In England and Wales, a private limited company's articles of association ('AoA') may contain provisions, giving the company, a lien over its issued shares, securing payment to the company, of (certain) sums owed by holder of those shares (the shareholder), to the company[1]. For public companies, see a footnote[2].
This article will explore this area of the law, in light of:
(1) Re General Exchange Bank (also known as Re Lewis) (1870-71) L.R. 6 Ch. App. 818 ('General Exchange Bank'), Court of Appeal in Chancery (James LJ; Mellish LJ) on 8.5.1871;
(2) Everitt v Automatic Weighing Machine Co [1892] 3 Ch. 506 ('Everitt'), High Court (North J) on 11.8.1892;
(3) Tennant v Turner (also known as Re Turner) [1938] Ch. 593 ('Turner'), High Court (Simonds J) on 1.4.1938;
(4) Champagne Perrler-jouet S.A. v H. H. Finch Ltd [1982] 1 WLR 1359 ('Champagne'), High Court (Walton J) on 26.4.1982;
(5) Key Choice Financial Planning Ltd v Evoy [2025] EWHC 4 (Ch) ('Key Choices'), High Court (Michael Green J) on 6.1.25 (briefly)
(as an complete aside, it is interesting to note who the advocates were in the early cases[3])
It is important to appreciate that, the lien here under consideration:
(a) is not a security (lien) on the company's assets; it is a lien that the company has, on another person's assets (where the assets in question, are shares in the company in question). The lien will not appear on the Companies House entry for the company, under 'Charges';
(b) will not, it seems[4], be recorded on the company's register of members.
SUMMARY
It is clear that a private limited company can have a lien over its own issued shares (whether fully paid up or part paid up), securing monies owed by the particular shareholder, to the company. The lien is created by the provisions of the company's AoA. Typically, the AoA's will state that it will be a first and parmount lien on all of the shares held by any shareholder(s).
What type of debt, owed to the company, by a particular shareholder, the lien will secure, will depends on the wording of the company's AoA. The company's AoA may stipulate that the lien secures money due from the shareholder, to the company:
(a) for (and only for) the shares in question (i.e. on part paid up shares, the lien secures payment of the unpaid up part of the cost of purchasing the share(s) from the company); alternatively,
(b) for all and any monies due to the company, from the shareholder (i.e. whether or not the debt arose, or is connected to in any way, the shares subject to the lien).
Though it is called a 'lien', it is, in substance, an equitable charge. Consequentally, unlike 'normal' liens, it does not depend on the company retaining possession of the item subject to the lien. In respect to shares issued and sold, this is convenient as the company no longer has the shares in question, in any event.
Subject to any pre-conditions for exercising any right arising from the lien (charge), the company can, where the shareholder fails to pay the sum due to the company, exercise the right of sale attached to the lien (charge). The company AoA may contain provisions specifying how the right of sale may be exercised.
In terms of roles:
(1) the company will be the creditor/company/lien-holder (or lien-grantee[4a])(equitable chargee);
(2) the shareholder will be the debtor/shareholder/lien-grantor (equitable chargor)
MAIN AUTHORITIES
It is convenient to start with Everitt (leaving General Exchange Bank to a footnote[5]).
1. Everitt
In Everitt, Mr Everitt:
(a) owed the Automatic Weighing Machine Company (the 'Company') c.£4671;
(a) was also the owner and registered holder of 3909 (fully paid up) shares in the Company. The AoA contain the following clauses:
'(38.) The company shall have a first and paramount lien upon the shares of each member for his debts, liabilities, and engagements, solely or jointly with any other person, to or with the company, whether the period of the payment, fulfilment, or discharge thereof shall have actually arrived or not.
“(39.) For the purpose of enforcing such lien, the directors may sell the shares subject thereto without any notice to or consent by the holder of such shares, or any other person, but no such sale shall be made unless and until default be made in the payment, fulfilment, or discharge of such debts, liabilities, or engagements, or some of them.
“(40.) A certificate in writing, under the hands of two of the directors, and countersigned by the secretary, that the last-mentioned power of sale has arisen, and is exercisable by the company under these presents, shall be conclusive evidence thereof.
“(41.) Upon any such sale the directors, or any one of them, may execute a transfer of the shares sold to the purchaser thereof, and such transfer, with the certificate last aforesaid, shall confer on the purchaser a complete title to such shares.'
The Company's directors pressed Mr Everitt for payment, and threatening that, if the c.£4671 debt was not paid, they would, in essence, exercise the company's power of sale in respect to Mr Everitt's shares, as conferred by the above clauses in the AoA.
On this aspect of the case[6], North J said:
'The lien on the shares, which is created by the articles of association, is not like a solicitor's lien upon documents of his client which are in his hands, a lien which is lost when the solicitor parts with the documents. The company's lien, as was pointed out by Lord Justice Mellish in In re General Exchange Bank, constitutes an equitable charge upon the shares for the debts due from the shareholder to the company.'
