Securities within the realm of private law : a theoretical and practical analysis of the legal nature of shares

Meissner, Ilke Ingrid (2019-04)

Thesis (LLD)--Stellenbosch University, 2019.

Thesis

ENGLISH ABSTRACT : This thesis provides practical and theoretical perspectives on the legal nature of shares. In South Africa and beyond, shares have undergone significant transformation over the last decades. They are held and transferred through a complex net of intermediaries. While commercial practice and financial markets have devised efficient and pragmatic holding and transfer mechanisms, the changes brought about by computerisation and a pervasive model of systemic intermediation have unsettled the existing consensus on the legal, conceptual underpinning of shares. The thesis therefore aims to provide clarity on the legal nature of holding mechanisms, the legal nature of transfer mechanisms and the legal nature of shares viewed more abstractly within the context of the taxonomy of private law. The thesis approaches the first two questions historically and comparatively to show how the legal understanding of holding and transfer mechanisms has changed. While the nature of intermediation has changed dramatically, the thesis shows that the legal concepts and mechanisms underlying the holding of shares predominantly have proved to be sufficiently adaptable. This cannot be said to be the case when considering the legal nature of transfer mechanisms. Traditional transfer mechanisms, such as assignment, negotiation and delivery have largely been replaced by mechanical, account-based transfer ones. On this basis, the thesis suggests that the continued application of the principles of cession to a South African analysis of transfer should be scrutinised in a more fundamental fashion. To complement the discussion, it is shown that conceptual alternatives to traditional doctrinal thinking can be found in a functional approach to legal reasoning and in a procedural “law of accounts” that synthesises the common characteristics shared by many rights held on accounts. Moreover, two theoretical models are considered that shed light on the question whether systemic intermediation leads to the creation of new and multiple assets which derive from a share and are held by lower-tier intermediaries and ultimate investors in place of the share itself. This approach, made popular by the introduction of “securities entitlements” by Article 8 of the UCC and also reflected in the notion of beneficial interests of a trust in English law, can be explained as establishing rights against the rights of a higher-tier intermediary. These rights function as assets. On the basis of the burdening of rights model, borrowed from German law, the application of the rights-against-rights approach to South African law is rejected, however. The thesis concludes that South African law evidences neither a multiplication of assets nor a division of ownership in relation to intermediaries. Lastly, the thesis considers the assertion that shares are, or should be, property or “property-like” to provide adequate protection to investors. An enquiry into the legal nature of shares is the overarching theme of the thesis that draws together its different parts. The thesis proposes an explanatory model that can be used to determine whether and under which circumstances obligations can have absolute effect in relation to third parties. It asserts that shares are obligations, but that a proper evaluation of the internal sphere (the issuer-investor bond) shows that shares are simultaneously object-like. The explanatory model suggests that obligations of this kind can serve as objects of other obligations (the external sphere) which may consequently have real or limited-real effect in relation to third-parties. The model therefore narrates the interrelation between property and obligations without calling into question the well-established fact that shares are personal rights, albeit with limited real effect.

AFRIKAANSE OPSOMMING : Hierdie proefskrif verskaf praktiese en teoretiese perspektiewe op die regsaard van aandele. In Suid-Afrika en elders, het aandele die afgelope dekades beduidende veranderinge ondergaan. Aandele word gehou en oorgedra deur 'n komplekse stelsel van tussengangers (bemiddeling). Terwyl kommersiële praktyk en finansiële markte doeltreffende en pragmatiese meganismes vir die houding en oordrag van aandele ontwikkel het, het die veranderinge wat deur gerekenaariseerde stelsels en omvattende sistemiese bemiddeling tot stand gekom het, die bestaande konsensus aangaande die juridiese en konseptuele onderbou van aandele ontwrig. Die proefskrif poog om sekerheid te skep oor die regsaard van meganismes waaardeur aandele gehou word, die regsaard van oordragsmeganismes en die regsaard van aandele beskou uit die oogpunt van die sistematiek van die privaatreg. Die proefskrif benader die eerste twee vrae histories en regsvergelykend om aan te toon hoe die regasaard van aandeelhouding en oordragsmeganismes verander het. Terwyl die aard van tussengangers dramaties verander het, toon die proefskrif dat die bstaande regskonsepte en –meganismes oor die algemeen voldoende aanpasbaar was. Dieselfde kan nie gesê word van die regsaard van oordragsmeganismes nie. Tradisionele oordragsmeganismes, soos sessie, verhandeling en lewering, is grotendeels vervang deur meganiese, rekeninggebaseerde oordrag. Op grond hiervan dui die proefskrif aan dat die voortgesette toepassing van die beginsels van die sessiereg in hierdie verband in die Suid-Afrikaanse reg op meer fundamentele wyse ondersoek moet word. Om die bespreking aan te vul, word getoon dat konseptuele alternatiewe vir tradisionele regsteoretiese denke gevind kan word in 'n funksionele benadering tot juridiese analise en in 'n prosedurele "rekeningreg" wat van toepassing kan wees op meerdere regte wat op rekeninge gebaseerd is. Gegewe die vraag of sistemiese, veelvlakkige bemiddeling lei tot die vermenigvuldiging van bates wat uit 'n aandeel voortspruit en deur beleggers en hul tussengangers gehou word, word twee teoretiese modelle voorgestel. Die benadering van afsonderlike regte of bates het gangbaar geword met die erkenning van "securities entitlements" in Artikel 8 van die UCC en word ook weerspieël in die idee van “beneficial interests”, wat voortspruit uit die Engelse trustreg. Na aanleiding van op 'n model ontleen aan die Duitse reg, wat behels dat die primêre reg eerder beswaar word, word die Anglo-Amerikaanse benadering in hierdie proefskrif van die hand gewys. In die Suid-Afrikaanse reg lei sistemiese bemiddeling nóg tot die vermenigvuldiging van bates, nóg tot 'n verdeling van eiendomsreg. Laastens behandel die proefskrif die bewering dat aandele “eiendom” (sake) is of eiendom moet wees om beleggers voldoende te beskerm. Die regsaard van aandele is die oorkoepelende tema en onder hierdie sambreel word die verskillende afdelings van die proefskrif saamgevat. Die proefskrif stel 'n verduidelikende model voor wat gebruik kan word om vas te stel of, en onder watter omstandighede, verbintenisse absolute regswerking kan hê. Al word aandele as verbintenisse beskou, toon 'n evaluering van die interne sfeer van die verhouding tussen die uitreiker en die belegger aan dat aandele terselfdertyd eienskappe van sake vertoon. Die verduidelikende model stel voor dat sulke verpligtinge as voorwerpe van ander verpligtinge (die eksterne sfeer) kan dien, wat derhalwe absolute regswerking teenoor derde partye kan hê. Die vorbeeld van aandele word dus gebruik om die verband tussen eiendomsreg en verbintenisreg nader te beskryf, maar sonder om die goed gevestigde siening dat aandele persoonlike regte is, maar met beperkte absolute werking, oorboord te gooi.

Please refer to this item in SUNScholar by using the following persistent URL: http://hdl.handle.net/10019.1/105856
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