Drafting Drag along Triggers in International Shareholders Agreements
Drafting cross-border drag-along triggers requires verifiable voting thresholds, explicit cash valuation floors, and deeded power-of-attorney execution clamp mechanics.
Missing Share Certificates
Meaning
Legal status of lost or destroyed physical documents that represent a specific number of shares held by an investor. When missing share certificates are reported, the company follows a specific process to verify ownership before issuing new documents or allowing a transfer of the shares.
Replacement Indemnity
The shareholder is required to sign a deed of indemnity to protect the company against any loss if the original certificates are later found. This document includes an agreement to pay the costs and damages that might arise if a third party claims ownership of the same shares based on the missing paperwork.
Security Bond
Large companies often require the investor to purchase a bond from an insurance company as a guarantee for the indemnity. The bond provides an extra layer of protection for the business by ensuring that funds are available to cover any potential claims related to the lost security. This bond is usually priced as a percentage of the current market value of the shares being replaced.
The insurance company conducts its own investigation into the loss before issuing the bond to the shareholder.
Register Reliance
The official register of members is the primary record of ownership even when the physical certificates are not available. Directors rely on the entries in this register to pay dividends and issue voting notices, but they will not register a sale until the certificate issue is resolved.