Two propositions are established by this passage. The company's lien then:
(a) though called a 'lien', is, in substance, an equitable charge. It is an equitable charge upon the shares held by the shareholder, for the debts, due from the shareholder to the company; and
(b) is not 'lost' when the company (the security-holder; akin to the solicitor) parts with the shares (i.e. issues them to the shareholder).
2. Turner
In Turner, a Mr Turner:
(1) owed Luke Turner & Co. Ltd ('LTC Company') c.£24,400;
(2) owned c.173,000 shares in LTC Company (the bulk of the shares).
LTC Company's AoA's contained, amongst other articles[7], Article 10, which contained:
"(j) The company shall have a first and paramount lien upon all shares registered in the name of each member (whether solely or jointly with others) and upon the proceeds of sale thereof for his debts, liabilities and engagements solely or jointly with any other person to or with the company whether the period for the payment fulfilment or discharge thereof shall have actually arrived or not and no equitable interest in any share shall be created except upon the footing that Article 6 hereof is to have full effect.'
Mr Turner subsequently died. As to this aspect of the case[8], Simonds J said, at 597-598
'It is clear on the authorities that there is created by such provisions as are contained in these articles an equitable charge in favour of the company: see In re General Exchange Bank [L. R. 6 Ch. 818]; Everitt v. Automatic Weighing Machine Co. [1892] 3 Ch. 506, 509.'
and later, at 898:
'It is sufficient to say that here there are shares which at the time of the testator's death were subject to an equitable charge in favour of the company.'
3. Champagne
In Champagne, the focus of the dispute was on a different aspect. In Champagne, the nub of the dispute, was as to:
(a) priority of securities (company's lien vs a mortgage granted, by the shareholder, to a third party); and
(b) whether the company, if its charge (lien) had priority, could only sell through some machinery set out in the Company's AoA (Article 7 in particular), or was it an unconstrained power to sell.
In essence:
(1) Mr James Lynch ('Mr Lynch') owed HH Finch Ltd ('HHF Company'), c.£27,000;
(2) Mr Lynch owned 12,292 shares in HHF Company (about 10% of the issued shares);
(3) HHF Company's AoA contained clause 11 (a modified form of Clause 11 from then then applicable Model Articles Table A[9]), which provided (so far as presently relevant):
'The company shall have a first and paramount lien on every share (whether fully paid or not) standing registered in the name of a person (whether solely or jointly with others) indebted or under liability to the company …'
(4) A complicating factor was that Mr Lynch's debt to HHF Company had been recorded, in what was denominated a 'loan account' (at 1362). This raised an issue as to whether the indebtedness was contrary to HHF Company's AoA, clause 10 (at 1362). Clause 10 prohibited the company from making '...a loan for any purpose whatsoever on the security of its shares …' As to this, the Judge made reference to the then current edition of Buckley on the Companies Acts, 14th ed. (1981), vol. 1, p. 918, wherein, it stated 'The effect of this article is presumably to prohibit any loan to a member which would result in the company having a lien upon any of of his shares.' (at 1362). The Judge's view (obiter) was that, if the indebitedness had been created, in contravention of HHF's Company AoA, then this would stop HHF Company having the lien over the debt thereby created[10]. On the facts however, the Judge found that, save for a very small part, the c£27,000, the debt did not arise from any actual cash advanced by HHF Company to Mr Lynch (at 13.62) - and so, '...the vast bulk of [Mr Lynch's] indebtedness to [HHF Company] did not arise out of any transaction of loan' (at 1364).
Pausing there. With the Clause 10 point dealt with, the Judge reaffirmed that basic position in respect to company liens granted under a company's AoA. The Judge said that HHF Company's position was as follows:
(1) '...the company has, and has at all material times had, a lien over [Mr Lynch's] shares conferred by its articles of association...' (at 1373)
(2) 'There is no doubt at all that it has an equitable charge on [Mr Lynch's] shares and, if any authority is wanted for that proposition, it is to be found in Everitt v. Automatic Weighing Machine Co. [1892] 3 Ch. 506.' (at 1370)
So far, so straightforward. But, as stated earlier, the nub of Champagne, related to 2 further points/issues:
(1) as to the priority of securities;
(2) as to whether a company's power of sale, arising from the lien (equitable charge), was constrained by restrictions on sale contained in the HHF's Company's AoA.
The Judge in Champagne addressed these, in turn.
(1) Company's lien vs a Mortgagee's charge over the same shares - priority of securities
As stated, in Champagne, there was not just the company's lien. The shareholder had also, subsequently, granted a mortgage (charge) over his shares, in favour of a third party. This presented a complicating factor. To explain:
(a) a company (James Lynch (Inns) Ltd; 'Inns')) Mr Lynch was the 100% shareholder of, was not doing well. Inns was supplied (with beverages) by Champagne Perrler-jouet S.A. ('Champagne House').
