Share Mortgage (Two Shareholders)

Updated for 2014

This document creates a mortgage over shares held by two or more shareholders in a private limited company incorporated in Ireland, together with a charge over all dividends, interest and other rights attaching to those shares.

The mortgage is granted by the shareholders to secure the obligations of the shareholders to the chargee under the terms of a specific agreement. This agreement can be a loan agreement, a guarantee, or a commercial contract of any description.

If the shareholders default in any way under the relevant agreement, then the chargee (person holding the benefit of the shares) will be able to take ownership of the shares which are subject to the charge.

Further details are set out below.

See below for a full product description
 

This document creates a mortgage over shares held by two or more shareholders in a private limited company incorporated in Ireland, together with a charge over all dividends, interest and other rights attaching to those shares. The persons who are granting this mortgage are called the “Shareholders” and the person who receives the benefit of the mortgage is called the “Chargee”.

The mortgage is granted by the Shareholders to secure the obligations of the Shareholders to the Chargee under the terms of a specific agreement which is referred to as the “Relevant Agreement” in the Share Mortgage document. This agreement can be a guarantee, a share purchase agreement, an agreement to pay a debt, a loan agreement or any other agreement under which monies may be payable by the Shareholders to the Chargee. If the Shareholders fail to pay the amount owing to the Chargee under the terms of the agreement, then the Chargee can enforce the mortgage by either transferring the shares in the company to it or selling those shares and using the proceeds of sale to pay off the monies owing by the Shareholders to the Chargee under the Relevant Agreement.

Under the Share Mortgage, the Shareholders agree to pay the amounts owing to the Chargee under the terms of the Relevant Agreement and grant an equitable mortgage over the “Securities” (which include the Shares in the Company) in favour of the Chargee pending payment in full of the amounts owing by the Shareholders to the Chargee under the Relevant Agreement.

An equitable mortgage is a mortgage in which the person granting it (i.e. the Shareholders) does not actually transfer the legal title to the securities (i.e. the Shares) to the Chargee but instead gives the Chargee the necessary documents to do so should the Shareholders default in their obligations under the mortgage. In this instance, the Shareholders will give the Chargee their signed but undated share transfer forms which allow the Chargee to transfer the Shares in the event that the Shareholders default in their obligations to make payment under the terms of the Relevant Agreement. Once all of the amounts owing under the Relevant Agreement are repaid in full, and only then, the Chargee will return the undated share transfer forms to the Shareholders and release the security over the Shares.

If the Chargee becomes entitled to enforce the security (see below) over the Shares, it will be entitled to do so without first being obliged to take action against any other person (such as another party to the Relevant Agreement or a guarantor, for example) to recover the monies owing to it under the terms of the Relevant Agreement. It can immediately enforce its security over the Shares.

For so long as the mortgage remains in place, the Shareholders shall be prohibited from transferring any interest in the Shares to any person or from creating any other mortgage, charge, encumbrance, or similar security interest over them.

Under the terms of the share mortgage, the Shareholders will give certain assurances (known as representations and warranties) to the Chargee in relation to the Shares and themselves. It addition, in order for the Chargee to enforce its security, the Shareholders also agree to provide certain documents to the Chargee including undated and signed share transfer forms, the share certificates in respect of the Shares that are being mortgaged and any other documents that may be required to transfer the Shares from the Shareholders to the Chargee.

The Shareholders shall be obliged to transfer any dividends they receive to the Chargee as part payment of the amounts owing under the Relevant Agreement.

For so long as the share mortgage remains in place, any votes attaching to the Securities or exercisable in connection therewith shall be exercised by the Shareholders in accordance with instructions received from the Chargee.

The share mortgage also contains standard ‘boiler plate’ clauses and other clauses typically found in share mortgages of this kind.

Detailed information in relation to each clause of this share mortgage and on how to complete the share mortgage are contained in the notes that accompany the mortgage.



Clauses Included in this Share Mortgage:

- Interpretation

- Covenant to Pay

- Security

- Representations and Warranties

- Covenants of the Shareholder

- Enforcement of Security

- Receivers

- Dividends

- Votes and Shareholder Rights

- Issues of Shares

- Power of Attorney

- Costs, Charges and Expenses

- Notices

- Section 17 Conveyancing and Law of Property Act, 1881

- Miscellaneous

- Governing Law and Jurisdiction

- Schedule – Details of the Shares Being Charged

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