Share Charge Agreement Template for the United States

A Share Charge Agreement is a critical security document that allows you to pledge shares as collateral for financial obligations. Under United States law, this agreement creates a legally enforceable security interest in shares, providing lenders with protection against borrower default while enabling you to access financing using your equity holdings as security.

When do you need this document?

You'll need a Share Charge Agreement when securing loans with share holdings, particularly in acquisition financing where target company shares serve as collateral. Corporate borrowers commonly use these agreements to pledge subsidiary shares for credit facilities, while private equity firms may charge portfolio company shares to secure acquisition debt. The document is essential in refinancing transactions where existing share charges require updating, and in structured finance deals involving multiple layers of security. Investment holding companies frequently use share charges when their only significant assets are equity investments in subsidiaries or other entities.

Key legal considerations

The agreement must clearly identify the charged shares, including class, number, and any restrictions on transfer or voting rights. You need to address voting arrangements, as UCC Article 9 allows chargors to retain voting rights unless the security agreement provides otherwise. Dividend and distribution rights require careful structuring, typically allowing the chargor to receive payments while solvent but directing them to the chargee upon default. The enforcement provisions must comply with UCC requirements for commercially reasonable disposition of securities, including proper notice periods and sale procedures. You should consider whether additional control agreements with transfer agents or securities intermediaries are necessary to perfect the security interest under UCC Article 8.

Legal requirements in United States

Under UCC Article 9, you must properly create and perfect the security interest in shares through attachment and filing requirements. For certificated securities, perfection typically occurs through possession of certificates or filing UCC-1 financing statements. Uncertificated securities require control agreements with the issuer or securities intermediary to achieve perfection. The agreement must comply with federal securities laws, including Securities Act registration requirements and any transfer restrictions. State blue sky laws may impose additional compliance obligations depending on the nature of the shares and transaction structure. You should ensure the charging provisions don't violate any existing shareholder agreements, corporate governance requirements, or regulatory restrictions applicable to the shares being charged.