(b) on 9.6.1979, Mr Lynch granted, to Champagne House: (i) a personal guarantee, for Inns debts (at 1364); and (ii) 'executed a mortgage of his shares in [HHF Company] to [Champagne House] by an agreement made between them.' (at 1365).
There was therefore, overlayed, a:
(a) bipartite situation: (1) Mr Lynch (debtor/shareholder/lien-grantor (equitable chargor)) and (2) HHF Company (creditor/company/lien-holder (equitable chargee)); and
(b) tripartite situation: (1) Mr Lynch (guarantor (guarantee obligor)/shareholder/mortgagor); (2) Champagne House (creditor/guarantee obligee/mortgagee); and (3) Inns (principal debtor)
The situation came before the Court, on a claim issued by Champagne House (for various declarations and injunctions), as a result of Champagne House having heard that: (a) HHF Company propose to exercise its lien over [Mr Lynch's] shares by a sale under article 7; and (b) had given a preliminary notice (a Clause 12 notice) in furtherance of that intention.
The issue was, one of priority of charges (i.e. HHF Company's (in substance) charge (lien) vs Champagne House mortgage charge). On this, the Judge:
(a) considered Clause 11 of Table A, as modified by HHF Company's particular AoA (particularly Article 5), and whether or not, in its modified form, '...it covered all cases of indebtedness or liability to [HHF Company], whether such indebtedness or liability was presently dischargeable or not.' (at 1366). The Judge held that 'so far as priority is concerned, at all times [HHF Company] has had a lien on [Mr Lynch's] shares for the moneys properly payable by him to [HHF Company], although, as a result of the deed of December 14, 1976, immediate payment of such moneys was very considerably deferred.' (at 1367).
(b) held that, 'the relevant date, so far as the question of priority is concerned, must be the date when notice was actually given to the company of the existence of [Champagne House's] equitable charge' (at 1366)
(c) dismissed, as not relevant, a HHF Company AoA clause, which stipulated that: 'Except as required by law, no person shall be recognised by the company as holding...any equitable, contingent, future or partial interest in any share or any interest in any fractional part of a share or (except only as by these regulations or by law otherwise provided) any other rights in respect of any share except an absolute right to the entirety thereof in the registered holder.' The Judge said that 'It is well established that, where what is in issue are the rights of the company itself in relation to the shares in question, the priority of its own rights is governed by the general rules relating to the question of priority.' (at 1367) (see Bradford Banking Co. Ltd. v. Henry Briggs, Son & Co. Ltd. (1886) 12 App.Cas. 29)
(d) held that 'the lien of the company takes priority to the equitable charge of [Champagne House].' (at 1373), seemingly because, on the relevant date, HHF Company's lien already existed and attached to Mr Lynch's shares (at 1366).
(2) What Company's liberty to sell the shares?
This second point in Champagne, was described by the Judge, as the 'real nub' (at 1367) of the case: 'if the company chooses to exercise its right to sell the shares comprised in its lien, is it bound to do so through the fairly common form transfer articles which the company has adopted, or is at liberty so to do; or, on the other hand, has it a freedom not possessed by [Mr Lynch] himself, namely, to sell his shares in the open market to whomsoever it pleases?' (at 1367).
On the facts, HHF Company's right to sell the shares (under AoA Clause 12) was held to be constrained by article 7 of HHF Company's AoA. The Judge, having earlier set out the relevant provisions[11], said 'I shall declare that the company has the right and the obligation to sell the shares through and only through the machinery prescribed by article 7.' [bold added].
In essence, the Judge reasoned, that other circumstances in which the shares might be transferred, would be subject to article 7, and so, to hold that HHF Company's right to sell was not constrained by article 7, would create a major breach in what was otherwise a coherent system. The Judge in Champagne said, at 1371:
'...if the articles of the company are to be construed in such a manner that the company itself, in exercise of its lien, can sell in disregard of article 7, there will...be a major breach in what is otherwise a coherent system, and, moreover, a breach for the sole benefit of [Mr Lynch], who has done nothing to merit such consideration but, on the contrary, will have earned such tender consideration by failing to discharge the debts he owes to the company.'
For completeness, the other circumstances were, what would happen if:
(a) HHF Company, rather than use the AoA mechanism for sale, applied to Court instead, for an order for sale from the Court, based on its (in substance) equitable charge[12]. In such a situation, the Judge said that 'the sale would be subject to the provisions of article 7', whether the shareholder complied with an injunction (to give a transfer notice) against the shareholder, or not;
(b) Mr Lynch was made bankrupt[13]. The Trustee in Bankruptcy, attempting to sell the shares, would have to comply with article 7 (give a transfer notice); and
(c) Mr Lynch were to die[14]. The executors of any Will, attempting to sell the shares, would have to comply with article 7 (give a transfer notice).
