Pledging of share for loan purpose

[Bidu Bhusan Dash]

Dear All,

Can a Private limited Company avail loan from any finance Company/any Bank by pledging equity shares of any share holders of the Company. ?

Regards

Bidu 

[Jalpa H. Salvi]

Dear Bidu,

 

I have seen a case wherein the Directors of a private limited company had pledged their shares to avail a loan from a Bank. So, In case of the Shareholders’ shares would be pledged for availing a loan, the shareholders will have to give a pledge request to DP for pledging of their shares and the same wd be transmitted to the Lender Bank through their DP for Confirmation.

 

For the Pledge of Shares, the Shares are required to be in the Demat form.

 

Members views solicited.

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Regards,

 

Jalpa H. Salvi

B.Com, ACS, LL.B.
09821431810

09869691458

[komal kavedia]

Yes....i have dealt with the same case long back. The Pvt. Co. can avail loan by pledging the shares & same need to be rooted through DP. But, ensure that shares are in DMAT.

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Thanks & Regards,

Komal D. Kavedia

B.Com, ACS, LL.B. (Gen.)
Cell No.: 09869112996

[Bidu Bhusan Dash]

Absolutely right !, If the shares of the private company are not in Demat mode then can it avail loan from any NBFC Company ?

Regards

Bidu

[komal kavedia]

Dear Bidu,

 

So in that case...you need to comply with NBFC regulations & proceedures listed on RBI site.

 

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Thanks & Regards,

Komal D. Kavedia

B.Com, ACS, LL.B. (Gen.)
Cell No.: 09869112996

Regards

Bidu

[Bidu Bhusan Dash]

Dear Komal,

Is there anything like proportionate of shares to be pledged on certain amount of loan, As for example: suppose X, a private limited Company requires of loan lets say, Rs.20.00 Crores , then how much equity shares has to be pledged ya any amount of shares can be pledged ya depends upon any other thing   ?

Regards

Bidu

[ekta kathuria]

Is it necessary to have shares in demat mode, why physically shares can't be pledged.

 

Pls reply.

 

 

Regards
Ekta

Regards

Bidu

[komal kavedia]

Dear Bidu,

 

See..in the Sanction Letter from bank..in their terms & conditions they usually mention so much of % need to be pledged...so proportionately you can pledge them on a proportionate basis.

 

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Thanks & Regards,

Komal D. Kavedia

B.Com, ACS, LL.B. (Gen.)
Cell No.: 09869112996

Regards

Bidu

[Bidu Bhusan Dash]

Thanks Komal !

[Jalpa H. Salvi]

 

 

Dear Bidu,

 

The no. of shares you have to pledge will depend upon the amount of loan you wsh to avail .I mean the value of the shares to be pledged shud be more than the amount of loan you wsh to avail. I don’t thnk it is on sm proportionate basis or smthn lik that.

 

In case of listed companies, the market value of shares being pledged is mentioned which is anytime more than the amount you are availing(if the shares are the only property which is being charged)

 

But in case of a private limited companyit may be on the face value or on a fair mkt value arrived at by a CA (as per mutually agreed btwn the lender and the borrower)

On Fri, Jul 8, 2011 at 4:05 PM, Bidu Bhusan Dash <bidub...@gmail.com> wrote:

Thanks Komal !

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[komal kavedia]

Your Welcome...!!!

 

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Thanks & Regards,

Komal D. Kavedia

B.Com, ACS, LL.B. (Gen.)
Cell No.: 09869112996

On Fri, Jul 8, 2011 at 4:05 PM, Bidu Bhusan Dash <bidub...@gmail.com> wrote:

Thanks Komal !

[ekta kathuria]

Is it necessary to have shares in demat mode, why physically shares can't be pledged.
 
Pls reply.

[Bidu Bhusan Dash]

Dear Komal/Jalpa,

Now there is a contradiction, one opine is proportionately shares can pledge on a proportionate basis and other is no. of shares to be pledge will depend upon the amount of loan  wish to avail(their is no proportion)

Which one is correct !

Regards

Bidu

[Bidu Bhusan Dash]

I think the shares in Demat mode is more authentic than physical mode. once the shares has been dematerialized you can't do any further pledging on that but in case of physical share certificate their is a chance of doing that.

Otherwise I dont think their is any provision relating to that

Other members views are solicited

Regards

Bidu

[Jalpa H. Salvi]

Dear Bidu, 

It depends upon the Lender how it sanctions the loan facility. Normally the Loan amount sanctioned depends upon the Price considered by the Lender for calculation of value of shares.

members views solicited!!!

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[Jalpa H. Salvi]

Dear Ekta,

 

It is not mandatory for the shares to be in Demat form in case of a pledge but in our case they insisted on the same as if the shares are in Demat form, it is more convenient. And the Loan amount that would be sanctioned also depends upon the form of the shares whether they are in physical or demat. More preference is given to Demat form.

[komal kavedia]

Dear Bidu,

 

As I mentioned, generally Bank decides & mentions in its Terms & Conditions, accordingly you have to follow.

 

Regards,

Komal Kavedia