Companies Act 2014 section 1042

Charges taken by PLC on own shares

Section 1042 sets out the general rule that a PLC cannot take security over its own shares, and specifies the limited exceptions where such security arrangements are permitted.

• Any mortgage, charge, lien or pledge taken by a PLC over its own shares is void unless it falls within one of the permitted exceptions.
• A PLC may hold a mortgage or charge over its own partly paid shares to the extent of any amount still payable on those shares.
• A PLC whose ordinary business involves money lending, providing credit, or hiring out goods under hire-purchase agreements may take security over its own shares where this arises from a transaction in the ordinary course of that business.
• Where a company re-registers as a PLC, any mortgage or charge over its own shares that was already in existence immediately before the re-registration application remains valid.