Equity pledge is the act of using the stocks held by "stock holders" as collateral to apply for loans from banks or provide guarantees for third-party loans. It usually occurs when shareholders are in urgent need of liquidity and When the shares cannot be liquidated.

Banks or trust companies obtain investor funds by issuing trust plans, and then lend the funds to shareholders of listed companies and collect interest. The shareholders pledge their equity to the trust company as a guarantee. In layman's terms, it means that you can hand over the equity you have the right to dispose of as collateral to guarantee loans and other financing activities.

Extended information

Legal provisions on equity pledge: According to the provisions of the "Security Law", if stocks that are transferable according to law are pledged, the pledger and the pledgee shall enter into a written contract and apply for pledge registration with the securities registration agency. The pledge contract shall take effect from the date of registration. If the shares of a limited liability company are pledged, the relevant provisions of the Company Law on share transfer shall apply. The pledge contract shall take effect from the date when the shares are pledged and recorded in the shareholder register.

According to the provisions of the Property Law, if equity is pledged, the parties shall enter into a written contract. If the equity registered with the securities registration and clearing agency is pledged, the pledge right is established when the securities registration and clearing agency handles the pledge registration; if other equity is pledged, the pledge right is established when the industrial and commercial administration handles the pledge registration.

The provisions of the "Property Rights Law" on the equity registration procedures for unlisted joint stock companies and limited liability companies are inconsistent with the "Guarantee Law". Since the Property Law was promulgated later, the legal practice of equity pledge shall be subject to the Property Law.

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