The Third Party Pledge Agreement is a crucial security document used in Indian financing transactions where a party other than the borrower provides security for the borrower's obligations. This arrangement is commonly used in group company structures, family businesses, or where related parties support each other's financial obligations. The document must comply with Indian pledge requirements under the Transfer of Property Act, 1882, particularly sections 172-179, and address registration requirements under various Indian laws. It details the pledge's creation, perfection requirements, enforcement mechanisms, and the tripartite relationship between pledgor, borrower, and pledgee. The agreement becomes particularly important in corporate financing where group companies or promoters provide security for the borrower's obligations, requiring careful consideration of corporate benefit and related party transaction regulations under Indian company law.
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1. Parties: Identification of the three main parties: Pledgor (third party), Borrower (principal debtor), and Pledgee (security holder)
2. Background: Context of the underlying loan/facility agreement between Borrower and Pledgee, and Pledgor's agreement to secure the obligations
3. Definitions and Interpretation: Definitions of key terms used in the agreement and rules of interpretation
4. Creation and Terms of Pledge: Explicit creation of the pledge, description of pledged assets, and secured obligations
5. Perfection Requirements: Steps required to perfect the pledge, including registration and notices
6. Representations and Warranties: Statements of fact by the Pledgor regarding ownership, authority, and status of pledged assets
7. Covenants: Ongoing obligations of the Pledgor regarding maintenance and preservation of pledged assets
8. Rights and Obligations of Parties: Detailed rights and responsibilities of each party under the agreement
9. Events of Default: Circumstances constituting default and consequences thereof
10. Enforcement: Pledgee's rights and procedures for enforcing the pledge upon default
11. Power of Attorney: Appointment of Pledgee as Pledgor's attorney for enforcement purposes
12. Indemnification: Pledgor's obligation to indemnify Pledgee against claims and losses
13. Notices: Process and requirements for serving notices under the agreement
14. Governing Law and Jurisdiction: Applicable law and courts having jurisdiction over disputes
15. Miscellaneous: Standard boilerplate provisions including amendments, waivers, and severability
1. Security Margin: Required when the pledge involves securities or assets with fluctuating value, specifying maintenance of minimum security value
2. Substitution of Pledged Assets: Optional provision allowing Pledgor to substitute pledged assets under specified conditions
3. Insurance: Required when pledged assets need to be insured, specifying insurance requirements
4. Income and Voting Rights: Needed for pledges of shares or income-generating assets, defining rights to dividends/income
5. Cross Default: Optional provision linking defaults under other agreements
6. Further Assurance: Optional clause requiring parties to execute additional documents if needed
7. Costs and Expenses: Optional detailed section on allocation of costs and expenses
1. Description of Pledged Assets: Detailed description and particulars of assets being pledged
2. Form of Notice of Pledge: Template for notifying relevant parties about the creation of pledge
3. Underlying Facility Agreement Details: Summary or extract of the main facility agreement being secured
4. Powers of Attorney: Format of power of attorney for enforcement purposes
5. Perfection Requirements: Checklist of actions required for perfecting the pledge
6. Form of Substitution Notice: Template for notices regarding substitution of pledged assets (if applicable)
7. Required Authorizations: List of necessary corporate and regulatory approvals
Relevant legal definitions
Clauses
Relevant Industries
Banking
Financial Services
Corporate Lending
Asset Management
Infrastructure
Real Estate
Manufacturing
Trading
Retail
Energy
Technology
Telecommunications
Relevant Teams
Legal
Finance
Treasury
Risk Management
Compliance
Corporate Secretarial
Credit
Corporate Finance
Transaction Management
Security Administration
Relevant Roles
Legal Counsel
Senior Legal Counsel
General Counsel
Finance Manager
Chief Financial Officer
Treasury Manager
Risk Manager
Compliance Officer
Company Secretary
Credit Manager
Security Trustee
Relationship Manager
Transaction Manager
Corporate Finance Manager
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