Meaning
A legal concept that establishes where the share register of a corporation is held, which determines the jurisdiction where the shares themselves are deemed to exist. The register of members situs is a critical concept in international finance because it dictates which court has the authority to order the transfer, freezing or seizure of a company’s shares. This location is usually the registered office of the company in the country of incorporation.
Physical Registration
Physical registration of the register determines where a creditor must apply for an execution order. This rules out the possibility of suing in an unrelated country to seize the corporate ownership.
Establishing Security
Establishing the correct location of the shares is vital for executing security agreements and pledges. Under the doctrine of the register of members situs, a lender secures its loan by registering its charge in the country of incorporation. This registration protects the lender against competing claims from other creditors.
It creates a transparent and enforceable security interest that is globally recognized.
Ownership Changes
Ownership changes must be processed by the local registrar to be legally effective. This administrative step completes the transfer of control during an acquisition or a court-ordered foreclosure.
