A share pledge agreement is used when a lender requires collateral for a debt. The collateral pledged with this agreement is shares of stock owned by a borrower.
The agreement is designed to protect a lender against default by a borrower. If a borrower defaults on a debt owed, this agreement gives the lender the specified number of stock shares owned by the borrower.
When the debt is paid in full, the share pledge agreement is no longer valid. During the time the agreement is in effect, the borrower retains the voting rights to the stock.
A share pledge agreement contains the date as well as the names and addresses of the pledgee and pledger. The agreement lists the name of the stock and the amount of shares of stock being pledged. It contains terms and conditions of the agreement including default procedures, voting rights, release of agreement and attorney fee obligations. The agreement is signed and dated by both parties.