Key Choice
Key Choices related to a right in a company's AoA, to forfeit the shares of the shareholder/debtor. A power to forfeit a share, is not the same as the company holding a lien over a share. However, it is noteworthy that in Key Choices, Michael Green J noted in the company's AoAs, article 23[15], which provided for a company lien over the company's issued shares, for debts owed by a shareholder, to the company. Michael Green J commented, at paragraph 20:
'As can be seen, the lien in Article 23 purports to provide security to the [company] over a person's share in respect of "all monies payable by him (either alone or jointly with any other person)", not seemingly limited, as is normally found, to the unpaid amount on partly paid shares. The means of enforcement of the lien are contained in Article 24, including the ability to enforce against jointly owned shares. I would comment that the priority granted to the [company's] lien (Article 23.1.1) and the enforcement against jointly owned shares only really make sense in relation to partly paid shares. Furthermore if the lien is enforced and the share sold, the owner of the share is entitled to the net proceeds of sale after payment of the owner's liability to the [company].'
SIMON HILL © 2026*
BARRISTER
33 BEDFORD ROW
NOTICE: This article is provided free of charge for information purposes only; it does not constitute legal advice and should not be relied on as such. No responsibility for the accuracy and/or correctness of the information and commentary set out in the article, or for any consequences of relying on it, is assumed or accepted by any member of Chambers or by Chambers as a whole, or the Copyright holder. No attempt has been made to provide an exhaustive review/account of the law in this area. *Copyright is owned by Barrister Search Limited.
[1] Reference needs to be made to the company's (current) articles of association ('AoA'), to see what is contained therein.
A few points:
(1) reference can be made to Companies House, to see the company's AoA. A good starting point is to look, in respect to a particular company, under 'Filing History'. The first document uploaded, which should be in a row with a description 'Incoporation', will contain the original incorporation document plus AoA (and any memordum of association). Readers will need to check the AoA have not been subsequently amended.
(2) most AoAs will incorporate by reference some or all of the model articles of association. The model articles of association - Table A - can be adopted in their entirety, or adopted in modified form, by a company. There have been different versions of the Model AoA Table A. Readers will need to check, which version of the Model AoA Table A, were incorporated into the company's AoA.
[2] In the Companies Act 2006, there is s.670, entitled 'Public companies: general rule against lien or charge on own shares', which has been in force since 1.10.09 and reads:
'(1) A lien or other charge of a public company on its own shares (whether taken expressly or otherwise) is void, except as permitted by this section.
(2) In the case of any description of company, a charge is permitted if the shares are not fully paid up and the charge is for an amount payable in respect of the shares.
(3) In the case of a company whose ordinary business-
(a) includes the lending of money, or
(b) consists of the provision of credit or the bailment (in Scotland, hiring) of goods under a hire-purchase agreement, or both,
a charge is permitted (whether the shares are fully paid or not) if it arises in connection with a transaction entered into by the company in the ordinary course of that business.'
(4) In the case of a company that has been re-registered as a public company, a charge is permitted if it was in existence immediately before the application for re-registration.'
As will be apparent:
(1) save for the 3 situations in subsections 670(2) to 670(4) Companies Act 2006, a lien or other charge of a public company on its own shares (whether taken expressly or otherwise) is void.
(2) The 3 situations are:
(a) for any description of company, where: (i) the charge is over non-fully paid up shares (i.e. partly paid up shares); and (ii) the charge is to secure an amount payable in respect of the shares (i.e. it secures only the sum unpaid on the shares);
(b) where the company engages, as its ordinary business, the one described in subsection 670(3), then 'a charge is permitted (whether the shares are fully paid or not) if it arises in connection with a transaction entered into by the company in the ordinary course of that business.'
(c) where a company has been re-registered as a public company, 'a charge is permitted if it was in existence immediately before the application for re-registration'
[3] Clearly, this is not relevant to the substance of this article, but for those interested in legal history and 19th-20th Century Judges:
(1) in Re General Exchange Bank (also known as Re Lewis) (1870-71) L.R. 6 Ch. App. 818:
(a) leading counsel for the General Exchange Bank was Sir Baggallay QC - later Baggallay LJ;
(b) counsel for the inspectors was Mr Lindley and Mr Jessel QC - later Lindley LJ and Jessel MR
(2) in Everitt v Automatic Weighing Machine Co [1892] 3 Ch. 506:
(a) counsel for the plaintiff was Mr Cozens-Hardy Q.C - later Cozens-Hardy MR
(b) counsel for the defendants, included Mr Swinfen Eady - later Swinfen Eady MR.
[4] In the author's view. Companies Act 2006 contains section 126, entitled 'Trusts not to be entered on register'. This reads:
'No notice of any trust, expressed, implied or constructive, shall be entered on the register of members of a company registered in England and Wales or Northern Ireland, or be receivable by the registrar.'
The lien is, in substance, an equitable charge. It is therefore a charge that is recognised by Equity. It is an equitable interest, but it is not a equitable interest (a beneficial interest) under a trust, per se. So it is questionable whether s.126 is relevant. The case of Malik v Hussain [2023] EWHC 1433 (Ch) does not assist on this point.
