The historic starting point

English law does not classify securities as tangibles but as intangibles: they are choses in action. Historically, choses in action constituted a personal obligation and could therefore not be transferred by the creditor by way of assignment. A transfer was, however, possible with the consent of the debtor. The debtor would agree to terminate the relationship with the transferor and to enter into a new relationship with the transferee. This method of transferring debt has come to be referred to in English law as novation.

Before incorporation became freely available, businesses were set up in the form of deed of settlement companies. The deeds setting up the company usually contained a rule enabling shareholders to transfer their interest by deed. Shares in companies that had a clause to that effect were considered transferable even though choses in action had not yet become generally transferable. It is possible that the rules on transfers of shares and of other securities, which originate from that time, were shaped around the idea that a transfer involves the termination of one obligation and the creation of a new one.

Moreover, the rules on share transfers developed at a time when companies such as the deed of settlement company of the late eighteenth and early nineteenth century resembled modern partnerships more than they resembled modern companies. The default position in partnership law is that a new partner may be introduced only with the consent of all existing partners.