In the previous chapter, we considered various kinds of contractual debts. In this chapter, we take the matter further by considering more complicated questions – shares in a company, and the procedure for debt enforcement now known as a third-party debt order.

Shares

Under English law, the rights of a shareholder against the company are regarded as being based on contract. This is not, however, the position in many other legal systems. If a shareholder deals with his shares – whether by transferring them outright or by pledging them as security for a debt – his rights against the other party under the contract of sale or pledge are governed by the law applicable to that contract. However, as soon as other parties enter the picture, the lex situs becomes important. Deciding what the situs of a share is can give rise to problems.

The common law

We first consider the position under the common law; then we will see whether the Rome I Regulation affects the matter.

1. Canada

2. Braun v. Custodian

3. Exchequer Court of Canada

4. [1944] 3 DLR 412; affirmed [1944] SCR 339; [1944] 4 DLR 209 (Supreme Court of Canada)

Background

In 1919, Braun, a naturalized US citizen, went to Germany and bought shares in the Canadian Pacific Railway Company, a company incorporated in Canada by a special Act of the Canadian Parliament. The previous owners of the shares were German nationals.