4.7 MORTGAGING AND CHARGING OF SHARES
Mortgaging of shares
– Mortgaging of shares refers to the process of creating a mortgage over shares to secure a loan or debt.
– The shareholder who owns the shares pledges them as collateral to a lender or creditor.
By creating a mortgage, the shareholder grants the lender a security interest in the shares, and in the event of default, the lender may have the right to sell the shares to recover the outstanding debt.
– The terms and conditions of the mortgage, including the repayment terms, interest rates, and events of default, are usually outlined in a mortgage agreement or deed.
Charging of shares
– Charging of shares is a similar concept to mortgaging and involves using shares as security for a debt or obligation.
– When shares are charged, the shareholder grants a charge or lien over the shares to the creditor.
The charge gives the creditor the right to sell the shares or enforce the security interest if the debtor fails to fulfill their obligations.
– The terms and conditions of the charge, such as the amount secured, repayment terms, and enforcement procedures, are typically set out in a charge agreement or deed.