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What is a Share Pledge, and What Does it Involve?
In the case of a share pledge, the share certificate is not pledged property but what is pledged is the right to that share. A share certificate is only a certificate that certifies the right over that share to the owner.
There are specific requirements for the share pledge as prescribed under the Civil and Commercial Code (“CCC”), including:
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- The share certificate must deliver to the pledgee, and the shareholder must notify the company in writing. Otherwise, the pledge is void (Section 750 of CCC).
- The creation of the pledge must be registered in the company’s share registration. Otherwise, such a pledge cannot be set up against the company or other third-party persons (Section 753 of CCC). In other words, the pledgee cannot request for dividend payment, or if a third party has legally processed such shares, the pledgee cannot claim its right against him.
Please do not hesitate to contact us if you have any questions at [email protected] View the original article on the FRANK Legal & Tax website