How To Deal With Equity Pledge Financing Of Small And Medium-Sized Enterprises

Equity pledge revitalizes the static equity in SMEs into available working capital, providing a new financing channel for SME loans. In recent years, with the gradual improvement of national and local laws and regulations and the active participation of market subjects, equity pledge financing has become an ideal choice for SMEs' financing and has developed rapidly.

The pledge of equity is a pledge of rights, which refers to a guarantee method that the pledgor and the pledgee agree that the pledgor will use the shares held by him as the pledge, and when the debtor fails to perform his debts when due, the creditor can be compensated according to the agreement for the conversion of shares, or sell the shares and give priority to the payment of the proceeds. The debtor or the third party is the pledger, the creditor is the pledgee, and the equity is the pledge. The so-called equity pledge financing means that the company's shareholders pledge their company's equity or the company's equity held by a third person that can be transferred according to law to the bank or other financial institution , the financing method for obtaining loans.

Equity pledge is a kind of guarantee that the civil subject, in order to guarantee the performance of its own or others' debts, agrees with the creditor to transfer the equity certificate that it has the legal right to dispose to the creditor's possession or register the pledge fact in the corresponding authority for publicity. The creditor can sell the pledge to give priority to the creditor's rights when the debt performance period expires and is not realized. Equity pledge generally has the following characteristics:

The object of equity pledge is equity. Equity belongs to property rights, which are neither creditor's rights nor property rights. Property right is a concept corresponding to personal right, which is a civil right with property as its content. However, not all property rights can be used as the subject of right pledge. If a right is to become a pledge, it must meet two basic conditions. First of all, it must be a kind of property right that can transfer possession and is suitable for pledge, that is, it has materiality; Secondly, it should have exchange value and be transferable, that is, transferable. Equity has both of these two attributes, so it can follow legal procedures for pledge financing.

　　 Equity pledge Symbolism means that the value entity as the object of equity pledge has not transferred its possession, but only the equity certificate representing shareholders' equity. However, since equity represents only "an abstract property right in the concept" enjoyed by shareholders, it is difficult to think that shareholders actually control and master, so the rights owned by shareholders are not free to dispose of at will as physical objects. When disposing of equity, not only the property under the equity certificate must be delivered, but also the equity certificate itself must be transferred. It can be seen that the object of equity pledge is different from the disposable entity, but a voucher representing a certain value and rights.

The general pledge takes the transfer of possession of the subject matter as an important element, and the continuous possession of the subject matter as a necessity. The pledgee has the obligation to keep the pledged property properly. On the one hand, due to the need to transfer the possession of equity certificates, equity pledge plays a particularly obvious role in publicity, which plays a positive role in preventing the pledger or other third parties from illegal infringement; On the other hand, due to the transfer of possession of the pledged property, the pledger is unable to exercise the right of return before the debt is paid off. This disadvantage in use and disposal can put greater mental pressure on the debt and urge it to perform voluntarily as soon as possible debt So as to withdraw the share certificate as soon as possible. Therefore, it has incomparable advantages in highlighting the security role of pledge.

Compared with other real estate, movable property and rights, the value of equity has greater volatility, so the guarantee function of equity pledge is relatively unstable. When the pledged equity depreciates, the function of equity guarantee for the principal creditor's rights will be weakened accordingly, and the security interests enjoyed by the pledgee in respect of the equity will be affected. At the same time, because the pledger lost the possession of the pledged equity certificate, it was difficult to take timely relief measures when the equity devalued. Therefore, equity pledge has a certain degree of risk to both parties. Based on the above characteristics, in the case that the modern concept of property rights has broken through the concept of tangible property, and today when the securitization of rights and market credit are highly developed, equity pledge has become an indispensable part of the modern pledge security system together with chattel pledge, showing its financing potential.