- •Contents
- •Preface
- •Table of legislation
- •Table of cases
- •Introduction
- •1.1 Convergence
- •1.2 Path-dependence
- •1.2.1 Politics
- •1.2.2 Economics
- •1.2.3 Culture
- •1.2.4 Social and commercial norms
- •1.2.5 Legal mentalities
- •1.3 Functional convergence
- •1.4 Summary of the analysis
- •2 Paper transfers
- •2.1 The historic starting point
- •2.2 Law and equity
- •2.3 Legal title and registration
- •2.4 Equitable title
- •2.4.1 Equity and transfers of registered securities
- •2.4.2 Legal nature of an equitable (beneficial) interest
- •2.4.3 Acquisition of an equitable (beneficial) interest
- •2.4.4 Equitable title and specific performance
- •2.4.4.1 Enforceable contract
- •2.4.4.2 Claimant must be ready and willing to perform
- •2.4.4.3 Specific or ascertained assets
- •2.4.4.4 Damages are an inadequate remedy
- •2.4.4.5 Conclusions
- •2.4.5 Equitable title on appropriation of securities and payment of purchase price
- •2.4.6 Equitable title on delivery of transfer documents
- •2.4.7 Express trusts
- •2.4.8 Conclusions
- •2.5 Summary of the analysis
- •3 Dematerialisation
- •3.1 Talisman
- •3.2 The need for reform
- •3.3 CREST
- •3.3.1 Introduction
- •3.3.2 Legal title
- •3.3.3 Equitable title
- •3.3.4 Conclusions
- •3.4 The 2001 reforms
- •3.4.1 Introduction
- •3.4.2.1 Effect of entries on registers: shares
- •3.4.2.2 Effect of entries on registers: public sector securities, corporate securities other than shares
- •3.4.2.3 Conclusions
- •3.4.3 Legal title
- •3.4.4 Equitable title
- •3.4.5 Conclusions
- •3.5 Summary of the analysis
- •4 Impact on the institutional framework
- •5 Defective issues
- •5.1 Introduction
- •5.2 Novation
- •5.2.1 Novation by operation of law
- •5.2.2 Novation by contract
- •5.2.3 Novation as a fiction
- •5.3 Defective issues and estoppel
- •5.4 Securities as negotiable rights
- •5.5 Summary of the analysis
- •6 Unauthorised transfers
- •6.1 Introduction
- •6.2 Certificated securities and estoppel
- •6.2.1 Restoration of the legal owner’s name on the register
- •6.2.2 Liability of the issuer
- •6.2.3 Liability of the person who instructed the issuer to amend the register
- •6.2.4 Conclusions
- •6.3 Uncertificated securities and estoppel
- •6.3.1 Restoration of the legal owner’s name on the register
- •6.3.2 CRESTCo’s liability for forged instructions
- •6.3.3 Liability of the issuer
- •6.3.4 Securities as negotiable rights
- •6.3.5 Conclusions
- •6.4 Summary of the analysis
- •7 Indirect holdings
- •7.1 Introduction
- •7.2 Certainty of intention
- •7.3 Certainty of subject matter
- •7.3.1 Tangible goods
- •7.3.2 Registered securities
- •7.3.3 Analysis
- •7.3.3.1 Academic commentators
- •7.3.3.2 US authority
- •7.3.3.3 Policy considerations
- •7.3.3.4 Law reform
- •7.3.4 Conclusions
- •7.4 Summary of the analysis
- •8 Conclusions on English law
- •9 The historic starting point
- •9.1 Securities as intangibles
- •9.2 Shortcomings of the law of assignment
- •9.3 Theories overcoming the law of assignment
- •9.3.1 Nature of the instrument
- •9.3.2 Contract
- •9.3.3 Transfer by novation
- •9.3.4 Conclusions
- •9.4 Securities as tangibles
- •9.5 Summary of the analysis
- •10 Paper transfers
- •10.1 Transfer of ownership
- •10.1.1 German Law
- •10.1.2 Austrian law
- •10.1.3 Conclusions
- •10.2 Unauthorised transfers
- •10.2.1 Introduction
- •10.2.2 German law
- •10.2.3 Austrian law
- •10.2.4 Conclusions
- •10.3 Defective issues
- •10.3.1 German law
- •10.3.2 Austrian law
- •10.3.3 Conclusions
- •10.4 Summary of the analysis
- •11 Impact on the institutional framework
- •11.1 Indirect holdings
- •11.2 Immobilisation
- •11.3 Global certificates
- •11.4 Government bonds
- •11.5 Summary of the analysis
- •12 Immobilisation and its legal analysis
- •12.1 Genesis of the statutory regime
- •12.1.1 1896 German statute
- •12.1.2 Depotgesetz 1937
- •12.2 Relationship between clients and their intermediary
- •12.3 Co-ownership
- •12.4 Transfer of co-ownership
- •12.4.1 Introduction
- •12.4.2 Depotgesetz
- •12.4.3 German property law
- •12.4.4 Global certificates and Government bonds
- •12.4.5 German Government bonds
- •12.4.6 Austrian law
- •12.4.7 Conclusions
- •12.5 Unauthorised transfers
- •12.5.1 German law
- •12.5.2 Austrian law
- •12.5.3 Conclusions
- •12.6 Defective issues
- •12.7 Summary of the analysis
- •13 Evidence of convergence?