[4a] In Snell's Equity (35th Ed), paragraph 44-002, the holder of the lien is called the 'lienee'.
[5] Re General Exchange Bank (also known as Re Lewis) (1870-71) L.R. 6 Ch. App. 818 ('General Exchange Bank') is not, it might be thought, an easy authority to follow. Cutting to the essential part, for our purposes, it is sufficient to note that:
(1) the Law Report records, that Article 13 of the London and Hamburg Bank's articles of association read:
“The company shall have a first and permanent lien on all shares of any member for all moneys due to the company from him alone, or jointly with any other person,”
(2) Mellish LJ in General Exchange Bank said, at 821:
'The first question is, whether this 13th article gives a mere right to hold the shares, or amounts to an equitable charge on the shares for any moneys due from the shareholders to the company. The words are:—[His Lordship read the 13th article.] I cannot help thinking that those words are perfectly sufficient to constitute an equitable charge on the shares. That being so...'
Further old cases include:
(1) Bradford Bankings Co v Briggs & Co (1886) 12 App Cas 29;
(2) Bank of Africa v Salisbury Gold Mining Co [1892] AC 281;
(3) Gray v Stone and Funnell [1893] WN 133;
(4) Hague v Dandeson (1848) 2 Exch 741;
(5) Re Hoylake Rly Co, ex p Littledale (1874) 9 Ch App 257;
(6) Bank of Africa v Salisbury Gold Mining Co [1892] AC 281;
(7) Re Bank of Hindustan, China and Japan, Anderson's Case (1869) LR 8 Eq 509;
(8) Allen v Gold Reefs of West Africa Ltd [1900] 1 Ch 656;
(9) Re Rowe, ex p West Coast Gold Fields [1904] 2 KB 489
[6] In Everitt v Automatic Weighing Machine Co [1892] 3 Ch. 506 ('Everitt'), there was a complicating factor, which need not be gone into in detail, in the main body of the article. The complicating factor was that:
(a) Mr Everitt had entered into an agreement with a Mr Hore, for Mr Hore to:
(i) buy Mr Everitt's shares in AWM Company, for c.£4971 - so for about c.£300 more than Mr Everitt's debt to AWM Company;
(ii) pay AWM Company, as part of the purchase, what Mr Everitt owed to AWM Company, with AWM Company to assign the benefit of the lien, from AWM Company to Mr Hore;
(b) AWM Company, however, declined to do the assignment.
(c) '[Mr Everitt] considered that he was entitled, by virtue of sect. 15, sub-sect. 1, of the Conveyancing Act, 1881, to require the company to make this assignment.'
The Law Report explained it as follows:
'[Mr Everitt] entered into an agreement with a Mr. Hore for the sale of the shares to him for £4971 6s. 6d. Hore was willing to pay to the company the amount due to them by [Mr Everitt] , and [Mr Everitt] requested the company, on this payment being made, to assign their debt and their lien under the articles on the shares to Hore as the [Mr Everitt's] nominee. [Mr Everitt] considered that he was entitled, by virtue of sect. 15, sub-sect. 1, of the Conveyancing Act, 1881, to require the company to make this assignment.
The company declined to make the assignment, and [Mr Everitt] then commenced this action.'
As an aside, in the author's view, it might be wondered why such an elaborate scheme was needed, if Mr Hore was truly buying the shares from Mr Everitt (why the lien at all?). But that is an aside. Mr Everitt wanted a determination that the lien came within the definition of 'mortgage' in Conveyancing and Law of Property Act 1881, s.2, with the consequence that, he was a mortgagor, and he could rely upon Conveyancing and Law of Property Act 1881, s.15.
In Conveyancing and Law of Property Act 1881, s.2 was entitled 'Interpretation of property, land, &c' and included (as originally enacted):
'In this Act-
...
'(vi) Mortgage includes any charge on any property for securing money or money's worth; and mortgage money means money, or money's worth, secured by a mortgage; and mortgagor includes any person from time to time deriving title under the original mortgagor, or entitled to redeem a mortgage, according to his estate, interest, or right, in the mortgaged property; and mortgagee includes any person from time to time deriving title under the original mortgagee ; and mortgagee in possession is, for the purposes of this Act, a mortgagee who, in right of the mortgage, has entered into and is in possession of the mortgaged property:'
The Law Report footnote also makes reference to:
'Sect. 2
(i.): Property, unless a contrary intention appears, includes real and personal property, and any estate or interest in any property, real or personal, and any debt, and any thing in action, and any other right or interest.
