should similarly be on an irrevocable basis.

Directors Resignations Letters and Letter of Authority

All directors of the company should provide a signed letter of resignation which will be left undated. They should also provide a letter confirming that the directors authorise the lender to date and complete the resignation letter on behalf of the director in an enforcement scenario. If the lender enforces its security over the shares, the letters are dated and all directors in place resign so that the lender can appoint its replacement directors to run the company and proceed to trade or sell the business.


Proceeding without the ancillaries can result in delays, frustrations and obstacles to the enforcement process, and can also significantly reduce the value of the share security.