As an investor, among the many factors to check before investing in a company, stock seizure is an important element to consider. A company with mortgaged shares is a concern of shareholders. In its latest financial stability report, even the Reserve Bank of India (RBI) recently raised concerns about pledging shares, given the size of retail investors` assets and the increase or decline in market scenarios. In India, of the more than 5,000 listed companies, the promoters of 4274 companies had mortgaged all or part of their shares, according to an analysis by the Securities and Exchange Board of India. This was also set out in the RBI`s financial stability report. Therefore, understanding Share Pledge becomes an important factor. (ii) The transfer of shares, if pledged, is in accordance with the current IDI policy. Rule 29 does not apply to Scheduled`s commercial banks or public financial institutions as collateral holders in connection with the pledging of debt insurance shares in the course of normal operations. The main agreement is between the borrower (usually the company) and the lender (bank or NBFC). There is a guarantee contract between the borrowing company and the project promoter. Only when the borrower approves and approves the share seizure agreement does the collateral agreement come into effect.
In principle, when the promoter negotiates a loan from the lender, he does so on behalf of the company as an agent of the lender, but does so in his own personal capacity. On the other hand, the execution of a written contract for the seizure of shares means the justification of pledging the shares for those who do not have share certificates. Since the aforementioned instances can be included in agreements, the pledge creditor, as the rightful owner of the shares, must be very careful when signing the share loan agreement, because if they do not comply with their obligations and are late, banks can, as holders of pledges, impose pledging and sell all or part of the mortgaged shares or part thereof. as well as the use of certain rights or all rights granted to them in accordance with the provisions of the share seizure contract. Unlike a normal agreement, the share seizure agreement exists between three parties: in accordance with Article 955 of the TCL, the conditions for the creation of share seizures for shares for which quotas have been issued and shares without quotas are different. Therefore, in order for the pledge to be properly established through the shares using share certificates, the pawnshop transfers the instrument to the bondor; and the performance of an action deposit contract would not constitute the justification for pledging, but only the obligations to be fulfilled by both parties. (iii) the lender and the borrower have properly executed the loan agreement and if the lenders sell the mortgaged shares on the open market, the share price continues to fall. In addition, the sale of shares by lenders on the open market also changes the company`s participation model. In most cases, even promoters lose their share and have no or less voting rights in crucial business of the company. . . .