A pledge which is also known as bailment is a process in which a debtor puts his property with the creditor as insurance or guaranty for the return of the payment. The pledge usually includes real estate property and if the debtor can’t repay his debt, the creditor has the right to foreclose and sale the collateral or pledged property to collect the amount of debt. Unlike past, now people can also pledge their shares and stocks in a corporation as guaranty or insurance for the return of their debt.
An agreement or contract that is written between a debtor and a creditor in order to pledge shares and stocks is known as the pledge contract for shares and stocks. In this contract, the debtor agrees to transfer the ownership of the shares or stocks to the creditor in case he can’t repay his debt or goes bankrupt. In this situation when the ownership rights of the shares or stocks are transferred to the creditor by this contract, the creditor has all rights to either keep or sale the shares and stocks to collect his debt.
Most people assume that when you have money, you can solve any problem but in reality, when there is money, there are always some risks and possible disputes that can raise between two parties i.e. debtor and creditor. This is why when a creditor loans some money to a debtor, he needs some kind of guaranty or insurance to make sure that the debtor will pay his debt back and if he can’t the creditor has the opportunity to use the insurance and collect his debt. Usually in these matters, the debtor introduces a third party as the guarantor or pledges his property with the creditor and allows him to collect his debt if he can’t pay back the debt either by holding the guarantor responsible or by selling the pledged property.
But, if the debtor doesn’t have any guarantor or personal property to pledge, he can also pledge his shares and stocks with the creditor. In this situation, the creditor has to verify if the shares or stocks has good value so that he can sell them and collect his debt and the selling rights are transferred to the creditor by the pledge contract for shares or stocks. Within this agreement, the debtor states that he will pay back his debt and in case he can’t, the creditor has the right to sale the pledged shares and stocks and in order to collect his debt.
- Name of the debtor with address
- Name of the creditor with address
- Date when the loan was received by the debtor
- Details of the loan with payment schedule, duration to repay in full and periodic installments
- Details of the shares and stocks that the debtor wants to pledge as guaranty
- Signature of the debtor with sworn statement that if he can’t repay the debt, the creditor has the right to sale the pledged shares and stocks
Here is preview of a Free Sample Pledge Contract Template for Share of Stock created as fill-able PDF format,
Here is download link for this Pledge Contract Template for Share of Stock,