Stélio Tauzene • Head of the Legal and Credit Operations Department at FNB Mozambique
In this article, we will discuss another type of pledge that can be used as a credit guarantee – the pledge of shareholdings in commercial companies.
This type of pledge has great economic relevance, especially in the context of financing. Shareholdings, particularly shares, are high-value assets in the assets of a business entity and are particularly suitable for use as collateral, provided they have a significant economic value. This value is even more relevant when the shares are traded on organised markets such as stock exchanges. The combination of economic value and liquidity makes it possible to quickly convert these assets into cash, which meets the needs of creditors when they are offered as financing collateral, guaranteeing the discharge of debts.
It is now common in commercial transactions for a company to offer as collateral (pledge) shares it holds in a particular company or even in another company in which it has a stake. The proposal or offer to pledge shareholdings must be made expressly, which is justified given that it aims to guarantee the interests of creditors in the banking and commercial sector. It must always be in writing and require the express consent of the shareholders, except in cases where the articles of association or other acts of the proposer have conferred powers on certain persons to materialise the pledge.
Therefore, in order to give rise to the pledge of shareholdings, it is necessary, in addition to the delivery of the title, in general terms, also the agreement itself between the parties, in which the type of shareholdings, the term, the amount of the financing and the respective coverage of the pledged asset, among other aspects, must be set out in detail. The effects take effect from the date of the application for registration with the issuer and, in these cases, the existence of a prior agreement is presupposed.
With regard to the social rights of shareholdings, in the case of shares or quotas, it is recommended that the criteria for utilising or exercising the social rights that comprise them be established. As for the obligations towards the company arising from them, everything remains unchanged and the partner must always be responsible for their fulfilment.
It is common in commercial transactions for a particular company to offer shareholdings as collateral
For example, as far as voting rights are concerned, as a general rule this falls to the shareholder or holder of the shareholding. However, there are cases in which, by agreement, this responsibility falls to the creditor (Bank), the holder of the pledged right, who may substitute himself for the holder of the shareholding, thus becoming entitled to vote.
If the terms of the exercise of voting rights have not been agreed, this will be governed by the principle of good faith, enlightened by the purpose of the contract. The aim is thus to create a privileged or controlling position for the creditor over an asset of the debtor (or of a third party), allowing him to be satisfied preferentially by the amount resulting from its sale. In this way, the collateral proposed by the debtor becomes more attractive to the creditor and, in turn, increases the likelihood of approval of the requested credit, since the creditor’s main interest is based on the consistency and value of the shareholding as a tradable asset.
It should be emphasised that pledging shareholdings does not make the creditor a shareholder, but it does give them an additional instrument to protect their position and the economic value of the asset, which they can use if the debtor fails to fulfil their obligations. This should be the prevailing spirit, as well as the limits on the exercise of voting rights by the secured party.
It should be emphasised that even in cases where the matters dealt with at the general meeting do not concern the specific interest of the creditor (Bank), the latter must act in accordance with the instructions of the other party (partner), which means voting in the direction defined by him.
In turn, if the holder of the shareholding exercises the right to vote, he must always respect the creditor’s interest in maintaining the consistency of the guarantee, and must refrain from carrying out acts that could diminish the value of the guarantee as the object of the business pledge, since such acts could lead the creditor to demand immediate fulfilment of the guaranteed obligation, and could result in damages of an unlawful and culpable nature.
To summarise, the pledge of shareholdings is, in itself, one of the types of credit guarantee that companies/partners can present whenever they are faced with a request for financing in which the banks require the presentation of collateral. After being analysed by the Bank and taking the above aspects into account, the proposal to pledge shareholdings can be approved and used as collateral for a given loan.
The encumbrance created ceases as soon as the loan covered by the guarantee is paid off. In other words, once the debt has been paid off, the creditor withdraws the pledge on the shareholdings, returning them free of any encumbrance.
