Can a Holding Company, or Someone Else’s Shares, Secure a Stock Loan?
Yes. At Black Haven the borrower and the pledgor can be different parties, holding companies such as BVI vehicles are accepted as borrowers and pledgors, and one facility can be secured by shares from more than one pledgor. Every borrower and every pledgor completes KYC, including their beneficial owners, before the loan agreement is signed.
Can a holding company borrow against listed shares?
Yes. Large holdings are often owned through a company rather than in a founder’s or a family’s own name, and Black Haven accepts holding companies, such as BVI vehicles, as borrowers and as pledgors. The company that owns the shares can pledge them to secure its own stock loan, or to secure a loan made to another party, such as one of its shareholders. The facility is assessed against the shares themselves, as with any stock loan: their liquidity, free float and how concentrated the holding is, whichever entity holds them.
Can someone else’s shares secure your loan?
Yes. The borrower and the pledgor can be different parties, so shares owned by one person or company can secure a loan made to another. This is usually called a third-party pledge, and it covers arrangements such as a family company pledging shares for a loan to a family member, or a shareholder pledging shares for a loan to a company it owns. The pledgor is a party to the security and goes through KYC in the same way as the borrower, and the custody account into which the shares are delivered can be in the pledgor’s name.
What the pledgor gives is security over its shares; the obligation to repay sits with the borrower under the loan agreement. How far the pledgor’s exposure goes beyond the pledged shares is a question of the documents, so a pledgor should take its own advice on them.
Can more than one pledgor secure the same facility?
Yes. Black Haven accepts multiple pledgors, so a single facility can be secured by shares held by several parties, for instance where a family’s holding is split between individuals and companies. Each pledgor is a party to the security and completes KYC, including its beneficial owners. The form of the shares matters as much as who holds them: only shares held electronically in the home-market depository can be pledged, and paper certificates must be deposited into it first, as explained in borrowing against paper share certificates.
Who has to complete KYC?
Every borrower and every pledgor, including its beneficial owners. For a holding company, that means looking through the company to the individuals who ultimately own or control it, and for a facility with several pledgors it means each of them. KYC starts once the term sheet is countersigned: the KYC questionnaire follows the countersigned term sheet, and the loan agreement follows KYC. None of it is needed to obtain indicative terms, which require only the borrowing entity, the issuer and number of shares, and a recent depository or brokerage statement, as set out in what to send for indicative terms.
What changes when shares are held through a company?
The facility is assessed in the same way, but three points deserve attention early. The first is authority: each pledgor signs as a party to the security, so its constitutional documents and internal approvals must permit the pledge, which your own counsel will confirm for the pledgor’s jurisdiction. The second is disclosure. Holding shares through a company does not, by itself, take a holding outside the disclosure rules, because many regimes count interests held through companies that a person controls; the market-by-market position is set out in guides such as share pledge disclosure in Hong Kong. The third is custody: the shares are delivered into an account in the borrower’s or the pledgor’s name at an independent custodian in The Bahamas, which holds them through a sub-custodian in the home market’s central depository.
Does the holder change what can be pledged?
No. The test is the shares, not the entity that owns them. India is the clearest example: Black Haven does not take shares listed on BSE or NSE as stock-loan collateral, and that holds whether they are owned directly or through an offshore company. An Indian issuer’s line listed outside India, such as an ADR, a GDR, or a dual or secondary listing, can be considered against that line, as the India stock loans page explains. The same applies everywhere: a holding company can be the borrower or the pledgor, but the shares it pledges still have to qualify.
Frequently asked.
01Can a BVI company be the borrower on a stock loan?
02Can a family member pledge shares to secure my loan?
03Can shares held by several companies secure one facility?
04Does holding shares through a company avoid disclosure rules?
Keep reading.
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