(v.): Conveyance, unless a contrary intention appears, includes assignment, appointment, lease, settlement, and other assurance, and covenant to surrender, made by deed, on a sale, mortgage, demise, or settlement of any property, or on any other dealing with or for any property; and convey, unless a contrary intention appears, has a meaning corresponding with that of conveyance'
In Conveyancing and Law of Property Act 1881, s.15 was entitled 'Obligation on mortgagee to transfer instead of re-conveying' and read (as originally enacted):
'(1) Where a mortgagor is entitled redeem, he shall, by virtue of this Act, have power to require the mortgagee, instead of re-conveying, and on the terms on which he would be bound to re-convey, to assign the mortgage debt and convey the mortgaged property to any third person, as the mortgagor directs; and the mortgagee shall, by virtue of this Act, be bound to assign and convey accordingly.
(2) This section does not apply in the case of a mortgagee being or having been in possession.
(3) This section applies to mortgages made either before or after the commencement of this Act, and shall have effect notwithstanding any stipulation to the contrary.'
As to this aspect of the case, North J in Everitt said:
'Consequently, by virtue of sect. 2, sub-sect. vi., of the Conveyancing Act , the lien is a “mortgage,” and the Plaintiff is a “mortgagor” within sect. 15, sub-sect. 1, of the Act, and is entitled to require the company to transfer their lien on the shares to his nominee on payment of the debt. The Plaintiff is, I am told, ready to pay the debt, and I must restrain the company from selling or transferring the shares during such a time as will enable the Plaintiff to pay the debt.'
[7] The Law Report for Tennant v Turner (also known as Re Turner) [1938] Ch. 593 ('Turner'), records that the LTC Company's articles of association contained the following provisions:
'Article 10: "(j) The company shall have a first and paramount lien upon all shares registered in the name of each member (whether solely or jointly with others) and upon the proceeds of sale thereof for his debts, liabilities and engagements solely or jointly with any other person to or with the company whether the period for the payment fulfilment or discharge thereof shall have actually arrived or not and no equitable interest in any share shall be created except upon the footing that Article 6 hereof is to have full effect.
Article 6: "Save as herein otherwise provided the company shall be entitled to treat the registered holder of any share as the absolute owner thereof and accordingly shall not except as ordered by a court of competent jurisdiction or as by statute required be bound to recognize any mortgage or charge thereof or any trust or equity in relation thereto or any equitable or other claim to or interest in such share on the part of any other person.
Article 10: "(k) Any such lien shall extend to all dividends "from time to time declared in respect of the shares subject thereto."
"(I) Unless otherwise agreed the registration of a transfer of shares shall operate as a waiver of the company's lien (if any) on such shares.
"(m) For the purpose of enforcing such lien the directors may sell the shares subject thereto in such manner as they think fit but no sale shall be made until such period as aforesaid shall have arrived and until notice in writing of the intention to sell shall have been served on such member his executors or administrators and default shall have been made by him or them in payment fulfilment or discharge of such debts, liabilities or engagements for seven days after such notice.
"(n) The net proceeds of any such sale shall be applied in or towards satisfaction of such debts, liabilities or engagements and the residue (if any) paid to such member his executors, administrators or assigns."
[8] Tennant v Turner (also known as Re Turner) [1938] Ch. 593 ('Turner'), is a probate case. Mr Turner died, leaving a Will:
(1) appointing, as executors: (a) his wife Mrs Turner; and (b) Mr Tennant;
(2) bequeathing Mrs Turner, 10,000 (fully paid up) shares in ATC Company.
In time, the executors caused the c.£24,400 debt to ATC Company, to be paid. The question was, did Mrs Turner, from the 10,000 shares, have to contribute something, towards the repayment of this debt? Or as Simonds J put it, at 596-597:
'The question raised in these proceedings is whether those 10,000 shares so bequeathed to the legatee ought to bear a proper proportion of the charge on all the testator's shares.'
As to this, Simonds J, in essence, answered in the affirmative. Simonds J said, at 598:
'It is sufficient to say that here there are shares which at the time of the testator's death were subject to an equitable charge in favour of the company. I must accordingly declare that the [Mrs Turner] is primarily liable as between herself and other persons interested in the estate of the testator to discharge a proportionate amount of the moneys owing to the company by the testator at the time of his death.'
[9] HHF Company was private company incorporated under Companies Act 1948. The unmodified Clause 11 of Table A read (at 1366):
'The company shall have a first and paramount lien on every share (not being a fully paid share) for all moneys (whether presently payable or not) called or payable at a fixed time in respect of that share, and the company shall also have a first and paramount lien on all shares (other than fully paid shares) standing registered in the name of a single person for all moneys presently payable by him or his estate to the company; but the directors may at any time declare any share to be wholly or in part exempt from the provisions of this regulation. The company's lien, if any, on a share shall extend to all dividends payable thereon.'
In respect to HHF Company, this was modified so far as the articles of HHF Company were concerned, by article 5, which reads (at 1366):
'The lien conferred by clause 11 in Part I of Table ‘A’ shall attach to fully paid shares and to all shares registered in the name of any person indebted or under liability to the company whether he be the sole registered holder thereof or one of two or more joint holders.'
The key modification then the Table A Clause 11, was to add, within what is subject to the lien: fully paid shares.
