A general security agreement is a common form of security over shares, under which the security provider usually grants security over all its assets (including any company shares it owns). Alternatively, a security provider can grant a specific security agreement to provide security specifically over company shares.
Taking and enforcement of charges over shares in English…
- Act in good faith.
- Take reasonable steps to obtain a proper price for the asset.
- Obtain the best price reasonably obtainable.
- Act with reasonable care and skill.
- Act fairly towards the chargor.
By taking a mortgage over shares (often referred to as a share charge) as part of the overall security package for corporate debt, a lender has, in an enforcement scenario, the option to sell the assets of the company that are charged under the general security arrangements or, pursuant to the share charge, can sell …
The deliverables referred to above serve to make the process of taking possession as streamlined and efficient as possible. Foreclosure is only available to security takers who hold legal title to the shares and is the most draconian, and therefore the least utilised, method of enforcement.
When can a security interest be enforced?
§ 9-203. ATTACHMENT AND ENFORCEABILITY OF SECURITY INTEREST; PROCEEDS; SUPPORTING OBLIGATIONS; FORMAL REQUISITES. (a) [Attachment.] A security interest attaches to collateral when it becomes enforceable against the debtor with respect to the collateral, unless an agreement expressly postpones the time of attachment.
In simple words, pledging of shares means taking loans against the shares that one holds. Shares are considered assets. Pledging of shares is a way for the promoters of a company to get loans to meet their business or personal requirements by keeping their shares as collateral to lenders.
A share charge does not need to be registered under the Bills of Sale Act 1878 if the chargor is an individual, as that statute expressly excludes security over interests in the capital or property of incorporated or joint stock companies or any choses in action (see Practice note, Security bills of sale).
There can be a pledge of shares in India, and there can also be a mortgage of shares; whether it is one or the other will depend on the intention of the parties & the circumstances of each case.
Whether an individual borrower with a share portfolio could create a floating charge over those shares and have freedom to trade remains a relatively untested area of law and so a floating charge over shares offered by an individual is unlikely to represent good and valuable security from a lender’s perspective.
Who is the Chargor?
Related Content. The entity who grants a charge in favour of a chargee.
As an example, let’s say you need $100,000 for a home loan deposit and $50,000 of your savings is tied up in shares. … The deposit for a home loan needs to be in cash, or held as equity in another property. This allows the lender to limit their exposure to risk.