Advertising is also done through changes in participation rights or voting rights. Advertising must be done even if the total right to vote or the right to vote falls below 5 per cent or if the total right to vote increases by more than 2 per cent. When lenders sell under-listed shares on the open market, the share price continues to fall. In addition, the sale of shares by lenders on the open market also changes the company`s participation model. In most cases, even promoters lose their share and have no or less the right to vote in the crucial business of the company. The regulatory amendment introduced by the RBI in Circular 57 recently allows non-resident shareholders of Indian companies to use loans from Indian and foreign banks that use their stakes in Indian companies as collateral, subject to obtaining the No-Objection (NOC) certificate from the relevant dealers (AD). As a result, the RBI`s prior authorization requirement for the collateral of Indian shares held by non-residents is waived, provided the conditions are met. All major public and private banks, as well as multinational banks, which act as DL for DL transactions, can play the role of AD in the area of equity collateral. Share collateral can be made with banks or non-bank financial institutions (NBFC).
Because equities are considered assets, banks or CFBCs are easily accepted as a credit guarantee. The loan is usually 25 to 50% of the value of the shares, depending on various factors such as the reputation of the promoter, the activity in which the company is involved, market conditions, etc. Under Section 19 of the Banking Regulation Act 1949, no bank may hold more than 30% of a company`s paid-up capital or 30% of its own capital and reserves, according to the rules, whether it is a borrower, an absolute holder or a mortgage (iii) that the lender and borrower have properly executed the loan contract. , and the main agreement is between the borrower (usually the entity) and the lender (bank or NBFC). There is a security contract between the credit company and the project promoter. It is only when the borrower accepts the share guarantee contract and sets the terms of issuance that the guarantee agreement enters into force. In principle, when the promoter negotiates a loan from the lender, he does so on behalf of the lender as a representative of the lender, but in his personal quality.