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Share Mortgage Agreement Template for India

A comprehensive security document governed by Indian law that creates a mortgage over shares owned by the mortgagor in favor of the mortgagee. The agreement details the terms and conditions of the share mortgage, including the creation and perfection of the security interest, rights and obligations of parties, enforcement mechanisms, and regulatory compliance requirements. It incorporates provisions from various Indian legislations including the Companies Act 2013, Securities Contracts (Regulation) Act 1956, and applicable SEBI regulations, ensuring compliance with both corporate and securities laws while providing robust security rights to the mortgagee.

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What is a Share Mortgage Agreement?

The Share Mortgage Agreement is a crucial security document used in Indian financing transactions where shares are offered as collateral for securing financial obligations. This agreement is commonly utilized in corporate lending, acquisition financing, project finance, and general corporate finance transactions where a lender requires security over shares of a company. The document needs to comply with Indian corporate law, securities regulations, and banking norms, particularly the Companies Act 2013 and SEBI regulations if listed shares are involved. It contains detailed provisions regarding the creation and perfection of the security interest, maintenance of security cover, voting rights, dividend arrangements, and enforcement mechanisms. The agreement becomes particularly important in scenarios involving large corporate borrowings, restructuring transactions, or when shares of valuable subsidiaries or investments are being offered as security.

What sections should be included in a Share Mortgage Agreement?

1. Parties: Details of the Mortgagor (share owner), Mortgagee (lender/security holder), and the Company whose shares are being mortgaged

2. Background: Context of the transaction, reference to principal facility/loan agreement, and purpose of the share mortgage

3. Definitions and Interpretation: Definitions of key terms, interpretation rules, and construction of the agreement

4. Creation of Mortgage: Express provisions creating the mortgage over shares, including the nature and extent of the security interest

5. Secured Obligations: Description of the obligations secured by the share mortgage, including principal amounts, interest, and other secured liabilities

6. Representations and Warranties: Mortgagor's representations regarding ownership, authority, and absence of encumbrances on shares

7. Covenants: Positive and negative obligations of the Mortgagor regarding the mortgaged shares

8. Rights and Obligations: Respective rights and obligations of the Mortgagor and Mortgagee during the security period

9. Events of Default: Circumstances constituting default and triggering enforcement rights

10. Enforcement: Mortgagee's rights and procedures for enforcing the security in case of default

11. Power of Attorney: Appointment of Mortgagee as attorney for specific security-related actions

12. Notices: Process and details for serving notices under the agreement

13. Governing Law and Jurisdiction: Applicable law and courts having jurisdiction over disputes

14. Miscellaneous: Standard boilerplate provisions including amendments, waivers, severability, etc.

What sections are optional to include in a Share Mortgage Agreement?

1. Depository Participant Instructions: Required when shares are in dematerialized form, detailing instructions for creating security interest through the depository system

2. Regulatory Compliance: Required for listed company shares, addressing compliance with SEBI regulations and stock exchange requirements

3. Share Transfer Instructions: Required for physical shares, detailing the process of transfer and registration of shares

4. Dividend and Voting Rights: Optional section specifying arrangements for exercise of voting rights and receipt of dividends during the security period

5. Security Margin Maintenance: Required in cases where minimum security value must be maintained, including top-up provisions

6. Insurance: Optional section for cases where insurance of the secured assets is required

7. Further Assurance: Optional detailed provisions regarding additional actions required to perfect the security

What schedules should be included in a Share Mortgage Agreement?

1. Schedule 1 - Details of Mortgaged Shares: List of shares being mortgaged, including share certificate numbers, distinctive numbers, and number of shares

2. Schedule 2 - Principal Facility Agreement: Details of the underlying loan or facility agreement being secured

3. Schedule 3 - Form of Notice to Company: Template notice to be sent to the company regarding creation of share mortgage

4. Schedule 4 - Form of Power of Attorney: Detailed power of attorney in favor of the Mortgagee

5. Schedule 5 - Depository Instructions: Forms and instructions for creating pledge in the depository system (for dematerialized shares)

6. Schedule 6 - Corporate Authorizations: List of corporate approvals obtained for creation of the mortgage

7. Appendix A - Share Certificates: Copies of share certificates (for physical shares)

8. Appendix B - Board Resolutions: Copies of relevant board resolutions of the Mortgagor

Authors

Alex Denne

Advisor @ 蜜桃传媒AI | 3 x UCL-Certified in Contract Law & Drafting | 4+ Years Managing 1M+ Legal Documents

Jurisdiction

India

Document Type

Loan Agreement

Sector

Banking

Cost

Free to use

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