What Is an Equity Mortgage Release?
Equity release pledge is the release of equity pledge. Equity pledge is the act of providing security for one's or others' debts by holding the company's equity (for a limited liability company, often referred to as a capital pledge or a share pledge, and for a stock limited liability company, a stock pledge or a share pledge). .
Equity release
Right!
- Chinese name
- Equity release
- Foreign name
- Equity pledge
- Equity release pledge is the release of equity pledge. Equity pledge is the act of providing security for one's or others' debts by holding the company's equity (for a limited liability company, often referred to as a capital pledge or a share pledge, and for a stock limited liability company, a stock pledge or a share pledge). .
- The subject matter of equity pledge is equity. For a right to become the subject of pledge, the following conditions must be met: first, it must be punishable by the pledgor, second, it must be property, and third, it must be transferable. At present, although there has been controversy over the nature of equity in China's theoretical circles and the definition of its concept has not been unified, it is an indisputable fact that equity has both the aforementioned property and transferability attributes, so equity is a kind of Eligible subject matter.
- Article 17 of Article 75 of the Guarantee Law stipulates that "shares and shares that can be transferred according to law" can be set up as a pledge. It can be seen that not all shares and stocks can be transferred, so to the extent that the law restricts free transfer, those pledged with equity should be restricted, which requires that equity pledges must comply with
- The most fundamental reason why equity can be used for pledge is the property and value of equity. However, the price of equity in actual operation (especially the value of equity reflected in the stock) is highly volatile because it is mainly affected by factors such as market supply and demand conditions, the level of market interest rates, and the duration of equity pledges. Therefore, the value of equity is an unstable expected value. The value of equity is extremely susceptible to changes in the company's conditions and the market. Especially in the case of pledged stocks, the value of stocks is often changing, which makes it difficult to grasp the strength of equity pledge guarantees. For pledgees, The expected value often runs counter to the actual situation, so that the pledgee bears the risk that the creditor's rights are not adequately guaranteed.
- Article 26 of the "People's Bank Securities Pledged Loan Measures" jointly issued by the People's Bank of China and the China Securities Regulatory Commission in February 2000 stipulates that: in order to control the risks caused by fluctuations in the value of stocks, a warning line and a short position line are specially established. When the ratio of the pledged stock market to the principal of the loan drops to the liquidation line, the lender shall sell the pledged shares in a timely manner, and the proceeds shall be used to repay principal and interest, and the remaining balance shall be returned to the borrower, and the shortfall shall be paid by the borrower. As for China's security law, although there is no direct provision on the change in the value of the right when the right is pledged, it does provide for the reduction of the value of collateral and pledged property. Article 51 of the Guarantee Law provides that if the conduct of the mortgagor is sufficient to reduce the value of the collateral, the mortgagee has the right to require the mortgagor to restore the value of the collateral or provide a guarantee equivalent to the reduced value. Article 70 of the Guarantee Law also stipulates that if the pledge is likely to be damaged or its value is significantly reduced, which is sufficient to endanger the rights of the pledgee, the pledgee may request the pledgee to provide corresponding guarantees. If the pledger does not provide it, the pledgee may auction or sell the pledged property, and agree with the pledgor to use the auctioned or sold price to pay off the guaranteed creditor's rights in advance or withdraw to the third party agreed by the pledgor.
- Nowadays, most small and medium-sized enterprises do not have so many physical assets for mortgage loans, so in order to help these SMEs to obtain cash flow, local governments have proposed to use corporate equity for financing. The significance of equity pledge financing is to match the first and second editions. The market establishes the third board market, and then establishes a multi-level capital market. The premise of equity pledge financing is to register for equity custody at the equity exchange where the enterprise is registered. The benefit of equity registration and custody is that it regulates the capital operation of the enterprise for the country and prevents the loss of state-owned assets. The benefit for the enterprise is that it can help the enterprise to improve its credibility, and then facilitate the investment and financing of the enterprise. It provides the basis; it is mainly to prevent shady transactions and protect the interests of shareholders. Taking the Shenyang United Property Exchange as an example, the following information is required for equity custody: a power of attorney for a legal person, a description of the company's basic situation, a resolution of the shareholders' meeting, a register of shareholders, a capital contribution certificate, a copy of the business license, a copy of the identity card, and a company charter , Application letter of commitment, etc. The cost is two thousandths of the company's total share capital, and the equity pledge fee is about two thousandths of the value of the pledged equity.