1. Generally speaking, what does equity pledge mean? Equity pledge means that the pledgee can be paid off by disposing of the pledged equity when the debtor cannot pay off the debt at the expiration of the debt repayment period. After the equity is pledged, it may not be transferred, unless the pledger and the pledgee agree through consultation. The proceeds from the pledgor's transfer of equity shall be paid off in advance or deposited with the pledgee. According to Article 425 of the Civil Law of People's Republic of China (PRC), if the debtor or a third party transfers his chattel to the creditor for the performance of the debt, if the debtor fails to perform the due debt or the parties agree to realize the pledge, the creditor has the right to be paid in priority for the chattel. The debtor or the third party specified in the preceding paragraph is the pledger, the creditor is the pledgee, and the delivered movable property is the pledged property. Article 443rd Where a fund share or equity is pledged, the pledge right shall be established at the time of pledge registration. After the pledge, the fund share and equity shall not be transferred, except that the pledgor and the pledgee agree through consultation. The pledgor shall pay off the debts in advance to the pledgee or deposit the proceeds from the fund share and equity transfer.
Equity pledge cannot be used as a reference for company bankruptcy. As a kind of pledge right, equity pledge is a feasible financing guarantee method.
Legal basis:
People's Republic of China (PRC) Civil Code
Article 443
Where a fund share or equity is pledged, the pledge right shall be established at the time of pledge registration.
After the pledge, the fund share and equity shall not be transferred, except that the pledgor and the pledgee agree through consultation. The pledgor shall pay off the debts in advance to the pledgee or deposit the proceeds from the fund share and equity transfer.