Can a corporation grant a security interest over shares it holds in another company?

Yes. Shares a corporation holds in another company are a form of personal property, specifically investment property, and the corporation can pledge or grant a security interest in those shares to a lender as collateral, much like it could with equipment, inventory, or receivables. This is common where a holding corporation's main asset is its ownership stake in an operating subsidiary or affiliate, and a lender wants security directly against that ownership interest.

How the interest is perfected depends on how the shares are held. If the shares exist as physical share certificates, a lender can perfect by taking possession of those certificates, which can offer a stronger priority position than registration alone. If the shares are registered in the corporation's name generally, or held through an intermediary account, registration under the Personal Property Security Act, and in some cases a control agreement with the relevant intermediary, are the more relevant tools. Because share pledges can interact with the target company's own share transfer restrictions or shareholders' agreement, it's worth reviewing those documents alongside the security arrangement before finalizing it.