Business Description
Pledged shares are those shares that are transferred to the lender as contributory security by the promoters of the company to raise finances or to take a loan to meet the business conditions, i.e., working capital demand, backing for the business, or raising finances for any new systems as well as for the particular conditions. Promoters of the company pledge shares & uses shares as contributory security for getting a loan to meet the business demand or particular fund conditions. For business, the loan can be taken to meet the working capital conditions, loans for acquiring new business, starting new systems, and acquiring means. It's different for the hypothecation of means. In pledging of shares, shares will be in the promoters ’ name, but they will be transferred to the bank as security of the loan. Till prepayment of the loan, promoters can’t transfer the power of shares. It's only preferable when promoters are assured about unborn performance and flux of business, and with that flux, they can repay the loan.