[10] In Champagne Perrler-jouet S.A. v H. H. Finch Ltd [1982] 1 WLR 1359, the Judge found that almost all of the debt was generating not in contravention of HHF Company's AoA Clause 10. He did however, go on to deal with what would have been the position, if clause 10 had been breached. What he said is necessarily obiter, as it was not necessary to his decision:
(a) the Judge rejected 2 contentions put forward, on the basis they would have made no difference:
(i) that a deed dated 14.12.76, wherein, it was agreed, amongst other things, that Mr Lynch would pay no less than £52 per calender year (Instalments), towards the £27,000 debt (at 1363-1364)(so long as Mr Lynch did not default); and
(ii) judgment having been entered against Mr Lynch, when he did default on his Instalments, for £27,766 (at 1364). The Judge said 'if the company had no right to exercise its lien in respect of a particular loan' - i.e. contrary to position he had just found, then 'I do not see that the lien would attach by virtue of the fact that a judgment had been recovered in respect thereof.' (at 1364).
(b) The Judge rejected a submission that, '...at the highest, all that had happened was that there had been a breach of a contractual provision contained in clause 10, and that the only person who could properly take the point was a shareholder.' (at 1364). The Judge said, 'I do not think this is correct' (at 1364), stating:
'...the question here is whether [HHF Company] has a lien on [Mr Lynch's] shares in respect of the money owed by him to [HHF Company]. If [HHF Company], by virtue of its constitution, was prohibited from taking such a lien, then no such lien has attached. The situation might well be different if there had been an express lien granted or taken; but clearly this did not happen. And, once a lien has failed to attach to an initial debt, it does not seem to me that any acknowledgment of that debt, or judgment recovered therefor, makes any difference. No initial lien, no subsequent lien without a transformation of the initial liability into something completely different - if that be possible.'
[11] In Champagne Perrler-jouet S.A. v H. H. Finch Ltd [1982] 1 WLR 1359, the Judge said, at 1367 to 1369:
'For this purpose it is necessary to refer to other articles of the company, in particular article 7, which, so far as material, provides:
“(A) Save as otherwise hereinafter provided no member (hereinafter called ‘the retiring member’) shall be entitled to transfer any shares whether by way of sale or otherwise, without first causing the same to be offered to the other members of the company at the fair value in accordance with the provisions of this clause.
(B) In order to ascertain whether any other members of the company are willing to purchase the shares at the fair value, the retiring member shall give a notice in writing (hereinafter referred to as a ‘sale notice’) to the company that he desires to sell the same. Every sale notice shall specify the denoting numbers (if any) of the shares which the retiring member desires to sell, and shall constitute the company the agent of the retiring member for the sale of such shares to the other members of the company at the fair value. No sale notice shall be withdrawn except with the sanction of the directors.
(C) The directors shall, with a view to finding members willing to purchase the shares (hereinafter referred to as ‘purchasing members’), offer the shares comprised in a sale notice to the persons then holding the remaining shares in the company as nearly as may be in proportion to their holdings of shares in the company, and shall limit a time within which such offer, if not accepted, will be deemed to be declined; and the directors shall make such arrangements as they shall think just and reasonable as regards the finding of purchasing members for any shares not accepted by members to whom they shall in the first instance have been so offered as aforesaid.
(D) If the company shall within 28 days after service of a sale notice find purchasing members in respect of all or any of the shares comprised therein it shall give notice thereof to the retiring member and the retiring member shall be bound upon payment of the fair value to transfer the shares to such purchasing members, who shall be bound to complete the purchase within seven days from the service of such last-mentioned notice.
(E) The fair value shall be fixed by the auditors for the time being of the company and the sum so fixed shall, for the purposes of this clause, be deemed to be the fair value of any share comprised in such notice.
(F) In the event of the retiring member failing to carry out the sale of any shares which he shall have become bound to transfer as aforesaid, the directors may authorise some person to execute a transfer of the shares to the purchasing members and may give a good receipt for the purchase price of such shares, and may register the purchasing members as holders thereof and issue to them certificates for the same, and thereupon the purchasing members shall become indefeasibly entitled thereto. The retiring member shall in such case be bound to deliver up his certificate for the said shares, and on such delivery shall be entitled to receive the said purchase price, without interest, and if such certificate shall comprise any shares which he has not become bound to transfer as aforesaid the company shall issue to him a balance certificate for such shares.
