Lien on shares

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megha agarwal

megha agarwal (Querist)
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04 April 2014 what is lien on shares?

RAMESH KUMAR VERMA

RAMESH KUMAR VERMA (Expert)
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07 April 2014 A lien is the right to retain possession of a thing until a claim is satisfied. In the case of a company lien on a share means that the member would not be permitted to transfer his shares unless he pays his debt to the company. The articles generally provide that the company shall have a first lien on the shares of each member for his debts and liabilities to the company. The right of lien is not inherent but must be clearly provided for in the articles. The articles may give the right of lien over share either for unpaid calls or for any other debt due by the member of the company. The company may have lien on fully paid-up shares. The lien also extends to the dividends payable on the shares.

The death of a shareholder does not destroy the lien. The right of lien can be exercised even through the claim has become barred by law of limitation. Where the liability of the shareholder towards the company is disputed by him, it does not deprive the company of its right of lien on the shares. But a company will not be able to exercise its right of lien where the shareholder has mortgaged his shares before he has incurred any liability to the company and the company has notice of it. Similarly, a company will loose its lien if registers a transfer of shares subject to the lien.

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