Equity Pledge Agreement

Equity Pledge Agreement Template for India

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Key Requirements PROMPT example:

"I need an Equity Pledge Agreement for pledging 25% shares of my private limited technology company to secure a business loan of INR 50 million from ABC Bank, with the pledge to be effective from March 1, 2025."

Document background

The Equity Pledge Agreement is a crucial security document used in Indian financing transactions where shares or other equity securities serve as collateral. This agreement becomes necessary when a borrower (pledgor) needs to secure financial obligations by pledging their shareholding in a company to a lender (pledgee). The document must comply with multiple Indian regulations including the Companies Act 2013, SEBI regulations (for listed shares), and the Depositories Act 1996. It includes detailed provisions about the pledge creation, maintenance, rights over dividends and voting, enforcement mechanisms, and regulatory compliance requirements. The agreement is particularly important in corporate lending, acquisition financing, and general corporate finance transactions where equity-based security is required.

Suggested Sections

1. Parties: Identifies the pledgor, pledgee, and the company whose shares are being pledged

2. Background: Sets out the context of the pledge arrangement and the underlying obligation being secured

3. Definitions: Defines key terms used throughout the agreement

4. Pledge and Security: Details the creation of the pledge, description of pledged shares, and security being created

5. Pledgor Representations and Warranties: Statements about ownership, authority to pledge, and absence of encumbrances

6. Covenants of the Pledgor: Ongoing obligations of the pledgor regarding the pledged shares

7. Rights of the Pledgee: Powers and rights granted to the pledgee over the pledged shares

8. Events of Default: Circumstances that constitute default under the agreement

9. Enforcement: Procedures and rights for enforcing the pledge upon default

10. Term and Termination: Duration of the pledge and conditions for termination

11. Notices: Communication procedures between parties

12. Governing Law and Jurisdiction: Specifies Indian law as governing law and jurisdiction for disputes

13. Miscellaneous: Standard boilerplate provisions including amendments, waivers, and severability

Optional Sections

1. Dividend Rights: Specifies treatment of dividends on pledged shares - include when dividend rights need specific allocation

2. Voting Rights: Addresses exercise of voting rights during pledge period - include when voting arrangements need specification

3. Further Assurance: Additional actions parties may need to take - include in complex transactions

4. Power of Attorney: Grants pledgee power to act on pledgor's behalf - include when required for enforcement

5. Tax Provisions: Addresses tax implications and responsibilities - include when significant tax considerations exist

6. Regulatory Compliance: Additional provisions for regulatory requirements - include for listed companies

7. Top-up and Margin Maintenance: Provisions for maintaining security value - include when share price volatility is a concern

Suggested Schedules

1. Schedule 1 - Details of Pledged Shares: Comprehensive list of shares being pledged including certificate numbers, distinctive numbers, and other identifying details

2. Schedule 2 - Form of Notice to Company: Template for notifying the company about the pledge creation

3. Schedule 3 - Pledge Recording Forms: Required forms for recording the pledge with depositories/registrars

4. Schedule 4 - Secured Obligations: Details of the underlying obligations secured by the pledge

5. Schedule 5 - Powers of Attorney: Format of power of attorney if required for pledge enforcement

6. Appendix A - Board Resolutions: Relevant corporate authorizations from pledgor and/or company

7. Appendix B - Shareholders' Resolutions: Any required shareholder approvals for the pledge

Authors

Alex Denne

Head of Growth (Open Source Law) @ ��Ƶ | 3 x UCL-Certified in Contract Law & Drafting | 4+ Years Managing 1M+ Legal Documents | Serial Founder & Legal AI Author

alex.den.21@genieai.co

Relevant legal definitions

Clauses

Relevant Industries

Banking & Financial Services

Investment Banking

Private Equity

Corporate Finance

Asset Management

Insurance

Real Estate

Manufacturing

Technology

Infrastructure

Healthcare

Retail

Relevant Teams

Legal

Finance

Corporate Secretarial

Compliance

Risk Management

Treasury

Corporate Finance

Investment Banking

Credit

Operations

Relevant Roles

Chief Financial Officer

Legal Counsel

Corporate Lawyer

Finance Director

Investment Banker

Company Secretary

Compliance Officer

Risk Manager

Treasury Manager

Corporate Finance Manager

Investment Manager

Security Trustee

Portfolio Manager

Credit Officer

Transaction Manager

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Authors

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