- •16 Legal doctrine and market infrastructure
- •17 Implications for convergence
- •17.1 UNIDROIT draft Convention
- •17.2 EU Legal Certainty Project
- •Select bibliography
- •Index
78 E N G L I S H L A W
members. Since in USR 2001, reg. 24 and also in USR 2001, reg. 20 both registers are referred to as ‘register of members’, USR 2001 reg. 24 applies to both the issuer and the Operator register of members. Both the issuer and the CREST register of members constitute prima facie evidence of title to the shares and of other information contained in them by virtue of USR 2001.
USR 2001 has transformed the CREST records into the shareholder register. This upgrade is, however, subject to one important qualification. CREST is required only to maintain the register of uncertificated shares. Any records CREST may keep of certificated shares do not constitute prima facie evidence. The upgrade effected by USR 2001 privileges only CREST records of uncertificated securities.
USR 2001 has also downgraded the legal status of the register maintained by the company. The particulars entered on the issuer register of members are not considered prima facie evidence if they are inconsistent with the Operator register of members.39 Since CREST is required by the USR 2001 to keep records only of uncertificated shares, this downgrade does not apply to certificated shares. As a result, a record on the issuer’s register of members remains prima facie evidence of certificated shares, but has lost this quality in so far as the records of uncertificated shares are inconsistent with the CREST register. USR 2001 has reduced the evidential quality of the issuer records in that respect.
3.4.2.2 Effect of entries on registers: public sector securities, corporate securities other than shares
For public sector securities there now exists a CREST ‘register of public sector securities’ and ‘records of uncertificated public sector securities’ maintained by the Bank of England, the issuing local authority, or its registrar.40 The latter records, however, do not enjoy special evidential status: only the CREST register constitutes prima facie evidence of any
matters which are by USR 2001 directed or authorised to be inserted in it.41
For corporate securities other than shares, the issuer is no longer required to maintain a register of securities held in uncertificated form, but shall instead keep a record of entries made on the Operator register.42 The issuer record of uncertificated securities does not
39 USR 2001, reg. 24 (2). 40 USR 2001, reg. 21 (1–3). 41 USR 2001, reg. 24 (5). 42 USR 2001, reg. 22 (2) b.
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constitute prima facie evidence. Instead, the Operator keeps the register of uncertificated corporate securities. The Operator register provides for evidence in the same way as a register maintained by the issuer would provide for evidence.43 USR 2001 did not interfere with any duty the issuer of corporate securities may be under to keep a register of certificated corporate securities; insofar as an issuer is under such a duty, this duty continues to exist.
3.4.2.3 Conclusions
USR 2001 upgraded the CREST records of uncertificated shares, of uncertificated public sector securities and of uncertificated corporate securities other than shares, to prima facie evidence. At the same time it downgraded the records maintained by the issuers in relation to uncertificated shares and, to an even greater extent, in relation to uncertificated corporate securities other than shares. USR 2001 has not interfered with the rules governing registers of certificated securities.
This revised transfer regime shows strong evidence of the original common law transfer procedures. The 2001 reforms serve as an example of how existing legal doctrine determines the content of the rules that will be implemented when a project of law reform is carried out: even when the aim of the law reform project is to cause a legal system to converge with what is perceived to be an international standard, national legal doctrine determines the content of the new legal rules.
This English law reform project also illustrates the nature of the influence exercised by incumbent market infrastructure providers. Keeping in line with existing legal doctrine, England decided to adopt a new rule whereby the CREST records would constitute the register of holders of securities. The proposal, however, did not carry this reform to its logical conclusion: it did not abolish the need for registers or records kept by or on behalf of issuers. USR 2001 preserves the decentralised registers for all certificated securities and also for uncertificated shares. Moreover, there continue to exist decentralised records of uncertificated securities other than shares. The reform proposal did not go so far as to abolish the need for issuer registers or records altogether.
In relation to shares, USR 2001 goes to pains to continue the decentralised shareholder register. To achieve this, the law is carefully drafted to accommodate a split register and to address issues arising out of
43 USR 2001, reg. 24 (6).