Share Charge Agreement Template for New Zealand

A Share Charge Agreement is a critical security document that allows you to use company shares as collateral for financial obligations. Under New Zealand law, this agreement creates a legally enforceable security interest over shares, providing lenders and investors with protection while enabling borrowers to access funding using their shareholdings as security.

When do you need this document?

You need a Share Charge Agreement when securing loans or credit facilities with company shares, whether you're a business owner seeking finance or an investor providing funding. This document is essential in corporate restructuring transactions where existing shareholders pledge their shares to secure new investment or debt arrangements. Private equity and venture capital transactions frequently require share charges to protect investor interests, particularly in staged funding arrangements. Syndicated lending facilities often incorporate share charges as part of comprehensive security packages, ensuring lenders have recourse to valuable shareholdings. You'll also need this agreement when refinancing existing debt where shares serve as additional security or when directors provide personal guarantees backed by their company shareholdings.

Key legal considerations

The charging clause must clearly identify the specific shares being charged, including share class, number of shares, and any future shares acquired by the chargor. You need to address voting rights arrangements, determining whether the chargor retains voting control until default or transfers these rights immediately to the chargee. Dividend and distribution rights require careful consideration, including whether payments flow to the chargor or are held by the chargee as additional security. The agreement must specify enforcement mechanisms, including the chargee's rights to sell shares, appoint receivers, or take possession of share certificates. Guarantee and indemnity provisions often accompany share charges, creating additional personal liability for directors or shareholders. Registration requirements under the Personal Property Securities Act 1999 are critical for protecting the chargee's priority against other creditors and ensuring enforceability of the security interest.

Legal requirements in New Zealand

Under the Personal Property Securities Act 1999, you must register the security interest on the Personal Property Securities Register within specified timeframes to achieve perfection and priority over competing interests. The Companies Act 1993 governs share transfer procedures and restrictions, requiring compliance with company constitutions and shareholder agreement provisions. For public company shares, the Financial Markets Conduct Act 2013 may impose additional disclosure obligations and trading restrictions. You must ensure the chargor has clear title to the shares and authority to grant the security interest, often requiring board resolutions or shareholder approvals. The agreement should comply with the Contract and Commercial Law Act 2017 for enforceability and include appropriate default and enforcement provisions. Foreign ownership restrictions under the Overseas Investment Act 2005 may apply if the chargee is an overseas person, requiring additional approvals for enforcement actions that result in ownership changes.