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Pledge of Shares
Last updated: March 27, 2025
What is a Pledge of Shares Agreement?
A pledge of shares agreement or Pledge And Security Agreement is an agreement between a lender and a borrower where the borrower agrees to contribute their membership interest in the borrowing entity, such as an LLC to the lender in the event of default. This allows the lender to take control of the entity in order to liquidate the property and recoup the principal loan balance in a timely manner.
This recourse tool is not only favorable to the lender -- it can also be favorable to the personal guarantors of the borrowing entity because it avoids foreclosure and possible bankruptcy.