(G) If the directors shall not, within the space of 28 days after service of a sale notice, find purchasing members for all of the shares comprised therein, or if, through no default of the retiring member, the purchase of any shares shall not be completed within 21 days after the service on the retiring member of the notice provided for by sub-clause (D) hereof, the retiring member shall, at any time, within six months after the expiry of the said 28 days or the service on him of the said notice as the case may be, be at liberty, subject to the provisions of clause 3 of Part II of Table A …”
and that, of course, provides that the directors may in their absolute discretion and without assigning any reason therefor decline to register any transfer of any share whether or not it is a fully paid share:
“… to transfer to any person as he may wish (and, in the case of a sale, at any price) the shares in respect of which no purchasing member was found or in, respect of which the sale was not completed as aforesaid. (H) The provisions of clause 3 of Part II of Table A shall not apply to any transfer to a purchasing member in accordance with the provisions of this clause. (I) The provisions of this clause shall apply mutatis mutandis to any person becoming entitled to a share in consequence of the death or bankruptcy of a member and who wishes either to transfer such share or himself to be registered in respect thereof. (J) Notwithstanding anything hereinbefore contained in this clause a share may be transferred (subject to the provisions of clause 3 of Part II of Table A) to the spouse or lineal descendant or brother or sister of a member or deceased or bankrupt member without first being offered to the other members of the company in accordance with the provisions of this clause.”
The provisions for sale under the company's lien are contained in clauses 12 to 14 of Table A. They read as follows:
“12. The company may sell, in such manner as the directors think fit, any shares on which the company has a lien, but no sale shall be made unless a sum in respect of which the lien exists is presently payable, nor until the expiration of 14 days after a notice in writing, stating and demanding payment of such part of the amount in respect of which the lien exists as is presently payable, has been given to the registered holder for the time being of the share, or the person entitled thereto by reason of his death or bankruptcy.
13. To give effect to any such sale the directors may authorise some person to transfer the shares sold to the purchaser thereof. The purchaser shall be registered as the holder of the shares comprised in any such transfer, and he shall not be bound to see to the application of the purchase money, nor shall his title to the shares be affected by any irregularity or invalidity in the proceedings in reference to the sale.
14. The proceeds of the sale shall be received by the company and applied in payment of such part of the amount in respect of which the lien exists as is presently payable, and the residue, if any, shall (subject to a like lien for sums not presently payable as existed upon the shares before the sale) be paid to the person entitled to the shares at the date of the sale.”'
[12] In Champagne Perrler-jouet S.A. v H. H. Finch Ltd [1982] 1 WLR 1359, the Judge said, at 1370-1371:
'Let it be supposed that the company, for whatever reason, decided not to utilise the power of sale conferred by clause 12: after all, it is only one which the company “may” not “must” use. There is no doubt at all that it has an equitable charge on [Mr Lynch's] shares and, if any authority is wanted for that proposition, it is to be found in Everitt v. Automatic Weighing Machine Co. [1892] 3 Ch. 506.
The company could, therefore, go to the court and say: “Please provide for a sale of these shares to answer our equitable charge.” This the court could do, as I see it, in one and only one way - namely, by ordering [Mr Lynch] to give a transfer notice. And, if [Mr Lynch] was unwilling so to do, then under section 30 of the Supreme Court Act 1981, some other person could be authorised to give it on his behalf. But there could be no conceivable doubt but that the sale would be subject to the provisions of article 7 - there is no other possibility.'
[13] In Champagne Perrler-jouet S.A. v H. H. Finch Ltd [1982] 1 WLR 1359, the Judge said, at 1371:
'Alternatively, let us assume that the company, havings its judgment unsatisfied, were to make [Mr Lynch] bankrupt. Then his trustee in bankruptcy, in order to realise the shares, would have to give a transfer notice as provided by article 7 (I) and, once again, the provisions of that article generally would apply.'
[14] In Champagne Perrler-jouet S.A. v H. H. Finch Ltd [1982] 1 WLR 1359, the Judge said, at 1371 (after speaking about if Mr Lynch should go bankrupt - see footnote above):
'Similarly, the article would apply if, James were to die and his executors wished to realise his shares — or, indeed, be registered as the holders of such shares themselves, which might well present problems for the plaintiffs, who have indicated that, if all else failed, they would in substance be content to retain the shares as an investment.'
[15] In Key Choice Financial Planning Ltd v Evoy [2025] EWHC 4 (Ch) ('Key Choices'), Michael Green J noted the company's AoA, article 23, at paragraph 19, as follows:
'Articles 23 and 24 provide for the [company] to have a lien over its shares. Article 23 is in the following terms:
"23 Company's lien over shares The company has a lien ( company's lien ) over every share, whether or not fully paid, which is registered in the name of any person indebted or under any liability to the company, whether he is the sole registered holder of the share or one of several joint holders, for all monies payable by him (either alone or jointly with any other person) to the company, whether payable immediately or at some tine in the future and whether or not a call notice has been sent in respect of it.
23.1 The company's lien over a share:
23.1.1 takes priority over any third party's interest in that share, and
23.1.2 extends to any dividend or other money payable by the company in respect of that share and (if the lien is enforced and the share is sold by the company) the proceeds of sale of that share.
23.2 The directors may at any time decide that a share which is or would otherwise be subject to the company's lien shall not be subject to it, either wholly or in part."'
The Michael Green J in Key Choices did not set out article 24 in his judgment.